Charitable giving often isincluded in financial and estate plans, and this is the time of year when there’s an increased focus on giving.
But many people don’t optimize the impact of their donations by developing a giving plan.
Few people are deliberate and strategic in their charitable activities. Many gifts are one-off events that don’t involve a lot of planning. Others are made routinely or reflexively.
A solid giving plan can maximize the benefits derived by both the charitable causes and the donor who’s interested in them.
Before we look at the specifics of a giving plan, always keep in mind that it’s quite common for a person’s charitable interests, goals, and plans to change over time. The reasons for a person to give and the objects of contributions change as the person’s life changes, he or she learns more, or the external environment seems to change.
That’s why a giving plan should be reassessed at least every couple of years if not annually. Determine if you are satisfied with how your gifts are being used and their impact, if the causes still are your focus, or if other causes are drawing your attention.
Decide at the outset how you’ll determine if a gift has the intended impact or is effective. With some gifts that’s easy. For example, a cash gift to a food bank might provide a certain amount of meals to those who can’t afford them.
But the effects of gifts that have indirect or long-term impacts, such as donations to medical research, might be harder to assess. Before giving, decide on a way to measure the success of a gift.
Also, consider how the structure of your gifts affects their impact, as discussed below.
The first step in an effective charitable giving plan is to develop a philanthropic purpose or philosophy. As with other financial plans, a donor should have goals and objectives.
One question to consider is whether the impact of your gifts should be local or broader-based, such as regional, national, or global. If you want both local and broader-based impacts, determine the percentage of giving you want in each category.
Then, determine the causes or interests you want to support.
It’s common for people to be interested in diseases or medical conditions that run in their families or affected people they care about.
Some people favor art, entertainment, or other cultural activities. Others seek to support education at certain levels or environmental causes.
Of course, faith organizations are significant beneficiaries of charitable giving.
Some donors want to help people who are in a particular situation while others want to focus on solutions to the causes that put people in the situation. That’s why some people donate to a facility that treats cancer while others fund research into cancer cures and prevention.
A decision to make early in the process is whether to target a small number of causes or give to many different causes.
Some people care deeply about one or two causes or simply want to be identified with them. Their giving is concentrated in those areas. Others want to give smaller amounts to multiple causes.
A benefit of targeted giving is you give more to a particular entity. That’s good for the charity, of course. But it also can give you a higher profile with the organization. You might be able to learn more about what it does and how it is run, among other things. Some people prefer that, while it doesn’t matter to others.
Another step is to decide if you want to do more than contribute financially.
Giving can be supplemented with volunteering. Higher-level donors often are offered seats on boards or committees, where they can learn more about the organization and perhaps influence policies and activities.
But you might learn more about an organization and the cause by being a volunteer who helps in the day-to-day activities.
Some people can offer their professional expertise to an organization. What you can offer depends on your background and the charity, but it is something worth exploring.
Whatever role you take, volunteering is likely to introduce you to interesting people who have at least one pursuit in common with you.
The final step in the plan is to determine how you want to give. Often, both you and the charity receive more when you don’t simply write a check.
Consider first how to maximize the tax benefits of your donations, which can allow you to give more.
In the past, I discussed the tax ramifications of various giving strategies, such as qualified charitable distributions (QCDs) from traditional IRAs and the benefits of donating appreciated investment property instead of cash. I also reviewed long-term gifts that provide you with tax deductions and a long-term stream of income while benefiting the charity, such as charitable gift annuities and charitable remainder trusts. Donor-advised funds are another popular giving vehicle, and very wealthy people often create private foundations.
You can work with a charity to determine the best way to give.
For example, some charities aren’t set up to accept donations of certain types of assets while others can accept many types of assets and help with all the tax-advantaged charitable vehicles.
Of course, decide whether you want to make primarily lifetime gifts or bequests through your estate.
Another good step is to find one or more mentors, or at least some people who are on the same journey as you, so you can learn from each other.
Donating is easy. But making effective gifts and optimizing their benefits requires some work. Your donations can have bigger impacts and help you make more of a difference when you do that work.
Read the full article here
