Justin Cole
Justin Cole

Presented by Justin Cole

Author Nelson Henderson is quoted as saying “The true meaning of life is to plant trees, under whose shade you do not expect to sit.” This philosophy is a keystone to how many of our clients manage their wealth legacy. Over decades of observing financial behavior, it is inspiring to witness how families in our local community level-up their philanthropic pursuit as they pass into new wealth tiers. 

As an Independent Branch Leader at Charles Schwab, I’ve noticed a boost in interest among our clients, particularly Baby Boomers who have spent decades accumulating their wealth and are keen on being good stewards of their assets. Many clients attend charitable events and often write checks to support causes they believe in, but they’re also more interested in having conversations about how they can incorporate their charitable giving goals into their broader financial plans for the long-term.  

It’s an encouraging interest, as we find that when our clients stick to a plan, it helps them build wealth and meet their financial goals, which can put them in a better position to give with greater impact to the causes that are meaningful to them.  Plus, having a thoughtful strategy for your charitable giving can help you make the greatest impact with your generosity while also receiving some tax savings.  

One of the most common ways our clients tend to choose to make the most of their giving is through a donor-advised fund (DAF), which is a charitable giving vehicle typically administered by a public charity and designed to help donors manage their charitable giving. You can open this type of account with a tax-deductible contribution and then make donations to public charities over time. The contribution is irrevocable but you pick the charities that it will benefit, as long as they are 501(c)(3) organizations. You can contribute a variety of tax-deductible assets, including appreciated securities, real estate and cash, and the fund sponsor handles the administrative details. (Please note that each DAF has its own rules around donations and grants.)

For clients who are interested in making meaningful contributions while also adding another source of retirement income, charitable remainder trusts may be an appropriate choice. A charitable remainder trust is an irrevocable trust that you set up and make a contribution to in cash, investments and property. The trust provides you and other income beneficiaries you may select with distributions from the trust annually for life or a period of time up to 20 years. After that period, the remainder of the trust passes to the named charity. There are various types of charitable trusts, and the rules governing them can be complex, so they can be expensive to set up and will require an attorney to draft the trust document. 

There are a number of additional vehicles to carry out your giving goals as well. But remember, if you make charitable donations with a more holistic plan in place, you will likely have a better impact on the organizations you donate to and your overall financial picture.

And as you consider where to make your donations, check an organization’s tax status. Nearly all 501(c)(3) organizations are eligible to receive tax-deductible contributions, but it’s always best to ask the charity you plan to donate to about its tax status or you can check the IRS’ online databased for qualified organizations.  

As you can see, your family’s philanthropic initiatives and financial plan are not mutually exclusive. There are plenty of tools and resources to help optimize your desire to help those around you.  We are living during an era of socially consciousness and a shared value system of lending a hand to lift those who are less fortunate. Consider marrying those values with your financial plan to better elevate your impact. 

Justin M. Cole is an Independent Branch Leader at Charles Schwab with over 20 years of experience helping clients achieve their financial goals. Mr. Cole also holds his Certified Financial Planner ® designation and has obtained his Masters degree in Business Administration (MBA) from the University of South Florida (USF).  Some content provided here has been compiled from previously published articles authored by various parties at Schwab. 

A donor’s ability to claim itemized deductions is subject to a variety of limitations depending on the donor’s specific tax situation.  Consult your tax advisor for more information. Information presented is for general informational purposes only and is not intended as personalized investment, tax or legal advice as individual situations vary. Charles Schwab does not provide tax or legal advice. Information presented is for general informational purposes only and is not intended as personalized investment advice. Where specific advice is necessary or appropriate, Charles Schwab recommends consultation with a qualified professional.