Crafting a charitable giving plan is an efficient way to organize your intentions, identify causes that matter to you and develop tax-efficient giving strategies. It also serves to involve family members in philanthropy and instill in them an attitude of giving for generations to come.
When selecting which causes to support, it’s essential that you have an in-depth conversation about your values and priorities. Consider enlisting the help of your financial advisor or family members as you begin prioritizing your list.
Organize Your Intentions
Organizing your intentions can help you prioritize the causes that matter most, avoid reactive last-minute giving that doesn’t further your purpose, and leave a lasting legacy. A charitable plan is an invaluable tool to guide you through this process and guarantee that your generosity is meaningful, sustainable, and efficient.
Many donors begin their strategy for charitable giving by consulting with friends and family, as well as well-known, publicly available sources like GuideStar or Candid.com for advice.
Research also indicates that donors are increasingly turning to their existing financial advisors for assistance. These trusted professionals are able to ask philanthropic questions not often addressed by peers or family members, such as what drives a donor to give and how they can identify a cause or organization aligning with their values.
When making charitable planning decisions or an ongoing giving program, it’s essential to keep your intentions in mind as you select a nonprofit and create the vehicle for giving.
Identify Your Causes
Identifying your causes is a crucial first step when creating a charitable giving plan. It allows you to prioritize your giving and decide which charities best reflect you, your family’s values and the company’s.
If you’re new to philanthropy, it can be tempting to donate money to every cause that takes your fancy. But before doing so, take time to consider a charity’s mission statement, desired outcomes and program effectiveness.
One way to assess a charity’s effectiveness is by reviewing its record of success with previous donors. You can do this by reviewing its reports and speaking to its board.
Ask friends and experts for recommendations on the most effective charities in a given cause area. For instance, global health and animal welfare have specialist charity evaluators who can suggest top organizations within those fields.
Establish Tax-Efficient Giving Strategies
When creating a charitable giving plan, there are several tax-efficient strategies you can utilize. These include donating appreciated stock, qualified charitable distributions and donor-advised funds.
Gifting appreciated securities provides you with a tax deduction for their fair market value at the time of donation, and if the securities are later sold, neither you nor the charity pays tax on capital gains.
Donating to a donor-advised fund is an increasingly popular giving strategy, offering the benefit of taking advantage of an upfront income tax deduction on the value of the contribution. Furthermore, it makes it simpler to maintain an established pattern of charitable giving and streamline record keeping.
Another tax-efficient strategy is bunching, which involves consolidating years’ worth of charitable donations into one year. This can allow your itemized deductions to exceed the standard deduction amount*.
Involve Your Family
Establishing a family charitable giving plan is an excellent way to foster connections between your loved ones and leave behind a lasting legacy of philanthropy. Depending on their ages, levels of independence, and strengths you may want them involved in only one aspect or all aspects of it.
When including your family in charitable giving, it’s essential to start the conversation in an open and respectful manner. This could involve holding a conversation that highlights each family member’s values and passions for philanthropy, or having a meeting that outlines your financial objectives.
Children, grandchildren and other family members should be included in philanthropic planning to develop responsible financial stewardship as well as instill a giving mindset that will be passed on to future generations. Furthermore, engaging younger generations in charitable giving maximizes the effect of each donor’s gifts, leading to more total dollars going towards causes that matter most to each individual.