Charitable giving, in focus for some especially at the end of the year, is an important way to help make a long-term impact across their communities.
While a tax-efficient focus may be appropriate for individuals potentially facing a high tax bill in a given year, philanthropy should be grounded in a year-round strategy in order to help maximize impact, tie values to giving, and model priorities to younger generations, according to Sangita Karra, senior philanthropic advisor with Wealth & Investment Management, Wells Fargo Bank, N.A.
There are many charitable giving vehicles, including donor-advised funds (DAFs), private foundations, and charitable remainder or lead trusts. With all choices, people should consider which option best lines up with their overarching goals and estate planning strategies.
As individuals and families explore philanthropic activity, it’s ideal to use those moments to teach the next generation about your own values, says Karra. When appropriate, it’s helpful to engage younger family members in foundations or trusts so they can begin thinking about their own charitable giving journey. Some may give the next generation a percentage of funds to allocate for charitable donations, exposing them to different nonprofit organizations and highlighting the need for due diligence.
“Many of our clients hope their children will keep the giving going, especially through a foundation that has their name on it,” Karra adds. “It becomes an institution for the family to build a legacy of support for a cause they are passionate about – be it in in the realm of the arts, health care, social services, or another great need."
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Donations are irrevocable charitable gifts. The sponsoring organizations maintaining the fund have ultimate control over how the assets in the fund accounts are invested and distributed. Donor Advised Funds donors do not receive investment returns. The amount ultimately available to the Donor to make grant recommendations may be more or less than the Donor contributions to the Donor Advised Fund. While annual giving is encouraged, the Donor Advised Fund should be viewed as a long-term philanthropic program. Tax benefits depend upon your individual circumstances. You should consult your Tax Advisor. While the operations of the Donor Advised Fund and Pooled Income Funds are regulated by the Internal Revenue Service, they are not guaranteed or insured by the United States or any of its agencies or instrumentalities. Contributions are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Donor Advised Funds are not registered under federal securities laws, pursuant to exemptions for charitable organizations.
Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.
Wealth & Investment Management (WIM) offers financial products and services through bank and brokerage affiliates of Wells Fargo & Company. Bank products and services are available through Wells Fargo Bank, N.A. Wells Fargo Trust is a part of WIM and offers services through Wells Fargo Bank, N.A. and Wells Fargo Delaware Trust Company, N.A.
