Guiding Your Path to Charitable Giving

During the holidays and looking at the year ahead, our thoughts often focus on how we can give back to our community and help those in need. Giving to worthy causes is hardly a seasonal consideration, but often our busy lives get in the way of thoughtful planning.  Charitable giving can be inspirational and powerful, and spark a deeply personal reflection of our values, evolving interests, resources, as well as the impact of the changing world around us. While we may be moved from time to time to volunteer or support a cause with an urgent need, giving can be more intentional and potentially far-reaching if using strategies to maximize your potential. In this article, we’ll share some helpful resources for you to explore.

Create a Philanthropic Mission Statement. Identify or refine what is most important to you and your family in defining your charitable activities.

A mission statement is a few sentences that crystalize the purpose and scope of your giving. It makes your charitable efforts more effective because it is based on what matters most to you, will help you feel more connected to your charities, and being comfortable with saying no to requests that don’t fit your plan.

Revisiting or expanding the causes for your charitable plan can be done in tandem with identifying the tangible and intangible resources you have to give, volunteer time, gifts of cash or assets, board participation, children/second generation participation, and legacy gifts.

Some additional resources:

A 5-step Toolkit for Family Philanthropy, including worksheets to help craft your Philanthropic Mission Statement.

The Center for High Impact Philanthropy and GiveWell are great resources to start your charitable search, and the TED talk Amplify the Money You Give provides a guide to maximizing the dollars you give. From providing vaccinations to promoting children’s literacy and environmental health, reducing hunger and food insecurity, urban renewal and disaster relief, there are several causes where your efforts can have a great impact.

If you’re interested in focusing your charitable efforts locally, Google your area for a list of applicable charities, like community foundations that can spread your dollars among hundreds of local non-profits. Charity Navigator can provide insight to a charity’s effectiveness scores based on financial health, accountability and transparency.

Choose Your Giving Strategy. Giving is personal; your strategy should be also.

In addition to finding and supporting the causes that matter to you, your charitable donations could entitle you to tax benefits, stretching what you can give even more. Just remember to discuss tax strategies with your CPA as tax laws and benefits change. Legacy planning should involve the help of an estate planning attorney.

These conversations could yield the following strategies for your charitable giving.

#1: “Bunch up” multi-year giving in one year with a donor advised fund

Donor advised funds (DAF) are simply mutual fund style “holding tanks” that enable you to make a gift in one year to garner a charitable deduction, while allowing you the time to decide how much and when to give to desired charities. Lumping several years of charitable giving into one year for tax purposes might allow your charitable gifts to exceed the standard deduction, thereby offering greater tax benefits than a level amount of giving each year that might not exceed the standard deduction.

Currently there is no limitation on when you must distribute funds from a DAF in any given year. Statistics suggest that three-quarters of funds deposited in DAFs by donors are distributed out to charities within five years.

#2Giving appreciated assets better than cash

If you have appreciated taxable investments, you may donate those assets directly to a charity or DAF and get a charitable deduction equal to the market value of the asset. If these shares or units are not sold before the transfer, you are not responsible for capital gains taxes once they are in the hands of a charity. In a perfect world, all or the gains of a good investment can go directly into the coffers of a charity without tax.

#3: Taking required minimum contributions (RMDs) from your IRA to direct them to charity

This strategy helps work around the unfortunate dilemma of not being able to fully deduct contributions if total deductions including the gift don’t exceed the standard deduction. If you direct all or a part of your RMD to charity you don’t report the income. Not only is every dollar given to charity removed from reportable income, it is possible total taxable income could decline as well — like the amount of Social Security that is ordinarily taxable.

#4 Legacy planning with an income stream

Donors with significant appreciated assets frequently consider vehicles like charitable remainder trusts as a way to leave the asset to charity while retaining an income stream for a period of time.

Learning more about your options

An effective charitable giving strategy can dramatically impact not only your life but the lives of those you support. We want to hear all about your charitable plans so we can help you do as much as possible for the causes you care for so deeply.


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