Charitable giving, in the context of financial advisors is a wealth management strategy that allows investors to donate assets—including appreciated securities, real estate, and other holdings—to qualified charitable organizations while optimizing their investment portfolio and tax efficiency.
Investors can donate appreciated securities directly from their portfolios to avoid capital gains taxes that would otherwise be triggered by selling. This approach allows donors to contribute at full market value while eliminating embedded gains—a particularly valuable strategy for long-held positions or highly appreciated stocks.
A popular vehicle for portfolio-focused donors, DAFs allow investors to contribute appreciated assets, receive an immediate tax deduction, and distribute to charities over time. The funds are invested and can grow tax-free, providing a way to build charitable capital while maintaining investment flexibility.
These vehicles enable investors to transfer appreciated securities into a trust, receive income distributions during their lifetime, and have remaining assets go to charity. This strategy creates liquidity for concentrated stock positions while generating ongoing income and tax benefits.
Charitable giving can serve as a portfolio management tool, allowing investors to donate underperforming or unwanted holdings while maintaining their target asset allocation—without incurring capital gains on the disposition.
For investors managing significant portfolios, charitable giving strategies integrate with broader estate planning, allowing them to reduce taxable estates while supporting causes aligned with their values.
Clients should want to give a charitable gift first and deal with tax deductions second, says director at Altair Advisers.
'Once you enter the distribution phase of retirement, the strategy changes,' Troy Sharpe says. 'It's about understanding the impact of today's decisions on future security.'
ClearBridge Wealth provides investment management and financial planning.
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Schwab Charitable reported its donors increased their giving by 8%, or nearly $350 million, to more than $5 billion in its fiscal year 2023.
The big tax benefits come in the way gifts can be used in conjunction with retirement accounts.
Philanthropic discussions with clients over issues close to their hearts can only deepen that relationship.
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Advisors, employers and DAFs can make everyone a philanthropist.
The team, which is rebranding as Momentum Wealth, is based in The Villages, Florida.
