The holiday season is the perfect time for families to discuss charitable giving. With everyone gathered for holiday get-togethers, an opportunity opens up to teach younger members of the family the impact they can have through planned giving. This time of year serves as a reminder of the importance of giving back to your community and the feeling you get when you make an impact on the lives of others. Older generations should seize the opportunity of having everyone in one place to discuss charitable giving, among other key financial matters with younger generations.
Giving back as a family can be a powerful bridge to connect generations and create a lasting impact together. The key lies in understanding philanthropic values and employing strategies that resonate with each and every member of the family, making them feel included and valued in the process.
Establishing your legacy and connecting generations
Charitable giving offers the opportunity for grandparents and parents to get children of all ages involved in the family finances. Even younger children can weigh in on causes they feel passionate about. Many families will give each child or grandchild a set allowance to deploy to the charities of their choice. This allows them to not only learn about making financial decisions, but also feel like their opinions matter and have an impact on the world around them. Additionally, it emphasizes and passes down the values and morals of the family to the next generation.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Although there are many advantages to monetary contributions, giving back through volunteer efforts is another option that creates powerful learning and sharing opportunities for families. Many families choose to volunteer at local food pantries and soup kitchens throughout the year, so their children are able to see firsthand their ability to help others in need and feel empowered to do so throughout their lives.
Beyond deepening family connections and instilling values, family philanthropy can have an impact on the legacy that is left behind. Giving back cultivates a profound sense of connection within the family tree and underscores the importance of generosity and giving. If implemented properly, this will ensure that these cherished values are carried out through generations to come.
Tax benefits of charitable giving
The tax benefits of charitable giving are undoubtedly an additional advantage to consider. By employing proper tax planning strategies, charitable contributions can reduce multiple different types of taxes including:
- Estate tax. By incorporating charities into your estate plan, you may be able to reduce the amount of estate and inheritance taxes.
- Income tax. If you have sufficient itemized deductions to exceed the 2023 standard deduction of $27,700 for couples and $13,850 for singles, your charitable contributions can save you on income tax.
- Capital gains tax. If you have owned a highly appreciated stock for over one year, you can save on capital gains taxes and possibly income tax by contributing shares of stock or other appreciated assets directly to a charity. You may be able to claim a deduction on your income tax in the amount of the market value at the time the asset was donated and avoid paying capital gains tax on the sale before making the donation. This strategy is a win for both you and the charity.
Charitable tax planning can be complex, and it is important to work with a professional on creating a strategy that will be the most tax-advantageous to your situation. Educate yourself and ask questions throughout the process to better understand the impact your dollars will have on both the world around you and your own financial situation. This could also offer a great opportunity to incorporate your children and grandchildren into conversations with your financial adviser and start healthy financial management habits early.
Although tax benefits should be thought about during the process, they should not be the only consideration. At the core of your charitable giving strategy should be your values and intention. Start by determining which areas of your community you would like to have the most impact on with your charitable giving strategy and craft your giving plan from there.
Vehicles for giving
Before you gift, it is important to understand the options that you have. Many individuals choose to use a donor-advised fund (DAF) as a strategic and meaningful vehicle for their philanthropic endeavors. With a DAF, you make an irrevocable contribution to a public charity of your choosing. Oftentimes, this can be a convenient, flexible and tax-efficient vehicle. You can donate cash, stocks, bonds, assets such as real estate and more through a DAF.
The DAF allows you to gift your original contribution to qualified charities of your choice over time, and it can also be invested for potential future growth. For high-income earners, especially those looking to continue their commitment to charitable giving in retirement, leveraging donor-advised funds is a great option. It can be an effective planning tool and allow you to bunch multiple years of planned gifts into a single tax year to take advantage of the itemized deduction.
Once you determine a strategy for charitable giving, you can employ a vehicle and method, select your charities, set your budget and start giving back.
Charitable giving goes beyond just giving money to an organization; it has evolved into a way for families to connect with one another, broaden their perspectives, learn important lessons about financial planning and preserve their legacy for years to come.
Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania. For additional information about Marshall Financial, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully.
Related content
- Six Charitable Giving Strategies: Feel Good and Cut Your Taxes
- Give Your Charitable Giving a Boost With These Strategies
- Tips on How and When to Donate During a Humanitarian Crisis
- What to Do if Your Passion for Charitable Giving Has Flagged
- How to Make Charitable Gifts With an IRA
-
The Most Tax-Friendly State for Retirement in 2025: Here It IsRetirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Plan for Higher Health Care Costs in 2026: Projected Medicare Part B and Part D PremiumsIn 2026, Medicare participants will pay more for their health care. Part B costs are expected to rise more than 10%. Here's what you can do.
-
Avoid Medicare's 'Shadow Tax' With This Financial Expert's IRMAA-Busting TipsYou're cruising along in retirement, and then bam: Your Medicare premiums soar because your income crossed the limit. Take a breath. There could be a solution.
-
Grilling Season and ETFs: There's More Than One Way to Cook Up a PortfolioExchange-traded funds come in a multitude of 'flavors' these days, from passive to active to factor-based. Their flexibility is what makes them so delicious.
-
You Don't Want It, But You Should Plan for It Anyway: An Expert Guide to Long-Term CarePlanning for long-term care is crucial to protect your independence, family and financial stability against unexpected health events and rising care costs not covered by standard insurance.
-
Five Questions to Help Ensure a Happy, Secure RetirementYou need to drill down to what you really want out of retirement. Then you can get down to the business of crafting a financial plan to make it happen.
-
I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting ByLearning good financial habits — building an emergency fund, paying down debt, saving consistently — gives you flexibility, options and a path to security.
-
How to Buy an Annuity Online (Without Regret)You should never be rushed into buying an annuity. But now that they can be sold quickly and easily online, you need to be more alert than ever to pushy salesmanship. Here are four signs you're working online with a professional.
-
How Much Income Will an Indexed Annuity Get You? An Annuities Expert Lays Out the NumbersGuaranteed lifetime income sounds great, but how much will it be? Several factors determine your future payout on indexed annuities with an income rider.
-
Financial Fact vs Fiction: Why Inflation Is Lower, But Prices Are NotDo you think bonds protect you from stock losses? Are you confident your assets will go to your intended heirs if all you have is a will? Think again — and read on for other myths that could be leading you astray.
