Top 5 Charitable Giving Strategies for a Lasting Family Legacy 

At BCR Wealth Strategies, we understand that wealth is not just about accumulating assets but what you do with them. If you’re among those with assets ranging from $1 million to $10 million, you have a unique opportunity to make a significant impact on the lives of others. Even better, charitable giving isn’t just a noble activity; it’s a strategic one that can enhance your financial well-being and leave a lasting legacy at the same time. 

Remember, effective giving is as much about strategy as it may be about generosity. 

This blog will dive into the top five charitable giving strategies that are more than just a cash donation. These strategies work for savvy investors who want to align their philanthropy with their families’ financial goals.  

As financial advisors in Birmingham, AL, one of our specialties is assisting you in creating and implementing charitable giving strategies that optimize tax benefits while supporting causes close to your heart and establishing a lasting legacy for your family. 

 

1. Donor-Advised Funds (DAFs)

A Donor-Advised Fund (DAF) is a charitable giving vehicle where you contribute assets to a fund managed by a public charity or an institution like a bank. As the donor you can instruct the administrator regarding what charity you want to donate from the DAF. Upon donation, you receive an immediate deduction for that tax year.  

Then, you advise how the funds are distributed to various charities over time. This allows for a flexible, philanthropic strategy without the administrative overhead of running a private foundation.  

DAFs are ideal for those looking to grow their charitable impact. The funds can be invested to increase tax-free before grants are made, providing tax benefits and the ability to support multiple causes as interests evolve over time. 

Example: You donate $100,000 of appreciated stock to your DAF. By doing so, you avoid capital gains tax on the sale of the stock, claim an income tax deduction for the stock’s full market value, and let the funds grow tax-free inside the DAF.  

Over the next several years, you can recommend grants to charities such as local schools, health initiatives, or arts organizations.  

This approach spreads your giving over time and allows for strategic planning around when and where to donate to maximize your donation’s impact. Work with a financial advisor in Birmingham, like BCR Wealth, to create an effective DAF strategy for your family. 

 

2. Qualified Charitable Distributions (QCDs)

Qualified Charitable Distributions (QCDs) allow individuals aged 70½ or older to transfer funds directly from their IRA to a qualified charity. This counts towards your Required Minimum Distribution (RMD) but isn’t taxed as income, thus reducing your taxable income.  

Each QCD can be up to $108,000 (for 2025) per year per individual. This strategy fulfills your charitable intentions and provides tax benefits, potentially lowering your Medicare premiums and keeping you in a lower tax bracket. QCDs are an excellent way to support charities while managing tax liabilities more effectively. 

Example: If your annual RMD is $20,000, you could direct $20,000 to a charity via a QCD. This satisfies your RMD and lowers your taxable income, potentially keeping you in a lower tax bracket or reducing Medicare premiums.  

For instance, donating to a food bank or a scholarship fund through a QCD could fulfill your charitable intentions while optimizing your tax situation. 

 

Watch our video on enhancing your charitable giving strategies. 

 

3. Charitable Remainder Trusts (CRTs)

Charitable Remainder Trusts (CRTs) are powerful financial instruments that transfer appreciated assets into a trust. Sales inside the trust are tax-free, and you or designated beneficiaries receive an income for life or a set number of years. After this term or the surviving spouse’s life ends, the remaining assets revert to the designated charities you selected. 

CRTs are ideal for those with highly appreciated assets, regardless of type, who would like to convert them into an income stream and support charitable causes after the surviving spouse’s demise. 

This strategy is one of the best ways to combine personal financial benefits with philanthropy, offering tax advantages while ensuring a charitable legacy. 

Example: Suppose you own property valued at $2 million with a $500,000 cost basis. Transferring this into a CRT allows a charity to sell the property without paying capital gains tax. You or other beneficiaries receive income from the trust for the remainder of your life or as designated. 

Upon your passing or the passing of your surviving spouse, the remaining assets go to your chosen charity. This strategy supports your lifestyle and leaves a significant charitable legacy at the same time. 

 

4. Bunching Charitable Contributions

Bunching charitable contributions involves combining several years’ worth of donations into one tax year to exceed the standard deduction, allowing for itemization. This strategy is particularly useful if your annual charitable giving doesn’t exceed the standard deduction threshold.  

By bunching, you itemize deductions in the year of the large donation, reducing taxable income significantly for that year. This can be especially advantageous in years with high income or capital gains, optimizing your tax benefits while supporting your favorite charities. 

Example: If you donate $5,000 annually, you might donate $25,000 every five years instead. In the year you bunch, you itemize deductions, significantly reducing your taxable income for that year.  

You could use this strategy to fund a community project or support a major initiative at a university, aligning your charitable giving with tax efficiency. Talk with a financial advisor in Birmingham about this strategy.  

 

5. Gifts of Appreciated Securities

Gifts of Appreciated Securities involve donating stocks or other securities that have increased in value since you acquired them. Instead of selling these assets and paying capital gains tax, you transfer the ownership to a charity.  

You receive a tax deduction for the market value of the securities at the time of the donation, provided you’ve held them for more than a year. This strategy avoids capital gains tax on the appreciation, offering a dual benefit of supporting your favorite causes while maximizing tax efficiency.  

It’s a smart way of giving to those with significant portfolios of appreciated assets. 

Example: You have shares in a company that has appreciated from $100,000 to $500,000. Donating these shares directly to a charity means you get a tax deduction of $500,000 without paying taxes on the $400,000 gain. This could be directed towards funding medical research or conservation efforts, substantially boosting the charity’s capabilities. 

At BCR Wealth Strategies, we’re dedicated to helping you navigate these strategies to ensure your charitable giving aligns with your financial goals. Each method offers unique benefits tailored to different financial situations and charitable objectives.  

Whether planning for immediate tax relief or setting up a legacy, our team can guide you through the complexities of charitable giving, ensuring your generosity is as effective and efficient as possible.  

Remember, strategic philanthropy is not just about giving; it’s about giving wisely. Are you ready to launch a charitable giving strategy in 2025? Connect with us.

Tim Jones

Tim Jones

Tim Jones CFP® is a Financial Planner and Vice President at BCR Wealth Strategies.