Helping clients optimize their charitable giving strategy

Supporting a meaningful cause can provide great personal satisfaction to individuals and families. With careful planning, it can also offer a range of tax and estate planning benefits.

As a financial professional, you can help clients design and implement a charitable giving strategy to help them meet both their philanthropic and tax goals. And you can highlight your value by working with a client’s estate planning and tax professionals, ensuring the right team is involved for a strategic and coordinated planning effort.

Getting there takes asking the right questions, understanding what motivates them and what success looks like. As part of this process, consider these five simple factors: Straightforward, grounding questions to help you understand clients’ charitable mindset, objectives and readiness: 

1. Why:  Understand the reasons for giving. What motivates and shapes the client’s giving philosophy?
2. Who:  Which organizations do they wish to support?
3. What: What types of assets do they plan to give? Have they considered all options in order to maximize the impact to the recipient and themselves?
4. How: Which gifting vehicles are right for them?
5. When: What is their giving timetable?

Here’s how to use these five questions to help uncover crucial information to build a high-impact and strategic charitable plan.

1. Why do you give? 

When it comes to charitable giving, most people are driven by some combination of personal values, faith and life experience. And there are many ways to put their desire to give into practice.

Do they want their name on a building or are they seeking to support immediate and urgent needs? Are they looking to advance a cause that’s meaningful to them, continue their family’s philanthropic legacy or are they focused on offsetting income or estate taxes?

Our investor-facing guide to charitable giving can help you get more specific as you help clients shape and share their charitable giving philosophy and priorities. Getting to the “why” can help maximize the impact of their giving both for themselves and those they’re seeking to support.  

2. Who do you want to benefit?

Some people have long-standing relationships with personal causes. Some respond to urgent needs that arise in real time. And while there are those who focus on local charities, others take a global approach. In reality, most mix and match pet causes with ad hoc giving.

Are they itemizing?

Before examining a client’s giving patterns and plans, it’s important to answer the following question: Are they able to deduct donations? To deduct charitable gifts and see income tax benefits, they’ll need to be itemizing deductions. And recently, the standard income tax deduction has increased, reducing the number of taxpayers who benefit from itemizing deductions.

The following questions can help you take stock of clients’ existing charitable organizations and vet potential new ones.

Which charities are you already supporting? Which are you considering supporting? When it comes to charitable giving, many clients are reactive.  Often they buy one-off tickets to events or support the pet causes of friends but lack a plan of their own. Encouraging them to be more intentional and programmatic about their charitable giving can help them increase their impact on causes they care about the most.  You can help by guiding them through steps like consolidating donations, paring down the number of causes they support or aligning their giving with their volunteering efforts.  

Are you donating to a “qualified” organization? Qualified organizations include nonprofit groups operating solely for religious, charitable, educational, literary or scientific purposes, or certain other causes as defined by the IRS. Deductions are also allowed for gifts to community foundations, donor-advised funds, supporting organizations and private foundations. To determine if an organization qualifies, go to the IRS website: irs.gov/teos

Remember tax exempt does not mean tax deductible. An organization being “tax exempt” doesn’t necessarily mean that contributions to it are tax deductible. Generally speaking, a charity must have so-called 501(c)(3) status in order for contributions to be tax deductible so before donating, use the aforementioned IRS tool to get the details.

Are your specific donation types eligible? Certain types of donations/contributions are not deductible. These include contributions to a school as a substitute for tuition, donations in exchange for college athletic event seating rights or giving to civic leagues, social and sports clubs, labor unions, chambers of commerce, foreign organizations, lobbying groups, political groups and candidates for public office. Before donating, it’s important to make sure the gift is deductible.

How do your donations impact your tax picture? To some clients, working to optimize the tax benefits of their giving somehow “doesn’t feel right.” Perhaps they believe doing so taints their giving or reveals self-interested motives. Their conviction can be stubborn and unproductive. Advisors can help clients overcome it by showing clients that often, the approach with the most tax benefits also makes the biggest impact on their recipients. A tax professional can provide a clearer picture of the impact donations have on a client’s tax picture.

Important changes to deduction rules: The One Big Beautiful Bill Act (OBBBA) signed into law in 2025 has potentially significant implications on tax deductions related to charitable giving.  The following are effective beginning in the 2026 tax year:

• New floor on charitable deductions. Those who are itemizing deductions can only deduct charitable contributions exceeding 0.5% of their adjusted gross income (AGI). So, for example, those with AGIs of $300,000 will only be able to deduct donations above and beyond a $1,500 threshold; for those with AGIs of $1,000,000, the figure is $5,000.

• New cap on itemized deductions.  The new rules cap the maximum tax benefit for charitable deductions at 35%, even for those whose marginal tax bracket is higher.

• Non-itemizers can receive a charitable deduction.  All filers, including those who do not itemize deductions but instead take the standard deduction, can deduct up to $1,000 ($2,000 for those filing jointly) for donations to public charities. Some types of donations are ineligible for the deduction, including contributions to donor-advised funds (DAFs) and supporting organizations.

• Permanent charitable deduction limit. The 60% AGI limit for cash contributions that had been temporary has been made permanent beginning with the 2026 tax year.

Planning considerations:  In light of these changes, clients, especially higher-income individuals, may want to consider the timing and amounts of their giving. For example, accelerating gifts to 2025 or making larger gifts with less frequency.   Here again, working with a tax professional is important.

3. What will you give? 

Many clients have multiple options when choosing what to donate. Some may default to cash which is easy and efficient. But from a tax efficiency and estate planning standpoint, not always the best choice.

You can help by highlighting the benefits of all giving options. That includes assets like securities and property which may increase their donation’s impact while affording greater tax benefits.

Cash: Cash is easy to give and value, and charitable organizations appreciate the liquidity. But it may be the least tax efficient approach because they may already have paid tax on it.

Publicly traded securities: Donations typically equal fair market value at the time of donation; donating appreciated securities is a common strategy for avoiding capital gains taxes. Donating significantly appreciated assets enables you to avoid the capital gains taxes that could be due if the assets were sold and the gains realized.

Private company stock: Interests in private companies can be donated but bring added challenges. Valuing them can be difficult and exposes donors to scrutiny. And assets are not usually liquid, limiting a charity’s ability to use them.

Property:  Donating real estate or personal property can offer numerous benefits. However, special rules related to valuation, reporting and deductibility may apply.  A tax specialist can help you understand them.

Matching gifts: A sometimes overlooked funding source is matching gifts offered by employers. Terms and amounts differ by organization, but many offer dollar-for-dollar matching (and in some cases more) to qualified organizations up to certain limits.

4. How are you set up to give?    

Beyond what they wish to give, is the question of how they wish to give it? And underneath that question is another pivotal one: Whether to give during one’s lifetime or at death?  These decisions can have significant short- and long-term tax implications and should factor heavily into their will and estate plans. The good news is there are many options and structures to accommodate differing needs and goals. Together with their estate planning specialist, you can guide them on which of the following approaches is right for them:

Outright gifts: The simplest strategy of all, cash gifts can be made outright or through a will or trust. Contributions are easy to value, and they move money out of the client’s estate, reducing the associated tax burden.

Bequests in a will: Within their will, a client can designate portions of their assets or estate to be donated to their chosen charity(ies), ensuring their charitable intentions are carried out after death.

Donor-Advised Funds (DAF): Making charitable contributions through a donor-advised fund can offer an immediate tax deduction and allow clients to stretch their giving out over time. They are often used to “bunch” contributions and give sizable amounts in high-income years, which may help reduce taxes on that income. Contributions to DAFs are invested according to the client’s guidance and donations directed to their chosen charities.  One caveat: Once assets are contributed to a DAF, they cannot be reclaimed.

Naming charities as retirement asset beneficiaries: If a client is making a charitable donation at death and has a retirement account, such as a 401(k) or individual retirement account (IRA), assets from that retirement account should be considered to fund the donation. Because retirement assets tend to receive less favorable tax treatment than assets in other commonly used estate planning vehicles, it can make sense to earmark retirement assets for charity rather than heirs.

Qualified charitable distributions (QCD): QCDs are distributions made directly from an IRA to a qualified charity during a client’s lifetime. They count toward the required minimum distributions (RMD) and are not included in taxable income. No deduction is allowed for a QCD, but it is an “above the line” reduction of income. To be eligible, donors must be at least 70½, and the total QCDs in any year cannot exceed $108,000 per person for 2025.

Charitable Remainder Trusts (CRT): Different trusts can be used to support a client’s chosen charities, leave a legacy to loved ones and reduce their taxable estate. For example, CRTs can provide clients or their beneficiaries with income for life, with the remaining assets going to charity upon death. Potentially suitable for those wishing to retain control over their assets while alive. These trusts may make sense for clients who need to diversify out of highly appreciated concentrated positions because they allow you to exchange those assets for the equivalent value of shares in more diversified assets without immediate tax consequences.

Charitable Lead Trusts (CLT): Think of a CLT as a CRT in reverse. CLTs pay a fixed amount to charity for a set period, after which the remaining assets go to the client’s named beneficiaries. CLTs can minimize future estate taxes by lowering the value of the assets that will eventually pass to heirs.

Retirement assets: One rule of thumb among estate planning experts is this: If a client is making a charitable donation at death and has a retirement account, assets from that retirement account should be used to fund the donation. Of course there are exceptions, but generally speaking retirement assets receive less favorable tax treatment than assets in other commonly used estate planning vehicles. So when working with clients to create an estate plan, it may make sense to discuss earmarking retirement fund assets for charitable giving objectives rather than heirs.

5. When? What is your time horizon for donating?     

Several factors influence clients’ decisions about when to give. Some wish to witness their donations making a difference in their own lifetimes. Or they may desire to personally model philanthropic behavior to be continued by their children and grandchildren – an often underappreciated benefit of giving while alive.  Others may aim to maximize the estate tax benefits of their charitable giving by scheduling bequests to be made at the time of death.

Whatever their goals, the timing of their giving should be a primary consideration in their strategic plan. For example, donating highly appreciated assets can help reduce income taxes during a high-income year, while certain types of trusts can be structured to provide a much-needed income stream in retirement before the assets are eventually donated.

Some questions to help guide this conversation include:

• How does the client wish to balance giving while alive with giving through their will and estate?
• Is the client weighing fluctuations in income and/or tax bracket when making donation decisions?
• Has the client considered employing a “bunching” or bundling strategy that allows for sizable gifting, often through a donor-advised fund (DAF), during high income years?
• Is the client thoughtfully timing gifts of highly appreciated securities to be able to deduct their fair market value and minimize capital gains tax?
• Is the client taking advantage of vehicles such as split interest trusts like charitable lead trusts (CLTs) and charitable remainder trusts (CRTs) to provide for loved ones and pursue charitable goals?
• For older clients, would charitable giving through QCDs help reduce the tax impact of required minimum distributions (RMDs)?

To support your client engagement around charitable giving, our list of discovery questions can help you get the philanthropic conversation started.