Creating a plan to make a difference

Charitable giving enables you to improve your community and leave a lasting legacy, whether you support the arts, contribute to your alma mater, fund medical research or help low-income families. While billionaire philanthropists often make the news with huge donations, every contributor makes a difference, regardless of the size of gift that is given.

Whether you want to give hundreds of dollars or hundreds of thousands, a planned approach to charitable giving will help your donations go farther and have a bigger impact. By integrating your charitable giving goals into your financial plan, you can use your assets to their fullest potential and make financial contributions as effective as possible.

Charitable giving tools and techniques

As you plan your charitable giving, consider your values and interests, and think about how you might fulfill past dreams, reinvent your passions and honor loved ones through your gifts. Perhaps you would like to support education programs for cancer survivors, fund sports leagues for low-income youth or contribute to an animal rescue organization.

A planned approach allows you to incorporate charitable giving into your everyday money habits and ongoing financial goals.

With the following techniques and tools, you can make meaningful charitable contributions and gain potentially significant tax or estate-planning benefits.

Cash and goods. When you give directly to a charitable organization (typically a 501(c)3), the charity receives the full gift immediately. However, direct giving generally requires you to keep a bank record or receipt for each charity for tax-reporting purposes. Additional requirements may apply in some cases, depending on the nature and value of the gift. Cash gifts are fully deductible, generally up to 50% of your adjusted gross income in the year the gifts are made. If your total gifts exceed this limit, you may carry the remainder of the deduction forward for up to five years.

Do you give your time as well as your money? You cannot take an income tax deduction for the value of your volunteer time, but you can deduct some of the unreimbursed expenses related to work done for a charity, including a mileage deduction of 14 cents per mile.

Donating appreciated stock or property.

By donating appreciated, publicly traded stock that you have owned for more than one year, you may be able to claim an income tax deduction for the full fair market value of the stock and avoid capital gains tax on the shares donated. Gifts of appreciated stock are generally deductible up to 30% of your adjusted gross income. Similarly, if you own property that has appreciated in value and you donate it to charity, you may be able to claim an income tax deduction. The amount of the deduction depends in part on the kind of property and how the charity uses it. In addition, assets donated to charity are generally not included in your taxable estate.

Giving retirement plan assets. If you're accumulating sizeable amounts of money in your retirement savings accounts such as IRAs and 401(k) plans, consider naming a charity as a beneficiary of your account. Upon your death, the charity receives your retirement savings and there shouldn't be any federal income or estate taxes related to that money.

Bequests. A bequest in your will or trust is a simple way to make a charitable gift. If you're writing or revising these documents, include charities in the written instructions for distribution of your property at death. The money you bequeath to a qualified charity may be fully deductible for federal estate tax purposes.

Donate a life insurance policy. Due to changing life circumstances and other factors, you may have more life insurance than is needed upon your death. There are several ways to donate benefits of a life insurance policy to charity, including naming a charity as the beneficiary of a policy, giving a policy on which you are still paying premiums to charity or having your insurance policy dividends, if any, go to a charity. Your tax advisor can help you determine if any tax deduction is available.

Charitable trusts. Although there are several types of charitable trusts, all are established for the dual purpose of donating to charity and providing for a non-charitable beneficiary such as you or your children. For example, for charitable remainder trusts, one party (for example, you) receives an income stream from the donated trust property in the form of annual payments for a period (not to exceed 20 years) or for life, and then the other party (the charity) receives the remaining property in a lump sum. Charitable trusts may offer a range of federal income, gift and estate tax benefits if all legal requirements are met. Setting these up require legal and tax counsel.

Donor-advised funds. These private funds are administered by third parties and are created for the purpose of managing charitable donations on behalf of an organization, family or individual. After you contribute, the organization establishes an account in your name and invests your gift in pools of specified investments. While you no longer own or control the assets from the gift, usually you can suggest exchanges among investment pools and recommend specific grants. Donor-advised funds provide the immediate tax benefits of an irrevocable gift while giving you time to decide which public charities you would like to receive grants.

Gift annuities. With this strategy, you make a charitable gift of cash, stocks or other property, and then you receive a fixed lifetime annuity payout from the charity. The charitable tax deduction related to the gift portion of the transferred property may lower your income taxes, the annuity payout may be part taxable and part non-taxable, and the charity has the use of funds and keeps any remaining principal upon your death.

Planning your gifts

Charitable giving can be as simple as supporting the church bake sale or as complex as donating appreciated stock to a charitable trust. Working with competent professionals — including attorneys, accountants, tax advisers and your Ameriprise financial advisor — is necessary to implement complex techniques within IRS guidelines and to ensure the effectiveness of your giving plan.

An Ameriprise financial advisor can help you integrate your charitable giving goals into your financial plan and maximize your efforts to build a better world and leave a lasting legacy. If you don't have an Ameriprise financial advisor, call 1-800- AMERIPRISE or search for an advisor in your area.