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Driving Meaningful Philanthropy – A Guide to Charitable Giving Vehicles

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By Kim Ciccarelli Kantor, CFP®, CAP®

 

Pledging your hard-earned money to support a good cause can be an enormously gratifying experience. To further enhance the power of your charitable giving, however, you may want to consider planning your philanthropy in advance with the guidance of your advisory team and your family.

 

A strategic approach to planned giving provides you with the opportunity to (1) maximize tax efficiencies; (2) build a sustainable, organized framework for your family’s charitable giving as a component of your wealth management plan; and (3) enrich and educate your children and grandchildren about the positive impact of philanthropy.

 

Many vehicles exist that can drive meaningful philanthropy for years to come. Each charitable giving method is distinctive in its structure and the results generated. Here is a brief overview of five popular charitable vehicles that could be successfully implemented in your family’s full financial picture:

 

Charitable Lead Trusts provides income to a charity of your choice for a specific time period. Upon termination, the remainder reverts to the original donor or another beneficiary. CLTs are especially effective when the primary donor has assets that are expected to appreciate and to be inherited by your loved ones.

 

Charitable Remainder Trusts are essentially the inverse of charitable lead trusts. Charitable remainder trusts provide income to a non-charitable beneficiary for a specified time period, with the remainder being passed to the charity. CRTs are useful for donors with highly appreciated assets who need additional income and would like to diversify their holdings.

 

Donor-Advised Funds serve as a conduit between your family and a community foundation or charitable organization. The donor funds an account and may select an investment strategy that reflects their goals. DAFs provide a great deal of flexibility in establishing a personalized timetable for recommending grants to specific qualified charities. The donor can also appoint successor advisors (i.e. family members) to sustain charitable endeavors for future generations.

 

Endowment Funds are established by a community foundation or public charity that makes consistent withdrawals to support either a specific need or the organization’s operating costs. Endowment funds are perpetual in nature and may be initiated during the donor’s lifetime or as part of their legacy plan.

 

Pooled Income Funds is a charitable fund maintained by a public charity which generates income for life to the donor and grants the remainder interest to a designated charity. The fund receives contributions from the donor that are pooled for investment and administrative purposes. A qualified charity will receive the remainder interest. Pooled income funds present a great opportunity for significant tax deductions, extensive family involvement and flexibility.

 

Your selection of charitable vehicle will depend upon your unique personal circumstances. Discuss these options with your advisor and family to identify which choice will best enrich your current philanthropic goals and suit your family dynamics.

 

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