Thinking Beyond Checkbook Philanthropy

Nov 3, 2022

Are you a checkbook Philanthropist?

Writing a check to your favorite charity at the end of the year is a generous way to support a cause or organization that you care about; there’s no doubt about that.

If this is the extent of your charitable giving, however, then you may be practicing what’s known as “checkbook philanthropy.” Checkbook philanthropy means simply donating cash by writing a check in response to a specific appeal they have received, nothing more or less.

Charitable giving can be so much more than writing a check, and there are endless causes and nonprofits that need support to help those in need. Instead, try taking a more strategic approach to philanthropy to leave a meaningful legacy behind that goes beyond your checkbook. Doing so may enable you to maximize your tax benefits, create income, and generate a bigger impact with your donations.

From determining your mission, making it a family affair, and setting it in motion with a Prosperity Financial Advisor – becoming a philanthropist is easier than you think. Here are 4 easy steps to get you there.

1. Determine Your Philanthropic Mission

Incorporating your life values, experiences, interests, faiths, and relationships into philanthropy is necessary to determine who you want to help. This helps you create a charitable mission statement; typically one to three sentences that put the purpose of your giving into words. 

Start by asking yourself these questions:

  • What inspires you to give?

  • What were some of the formative experiences in your life? 

  • Who are the people who have been strong influences on you? 

  • When you think about our world, what inspires or upsets you?

  • What are some of your core values or principles?

  • How does faith, religion, or culture change affect those values? 

  • Who are the people, populations, or groups you want to help and why?

  • What is your vision or long-term goal for your giving?

2. Make Philanthropy a Family Affair 

The beauty of philanthropy is that it doesn’t just help the charities you care about, it can leave a lasting legacy for your family as well. Your children and the next generations will be naturally inclined to make a difference, stepping into a legacy of giving – of giving resources, time, and charitable dollars. Maintaining this legacy is part of their promise to society, and they are working hard to build a better future for everyone, and build better philanthropists in the process.

  • Know the key charities that are important to your spouse or partner
  • Consider supporting your partner’s giving interests personally as well as financially
  • Be open to changing your charitable giving strategies as you both age
  • Incorporate your children’s interests into your giving plan 
  • Ask your children about their changing values and experiences as they grow older 
  • Involve the whole family in charity events, volunteering, and helping beyond the checkbook.

3. Consider the Financial Tools Available to You

Bring your charitable giving plan to the next level with a variety of financial tools and strategies. These bring big benefits for you and your charities in many ways – guaranteed income, death benefits, tax deductions, and more.

Donate a Charitable Gift Annuity 

Charitable gift annuities function basically like any life annuity. They are a contract in which the annuitant pays a lump sum and in return receives a regular income stream, which is usually paid out in determined periods.

The payments stop upon the annuitant’s death, and the remaining assets can go to family members, charities or organizations. In turn, the income payments can also instead go to charity and the remaining assets go to a family member. 

Donate Income Producing Real Estate

Charitable donations can come from all types of assets. If you have income-producing real estate, you can set up a payment plan to have your charity of choice receive revenue and have it returned to your family upon death. Alternatively, you can have your family enjoy the real estate for a number of years, and have the charity receive income later.

Donate From Your IRA with a Qualified Charitable Distribution (QCD)

A QCD allows owners of a traditional IRA to exclude required distributions from their adjusted gross income (AGI) if they give the money to approved charities, also known as qualified charitable organizations.

The QCD rule allows you to deduct the amount you donate from your IRA. It counts as part of your annual RMD amount, and you must pay the distribution directly from your IRA to the qualified charity. Therefore, if you are at least age 72, you can use the QCD rule to exempt your RMDs from taxation.

You can choose to make full or partial RMD distributions to charities. For example, if your RMD amount is $5,000 a year, you can make a $3,000 charitable distribution and take the remaining $2,000 yourself. You can also give the full $5,000 to charity if you choose.

Keep in mind, these are only some of the many charitable giving strategies. Your Prosperity Financial Advisor will help you discover which fit best into your financial plan. 

4. Set Your Plan In Motion With A Prosperity Financial Advisor

What does “legacy” mean to you?

Like many people, you may have the desire to use your money in a way that can make a difference in the world. In other words, you simply want to do more with your wealth. Our Prosperity Financial Advisors will revamp your financial plan to include the charities you want to help along with the financial tools and strategies you need to get there. 

Leaving a meaningful legacy isn’t something that happens naturally – you have to plan for it. 

A sophisticated financial plan balances the interests of yourself, your family, and the causes you care about most. Through strategies like charitable giving, charitable annuities, and impact investing, you can provide for loved ones while building a lasting legacy. 

Start the conversation today and let’s get the giving ball rolling.

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We’ll spend 30 minutes getting to know you—your situation, needs, and vision—then offer a strategic plan to reach your goals.
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