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'Tis the Season … Give Wisely!

By December 1, 2014June 16th, 2016Advanced Planning

While it is important to think charitably throughout the year, the holiday season is what many people signify as a time of giving. This not only has to do with family but to the charitable organizations we desire to support. A November 2014 report published by Charities Aid Foundation (CAF), World Giving Index 2014 – A global view of giving trends, provides insight into the scope and nature of giving around the world. CAF is a leading international charity registered in the United Kingdom, with nine offices covering six continents and more than 160 countries. They focus their rankings on, 1) donating money to a charity, 2) volunteering your time to an organization, and 3) helping strangers or someone you didn’t know who needed help.

As the report findings state, this year the United States is the only country to be ranked in the Top 10 for all three of the charitable giving behaviors covered by the World Giving Index. It is actually ranked #1 overall, along with Myanmar, reflecting how important each country’s distinctive culture is in the predilection of its people to be charitable. Interestingly, only five of the countries in this year’s Index Top 20 are members of the G20, a group representing the world’s largest economies. Eleven G20 countries are ranked outside the Top 50, and three are even outside the Top 100. All this to say that giving is about more than just existing wealth.

For additional information on donor-advised funds and how to set them up please give us a call.

All three of the charitable giving behaviors mentioned above are critical in helping to meet the various needs both here and abroad. Our focus in this article will be on one popular method of donating money to a charity; donor-advised funds. Before delving into this avenue of giving we wanted to mention a word about volunteering your time. While it doesn’t cost a dime, finding that free time to help someone in need can be worth so much more than just donating money. If you are looking for a way to start volunteering, or to do more of it, then consider two simple things such as identifying an organization that supports a cause you’re passionate about and asking where they need the most help. This is a great step in the right direction.

What is a Donor-Advised Fund?

A straightforward way to optimize giving throughout the year is with donor-advised funds. They are tax-advantaged accounts to which donors can contribute cash, securities, real estate, art and other valuables for eventual distribution to charities. Donor-advised funds allow folks to contribute to the account at any time – and claim an immediate tax deduction – but can also be flexible in determining when and how to distribute the gifts. For example, a donor might make several tax-deductible donations to a donor-advised fund account throughout the year as part of a plan to give a large, one-time gift to an organization later in life.

Additionally, a considerable benefit of giving in this manner is that you have the ability to contribute appreciated securities or other assets instead of having to sell the security first, incur capital gains taxes, and then donate the cash. This can be very beneficial in avoiding capital gains taxes on those assets, meaning more money goes to the charity. In fact, Kim Laughton of Schwab Charitable says donors are increasingly sensitive to the fact that while giving is always good, giving wisely is great. “Charitable planning is becoming a natural part of financial planning and wealth management discussions”. Please see the example in the table below to understand how a donor-advised fund allows you to think strategically as a way to maximize charitable gifts over and above purely giving cash.


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Lastly, aside from the manner in which you choose to give, support organizations that have touched your life in some way. Consider the following as you decide which charities are deserving of your support:

  • Specific organizations: Reach out to organizations you are thinking of supporting. Ask questions about how they are run, how much of your donation goes to support the cause, and how they typically prefer to receive gifts. Also consider reviewing the organization’s financial statements and staff turnover as a means of due diligence.
  • Leave a legacy: Consider speaking with your estate attorney to discuss ways in which you can weave giving into your estate plan. This can be a great way to pass down values to your heirs and ensure they know which charitable organizations to support in your memory.

In closing, for additional information on donor-advised funds and how to set them up, plus other important features not necessarily described here, please give us a call. We are happy to explain the benefits in greater detail relative to your individual financial situation.