Making an impact: How to put your charity dollars to work

Charitable giving

In times of natural disasters, ensuring your donation is being used in the most impactful way can be a nuanced affair.


The last 12 months has seen its share of weather-related misery for people around the world. If you’re moved to provide financial help to those in need, a number of nonprofit aid organizations may be happy to accept your generosity. But how can you put your charity dollars to best use?

In 2021, American individuals, estates, foundations and corporations contributed an estimated $485 billion to U.S. charities, a 4.0 percent increase over 2020, according to a report by Giving USA.

And while small amounts of philanthropy through giving and volunteering helps, when it comes to larger donations, ensuring your donation is being used in the most impactful way can be a nuanced affair, explains Cathy Walker, a senior trust consultant at RBC Wealth Management-U.S.

“We’ll have a client say, ‘I want to leave a $2 million estate or gift a million dollars to this particular charity’ and in their thought, they’re going to give it all at one time,” says Walker. But a lump sum isn’t always the best scenario. “Some of the smaller charities could potentially lose government support or local support because they all of a sudden have a big balance sheet—we also have to talk about making sure that the money is being used in a way the client feels is appropriate.”

Find a qualified charity

The first step, says Walker, is to ensure it’s a qualified charity—a nonprofit organization registered for tax-exempt status according to the U.S. Treasury.

“If I were making a donation directly to an animal shelter, I would want to make sure the animal shelter itself is in good standing with the IRS,” she says. “Make sure they’re doing what they’re supposed to be doing—are they spending too much money on marketing and support or are they spending more of their money on actually taking care of the animals?”

Once you’ve established the charity aligns with your philanthropic goals, there are several tools that can be used to make sure you retain control over how the money is used while still meeting your wealth management and tax strategy goals.

Create a donor-advised fund

A few years ago, Walker had a client approach her with ambition to give $2.5 million to a teaching hospital in Denver. “They were doing research on something he was personally very connected to, that he felt very strongly about,” she explains. The donor was set to transfer $2.5 million in securities when the trust consultant stopped him. “We said, ‘Be careful, you’re not supporting the entire teaching hospital, what you’re supporting is the research of the particular person.’ “

Handing over a lump sum often means giving up control, something Walker pointed out to the donor. He’d have no rights on how the money was used if the researcher switched to another organization, which is what ended up happening. Luckily, the philanthropist had taken Walker’s advice and set up a donor-advised fund (DAF) where payments could be made on an annual basis.

DAFs are set up as public charities with gifts to the fund qualifying for the maximum charitable deduction. Unlike a foundation, which usually starts around $5 million, DAFs can be established with $5,000.

“I call it Foundation Light,” says Bill Ringham, director of private wealth strategies at RBC Wealth Management–U.S. “(Except you) don’t have to set up anything, the donor-advised fund does all the work and all the reporting.”

While the fund isn’t binding, typically charities go along with the requests of donors and if they don’t seem to align with the philanthropist’s mission, they can re-direct the funds elsewhere.

In the end, it’s about sharing the wealth, says Walker. She points to her client who backed the researcher at the teaching hospital.

“Hopefully, after two or three years they find the answer that they’re looking for,” she says. “And then maybe he wants to support another organization with this money—he’s not tied to having just dumped all in one place and then not doing what he hoped.”


One of the most significant changes to our tax code in recent history came in 2018. This resulted in taxpayers being creative in order to maximize the tax efficiency of their charitable giving. Historically, contributions to public and private charities have been deductible as an itemized deduction subject to certain limits. But under the Tax Cuts and Jobs Act, many taxpayers who previously itemized found themselves benefiting from the standard deduction instead of itemizing their deductions. 

In essence, the income tax efficiency of charitable gifts would have been lost except for the concept of ‘bunching’ charitable donations. By accelerating several years of giving into a single year, so itemized deductions exceed the standard deduction ($12,950 for a single filer, $25,900 for a married couple filing jointly), donations to charity can still offer a tax benefit.

In year one, for example, the ‘bunched,’ or larger charitable donations, can generate deductions that exceed the standard deduction, so overall tax liability is reduced compared to using the standard deduction. In the following years, the standard deduction can be used even though larger charitable gifts aren’t made. And for those looking to continue an annual charitable giving pattern, making the bunched’ charitable gifts into a donor advised fund may be a perfect solution. A donor-advised fund offers an easy way to make gifts over multiple tax years for multiple tax purposes.

Launch a Charitable Lead Trust

A Charitable Lead Trust (CLT) allows a donor to give a portion of the trust income to a charity over a specified period (typically their lifetime or a set number of years.) Through the CLT, the donor can receive either a gift tax charitable deduction or estate tax deduction. After the period has passed, the remaining assets are returned to the donor or beneficiary.

“The benefit here is they’re now controlling how much money the charity gets over a period of time,” says Cyndy Ranzau, a wealth strategist with RBC Wealth Management–U.S. “And most charities will honor your request on how the money should be spent.”

Establish a Charitable Remainder Trust

“A Charitable Remainder Trust is the opposite of a Charitable Lead Trust,” explains Ranzau. Essentially, the CRT is established to receive gifts of cash or other property on behalf of a qualified charity. In turn it allows the donor, along with other family members, to receive an annual payment from the trust for the remaining lifetime of the income recipient or for a term that doesn’t exceed 20 years. When the income beneficiaries die, the remaining assets pass on to the charity.

“It’s an irrevocable trust, meaning it can’t be changed by the donor,” she adds. While CRTs provide a strong tax incentive in that property held in the trust is not currently taxable, the annual payment will likely be at least partially taxable to the recipient. Also, once the donation has been made, only the annual payment is available to the income beneficiary. No additional principal can be distributed.

Set up a foundation

For higher net worth clients, setting up a foundation can be an effective way to influence how your charitable assets are used.

“Often, the client has taken care of their children during their lifetime and now wants to create a legacy that goes on for generations beyond their lifetime,” Ranzau says.

Often these family or private foundations will be run by directors and trustees to ensure they’re executing the donor’s vision. “Foundations are required under IRS guidelines to actually disperse a minimum of five percent of the assets to charitable causes that are in line with the foundation’s mission,” Ranzau adds.

The foundation can target any sort of purpose. For instance, Ranzau has worked with one set up by clients that supports students from rural communities. The trustees of the foundation solicit proposals from universities and donate to one that fit with the mission statement set out by the individuals who established the foundation.

The right option for your charitable giving will depend on your specific situation, but by researching the different tools available to you and speaking with your financial advisor, you can work to make sure your gifts have as large an impact as possible. 

Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.

RBC Wealth Management, a division of RBC Capital Markets, LLC, registered investment adviser and Member NYSE/FINRA/SIPC.

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