Philanthropic Planning

True Tamplin, BSc, CEPF®

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 01, 2024

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What Is Philanthropic Planning?

Philanthropic planning refers to creating a comprehensive strategy for charitable giving that aligns with an individual's or organization's values, goals, and financial resources.

This approach involves developing a plan identifying the most effective and efficient ways to make charitable contributions, considering tax implications and the potential impact on the philanthropic causes being supported.

Whether through an endowment, private charity, public or private foundation, or donor-advised fund, philanthropic planning is often part of a comprehensive wealth management strategy.

Collaborating with financial advisors, lawyers, and other experts is frequently a part of philanthropic planning and typically encompasses crafting a statement of purpose that details the objectives and principles of the charitable donations.

Giving to charitable causes is about more than just maximizing income tax benefits. It is about using wealth to have a beneficial and long-term impact on the community and the larger world.

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Taylor Kovar, CFP®

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I'm Taylor Kovar, a Certified Financial Planner (CFP), specializing in helping business owners with strategic financial planning.

A couple approached me, eager to support environmental conservation but worried about their financial future. We explored a charitable remainder trust, allowing them to donate a piece of land they no longer needed. This not only provided them with a significant tax deduction but also guaranteed them a steady income stream for life. It was a win-win; they contributed to a cause close to their hearts while securing their financial well-being. It's amazing how strategic giving can align philanthropy with personal financial goals. Ready to make a difference while securing your financial future? Let's explore how strategic philanthropy can enhance your legacy and impact.

Contact me at (936) 899 - 5629 or [email protected] to discuss how we can achieve your financial objectives.


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How Philanthropic Planning Works

Philanthropic planning involves developing a thoughtful and strategic approach to making donations. The following steps can guide individuals and organizations through the philanthropic planning process:

Understand Past Charitable Donations

Review donations you have made as an individual or company. Consider any areas that may have been neglected in the past. Aside from reviewing past donations, identify the causes you have supported and evaluate the impact of your contributions.

Determine Philanthropic Goals

The next step involves identifying the causes that you are most passionate about. Define the impact you want to make, and establish a clear set of objectives for your charitable giving.

These could be focused on a particular cause, such as healthcare or education, and support for local communities through organizations. Clear philanthropic goals will guide decisions about who and what to donate.

Align Interests With Charity

Make sure that the goals align with your interests and values. This will ensure that any donations are meaningful and represent who you are as a person or company.

Online databases provide information about nonprofits, including their financials, mission, and impact. These databases can help you identify organizations making a meaningful impact on the causes you care about.

Choose Charitable Organizations

After identifying the organizations that align with your interests, the next step is choosing the charitable organizations you will support. This process involves donating to multiple organizations or selecting a single organization.

When choosing charities, consider factors such as how effective their operations are. Assess how transparent they are about their finances and how much money donated goes directly towards their cause compared to overhead costs.

Allocate Time

In addition to financial contributions, philanthropic planning also involves allocating time to charitable causes. This can include volunteering your time or expertise to organizations you support and serving on nonprofit boards or committees.

Volunteering at local events organized by nonprofits is an excellent way to build relationships with those involved. At the same time, it gives direct access to people directly impacted by the supported cause, which can provide unique insight into its efficacy.

Consider Long-Term Commitment

Philanthropic planning is a long-term commitment, and it is essential to consider the sustainability of your contributions over time. This may involve developing a multi-year giving plan or establishing a charitable foundation to ensure the longevity of your charitable impact.

Incorporate Philanthropy in Financial Planning

Incorporate some financial planning into the equation to allocate resources optimally towards projects without compromising personal finances too drastically, which usually involves establishing separate accounts.

This may require working with a financial advisor or wealth management services to develop a budget for charitable giving. Similarly, such professionals can help evaluate your contributions' tax implications and identify the most effective ways to maximize the impact of your donations.


Philanthropic Planning Strategies

There are various strategies that individuals and organizations can use to maximize the impact of their charitable donations. The following are some of the most common:

Tax-Efficient Philanthropy

Tax-efficient philanthropy involves structuring charitable donations to maximize tax benefits. Charitable donations can qualify for deductions in a given tax year or using tax-advantaged vehicles such as charitable remainder trusts or gift annuities.

Charitable Bequests

In this case, assets are passed down upon death or through a trust established before death. These assets can be given to charity without affecting the donor's estate taxes or other financial liabilities.

A charitable bequest leaves a portion of an individual's estate to a charitable organization in a will. This is a simple way to make a charitable contribution and can effectively leave a lasting legacy.

Testamentary Trusts for Charity

Testamentary trusts for charity are another option for those wishing their donor's funds to remain active after they pass away. It allows someone's funds to be distributed as outlined within a will or trust document allowing them to continue helping others even after death.

This type of trust provides regular donations or a lump sum to the charity over a set period. It also allows the donor to specify terms and conditions on how the funds should be used.

Direct Gifts to Charity

Direct gifts involve making a one-time or ongoing donation to a charitable organization. This is one of the simplest and most common ways to give to charity. It allows individuals to support causes they care about without creating complex legal arrangements.

This method has limited paperwork requirements, making it easy and efficient for those wishing to donate directly from their pocketbooks or personal accounts. It does not involve outside intermediaries or additional entities such as foundations or trusts.

Donating Securities

Donating a publicly listed security that has increased in value can benefit from eliminating the capital gain tax and the donation tax credit. This presents an opportunity for tax savings compared to selling the security and making a cash donation.

Donating securities involves giving stocks, bonds, or other securities to a charitable organization.

Private Foundations

A private foundation is a nonprofit organization created by an individual or family to support charitable causes. Donors can receive an immediate tax deduction for contributions made to the foundation.

The foundation's assets can grow tax-free. In addition, private foundations are not subject to the same tax rules as public charities, which means they have more flexibility in distributing their assets.

Donor-Advised Funds

These funds are charitable giving accounts managed by a sponsoring organization. Individuals can make tax-deductible donations to the fund and then recommend grants to charitable organizations without the commitment necessary for a private foundation.

Donor-advised funds provide the most significant potential benefits because they allow donors flexibility while maintaining control over grant distributions. Clients can direct funds toward a variety of different organizations.

Philanthropic Planning Strategies

Benefits of Philanthropic Planning

The following are some of the most significant benefits of philanthropic planning:

Increased Tax Savings

By taking advantage of charitable giving options such as donating securities, creating philanthropic trusts, or establishing donor-advised funds, donors can maximize their tax benefits while supporting causes they care about.

Legacy Creation

Another advantage of philanthropic planning is the ability of donors to create a lasting legacy in their name or that of their families. By selecting specific charities or causes to support over time, donors can ensure that their values and ideals live on well after they have passed away.

Future Generations Involvement

Future generations have the potential to become involved through inheritance and education. Families can pass on the importance of giving back while encouraging children and other relatives to participate in charitable giving activities.

Multiple Causes Support

Donors have the opportunity to make an impact across many levels at once. By donating to multiple charities or establishing a donor-advised fund, diversify their philanthropic portfolio and ensure more people receive help.

Community Development

Philanthropy can positively affect entire communities by providing resources for projects that governments or other entities may not otherwise fund or support. Supporting community development initiatives help build a more vital and vibrant community for everyone.

Philanthropic Planning Benefits

Final Thoughts

Through philanthropic planning, individuals and organizations can maximize the impact of their charitable giving. At the same time, they can minimize taxes and ensure that their contributions align with their overall financial and philanthropic goals.

This process can be precious for high-net-worth individuals and families who want a comprehensive method that involves developing a thoughtful and strategic approach to making donations.

One should start by understanding their past charitable donations. Next, they should determine their philanthropic goals and choose the charitable organizations they want to commit to. Additionally, incorporating financial planning can help maximize the impact of donations.

Strategies in philanthropic planning include tax-efficient philanthropy, charitable bequests, testamentary trusts for charity, direct gifts to charity, donating securities, private foundations, and donor-advised funds.

Ultimately, philanthropic planning can create a lasting legacy, involve future generations, and support multiple causes. It also has the potential to impact entire communities through development initiatives positively.

Consider speaking to an expert in wealth management for guidance in your philanthropic efforts.

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About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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