For some people, financial generosity or giving can be a sore subject, but for others, it can be all that they talk about. Regardless of someone’s level of generosity, most people would tell you they prefer to be more generous. Even though most people’s “giving plan” is a reactive check when a friend or colleague asks, building an intentional generosity piece can have significantly more benefits than simply being kind. Planning your giving relative to your cash flow, taxes, and even estate planning can dramatically change things.
Key Takeaways
- Living beneath your means is a fundamental principle of personal finance, and incorporating planned giving is one way you can help prevent overspending. By allocating part of your income to a cause, you are forced to manage the remainder more carefully.
- Planned giving can provide significant tax benefits when you approach it strategically. Donating cash or appreciated assets, like stocks, can offer deductions while potentially avoiding capital gains taxes. Tools like Donor-Advised Funds and Charitable Remainder Trusts allow donors to maximize tax efficiency by controlling the timing and distribution of their charitable contributions.
- Generosity plays an important role in estate planning and lifetime giving, allowing individuals to support causes while managing the tax implications. Tools like the annual gift exclusion and lifetime exemption enable strategic giving during life or at death, helping donors maximize their impact without triggering gift or estate taxes.
Generosity and Cash Flow Planning
One of the most basic but important themes in personal finance is to spend less than you make. Whether you run multiple businesses or a 1-person budget, overspending can lead to difficult situations and many times, into crippling debt. For centuries, generosity has been one of the best ways to combat overspending. Especially with planned giving, knowing beforehand that some of the revenue or income coming in is not for you, can change the way you spend money.
Likely, most people have heard of the biblical concept of tithing, where church members should give 10% of their income to their local church. While I personally do not believe there is any magic to the number 10, the concept of the tithe is a perfect example of fighting overspending. Knowing that you should give the first 10% of your revenue or income back to your church/community/group/etc. means that you need to be more intentional with the other 90%. Living on 10% less than what you could live on means 10% more on the needs around you.
At the end of the day, we are all building a financial plan on (the personal side or the business side) that organizes the money coming in to eventually be spent on some need that we have. Sometimes, too much emphasis is put on giving money away and not enough on solving needs in our community. When people realize that money is just a means to some end, then what the ends are becomes more important.
Generosity and Tax Planning
After you have decided to give money away, the process of determining what money to give can have important implications for any tax benefits for doing so. Generally, donating cash to charity can be deducted for those who itemize deductions. Usually, up to 60% of your adjusted gross income can be deducted. There are more rules around donating non-cash items, and in certain situations, it could be a great idea.
One of the most common situations is to donate appreciated assets instead of cash. Many people may own a stock that has grown significantly over the years and may be subject to large capital gains if they ever sell it. One strategy could be to donate the actual shares of stock instead of the cash that someone may normally contribute. Not only will you get a similar deduction for the donation, but also, you would not have to pay any capital gains tax on the shares you would have sold. You can imagine how quickly the tax savings could add up for someone currently sitting on five or six figures of potential capital gains tax.
The timing of giving is one of the reasons why planned giving can be so tax efficient. Placing money into a Donor-Advised Fund (DAFs) or a Charitable Remainder Trust can help with this. DAFs are excellent accounts to help owners and families recognize tax savings for donations without having to give their charities a larger lump sum than they prefer. Instead, you can donate a lump sum to the DAF to get the tax benefit while still giving funds to the charity over several years.
Generosity and Estate Planning
Generosity can also be a very important piece whenever an owner or family is creating or updating their estate plan. Once you must think through the fact that all your money has to go somewhere after you do, some people generally want to donate some portion of their estate to charity or other organizations. Many times, people who want to be generous start asking, “Why should we wait until we die to give money when we could do it now?” That answer is going to be different for each person, especially related to their estate plan, but generosity can be as important while you’re alive as when you are gone.
One of the tactical examples of this is the annual gift exclusion amount. In 2025, you can give up to $19,000 to any single person for the year without any gift or state tax. For married couples, you could technically double that to $38,000 for any single person. Any amount over this annual limit could require a gift tax return and could potentially create a gift or estate tax, but likely for most people, it would not be relevant.
Most people may not realize that, at least on the federal level, the gift tax and the estate tax are the same taxation system. Whether you donate everything or nothing before you die, Americans could be subject to a 40% gift and estate tax if their lifetime gifts and estate value surpass their lifetime exclusion. Next year in 2026, individuals have a lifetime exemption amount of $15 million, and married couples together have a lifetime exemption of $30 million. This means that for all gifts (above the annual exclusion) throughout your life and your final estate after you pass, as long as that is under $15 or $30 million, you will not owe federal gift or state tax. This is why it’s arguably not a big deal to get more than the annual exclusion amount of $19,000 as long as you work with your accountant to track the remaining lifetime exemption relative to your current net worth.
Generosity can create more generosity
Ultimately, generosity and planned giving can affect more parts of your financial plan than most people may realize. Prioritizing giving as a core value for you, your family, and/or your business can change the way you view money. Instead of spending all the revenue or income coming in, deliberately living on less can make the remaining amounts more impactful while giving back to the community at the same time. Focusing on the “how” of giving around tax-efficient assets or accounts can help boost how generous you can be. Finally, building generosity into your estate plan for both before and after you pass can help you be more generous now instead of later. Most people want to be more generous, and usually, building a giving plan can help.
TC Falkner 