For many of us, charitable giving is more than generosity — it’s an expression of our values and vision for a better world. Yet, while most people give with their hearts, few realize how much more effective their giving could be with a little strategy.
When done thoughtfully, philanthropy can simultaneously advance the causes you care about and align with your overall financial goals — sometimes even lowering your taxes in the process.
Here’s how to move from being a generous donor to a truly strategic philanthropist.
Most people give by writing a check or donating cash. While that’s wonderful, it’s often the least tax-efficient way to give. Let’s explore three smarter ways to maximize your impact.
If you’ve owned stock that’s significantly increased in value, selling it means paying capital gains tax — which can be up to 20% federally. Then, when you donate the cash proceeds, your deduction only covers the donation amount.
A better solution: donate the appreciated stock directly to a charity or a Donor Advised Fund (DAF).
The benefits are twofold:
This is often the single most tax-efficient way to give for many donors.
A Donor Advised Fund (DAF) acts like a personal charitable account. You contribute to it, get an immediate tax deduction, and then recommend grants to your favorite charities over time.
Popular sponsors include Fidelity Charitable, Schwab Charitable, and local community foundations.
Here’s how it works:
This flexibility allows you to give strategically and simplify your recordkeeping.
Since the 2017 tax law increased the standard deduction, about 90% of taxpayers no longer itemize deductions — meaning many people get no tax benefit for their annual giving.
Enter “bunching.”
Instead of giving $5,000 every year for five years, you could contribute $25,000 to your DAF in a single year. In that year, your total deductions may exceed the standard deduction, allowing you to itemize and take a large charitable deduction.
Then, for the next four years, you can take the standard deduction — while continuing to make grants from your DAF to your charities on your usual schedule.
The result: a larger tax benefit and consistent support for the organizations you care about.
For families who want to make philanthropy part of their legacy, the traditional route has often been a Private Foundation. Foundations offer complete control over grantmaking, investment management, and family governance — but they also come with significant complexity and cost.
Setting up a private foundation requires forming a separate 501(c)(3) entity, hiring legal and tax professionals, and maintaining a formal board. Each year, the foundation must file public tax returns, hold official meetings, and distribute at least 5% of its assets to charities. These requirements can be burdensome and expensive, especially for smaller families or those just beginning their charitable journey.
By contrast, a Donor Advised Fund (DAF) offers many of the same benefits — flexibility, family involvement, and the ability to create a charitable legacy — without the administrative weight. Opening a DAF is as simple as setting up an account with a sponsoring organization such as Fidelity Charitable, Schwab Charitable, or a local community foundation. The sponsor handles all the recordkeeping, investments, and tax filings on your behalf.
DAFs also provide more favorable tax treatment. Donors can deduct up to 60% of adjusted gross income (AGI) for cash contributions and up to 30% for gifts of appreciated stock, compared with the lower limits applied to private foundations. And when it comes to legacy planning, naming children or grandchildren as successor advisors is as easy as filling out a simple form—no formal board transitions or legal structures required.
In short, a Donor Advised Fund provides the same spirit of long-term, family-centered giving that a private foundation offers, but with far less administrative complexity, lower costs, and greater tax efficiency. It’s a streamlined way to build a charitable legacy that lasts for generations.
For those age 70½ or older, a Qualified Charitable Distribution (QCD) allows you to transfer up to $105,000 per year (2024 limit) directly from your IRA to a qualified charity.
Why it matters:
This strategy can significantly reduce your taxable income in retirement. (Note: QCDs can’t be used for DAFs or private foundations — they must go directly to operating charities.)
Charitable giving can be a powerful part of your estate plan — ensuring your values live on and your assets are used intentionally.
The simplest approach: name a charity (or your DAF) as a beneficiary for a set amount or percentage of your estate.
This is one of the most tax-efficient legacy strategies.
When heirs inherit IRAs or 401(k)s, they must pay income tax on withdrawals.
But when a charity inherits these accounts, they receive every dollar tax-free.
By leaving retirement assets to charity and other assets (like cash or brokerage accounts) to your heirs, you maximize both impact and efficiency.
Charities can also be named as beneficiaries of life insurance policies, real estate, or other assets — often without affecting your current lifestyle.
You don’t have to give more to give smarter. Here are three actions to take now:
Strategic giving allows you to amplify your generosity — creating more impact for the causes you care about and optimizing your financial picture at the same time.
With thoughtful planning, you can build a charitable legacy that reflects your values and continues to make a difference for generations to come.
This material is for informational purposes only and not intended as tax or legal advice. Please consult your own professional advisors before taking action.
Financial advisor for those who have saved $1,000,000 or more for retirement