Share With the World
By: Josh Slocum, McClellan Wealth Management


One element of a comprehensive financial management plan you may want to consider is Philanthropic Planning. From smaller charitable donations to setting up a Donor-Advised Fund, there are many ways to incorporate this to meet your personal financial planning objectives. 

Everyone has a different reason for wanting to champion philanthropy, and the process can be confusing. At McClellan Wealth Management in Birmingham, AL, we believe in the power of planning and will work with you to understand this process in depth. If you have considered boosting your charitable efforts, read below on Philanthropic Planning in Birmingham, AL and how to get started

Philanthropic Planning 

Philanthropic Planning identifies ways you might maximize your charitable donations. Including this strategy in your management plan is one of the more direct ways to give to the charities you support and want to see functioning long into the future. On a more personal note, participating in Philanthropic Planning could also minimize taxes, including estate taxes, if assets are set up to give to charities after death. 

Two of the most popular types of philanthropy are charitable giving and setting up a foundation. Both types involve finding ways to set aside money for the benefit of others. By planning how to incorporate charity into your financial management, you might be able to maximize the effectiveness of your giving rather than handing out money at random. After you and your financial planner identify the causes and charities that appeal to you and the personal goals you want to achieve, you will have a plan that you can follow that may maximize your efforts. 

Budgeting For Annual Charitable Giving

Regardless of your income level or tax bracket, you can support the causes that matter to you with proper budgeting. To get the most out of your donations, try narrowing down how many charities you give to. This way, your dollar can make more of a concentrated impact. Also, if it is a cause that is important to you, then you will be more likely to give consistently.  

One way you can budget for charity is by depositing a certain amount of your paycheck into a savings account specifically for donations. Let’s say you can afford to donate up to 7% of your current income. If you decide on that percentage and always set aside that amount, you know you have something to give and get into the habit of setting that amount aside. If your paycheck increases over the years, your donation amount will also increase without changing the percentage. This is similar to a set-it-and-forget-it plan.

Financial Planning With McClellan Wealth Management

If you are struggling to figure out your budget overall, let alone where you can budget for charity, we have the knowledge to help you. We can help make sure that every dollar you earn is utilized to its maximum potential. We will help you analyze your future goals, assets, and liabilities and devise a plan that is adaptable to your lifestyle. Life is not static, and with consistent monitoring and adjustments to the plan as needed, we work with you to help keep your finances on track toward attainable goals

Setting Up A Charitable Foundation

You and your financial advisor may decide that setting up a charitable foundation fits into your plan. These are defined under section 501(c)(3) of the Internal Revenue Code (IRC). As long as the foundation’s purpose is “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports, or prevent cruelty to children or animals,” it is eligible for tax exemptions. Essentially, the purpose must be to benefit the public.

There are private foundations and public charities. Private foundations are funded by a single source, like a family or company, while public charities have to receive one-third of their funds from public donations. Private foundations send grants to individuals and organizations based on their objectives and often give to public charities, but public charities cannot give to private funds. 

If you consistently make large donations, notice that a need isn’t being met, or want to create a legacy to honor a loved one, then setting up a private foundation might appeal to you. These organizations have assets called endowments that are used in investments to provide funds for the foundation’s operations and grants. 

To set up a charitable foundation, you should: 

  1. Define the purpose of the foundation and the guidelines for grants
  2. Decide between a charitable trust or a nonprofit corporation
  3. Apply for an employer identification number (EIN)
  4. File for tax-exempt status with the IRS (Form 1023)
  5. File for tax-exempt status with your state after the IRS approves your tax-exempt status

Starting A Donor-Advised Fund

A donor-advised fund is sponsored by a 501(c)(3) organization. Individual donors contribute to the account, giving the organization legal control over the donations. However, the donor can create stipulations on how the funds are used. These advisory privileges vary based on how the fund and organization are set up. One example of this kind of fund would be donating to a school to fund a student’s education. 

Philanthropic and Financial Planning With McClellan Wealth Management

At McClellan Wealth Management, we specialize in providing effective plans that maximize your financial capabilities. If you are interested in philanthropic efforts or want to get started on your comprehensive financial management plan, contact us online or call us at (205) 208-9868. Let us help you set lifelong goals that are achievable and beneficial to your community. 


*This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal, or tax advisor for specific information pertaining to your situation.  Investing involves risk, including loss of principal. Advisory services are offered through McClellan Wealth Management, a Member of Advisory Services Network, LLC.

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