August is not a time we typically hear a lot about charitable giving. Most donations occur at the very beginning or end of the year, which on top of making mid-year cash flow a challenge for nonprofits, also means that their causes are often out of sight and mind.
In a race to stay front of mind with donors, giving can feel a little chaotic. I know in my house, it’s rare to go a day without receiving a charitable request in the mail. Community organizations, causes we’ve supported in the past, schools we attended from grade school through grad school; most seem to reach out at least three or four times a year.
That’s just the mailbox. Checkout lines at the grocery, fast food or other retail outlets often include donation request. Emails, social media posts and other digital forums notify us about crowdsourcing efforts, a 5k or gala event. Even parking meters have gotten into the act. It becomes easy to lose track of what’s being asked, what’s been given and to which cause.
This puts non-profit organizations in a tough spot. A 2016 study of high net worth households* shows the most common reason for a donor to stop giving to an organization is too frequent solicitation. Yet, the greatest challenge donors claim to face is identifying what causes they care about most and where to donate. In other words, you need to stay in front of donors to stay front of mind, but overdo it and risk alienating your audience.
Make a Plan
What can we do to simplify all of this?
Like any other financial decision, the first best step is good planning.
Charitable giving is a deeply personal subject. Some of us choose to give small amounts to a broad array of organizations. Some choose larger gifts to a few key causes. Gifts can come in many forms. We give our time, our money and our voice by spreading the word about an organization’s mission to friends, family or social media networks.
Whether you want to help those less fortunate, the arts, a religious institution or any organization that at some point supported you, giving is about using some portion of our discretionary resources to help effect some kind of change in the world.
One method we suggest to those who struggle with all the “noise” is to start each year identifying a set amount to give. Obviously, it is important to make sure this amount comes from proper consideration of total cash flow and knowing that you’re taking care of the other aspects of your plan as well.
Next, select those organizations that you’d like to impact and determine what portion of your giving budget will be allotted. It’s typically a good idea to hold back a certain amount of your giving budget for spur of the moment gifts that aren’t included in the plan.
While some of the same studies mentioned above cite fewer and fewer donors are motivated by the tax benefits of giving, it doesn’t mean we shouldn’t seek to be as tax efficient as possible with our gifts.
Gifts can be made at any time of year and cash or check are not always the best forms of payment. Appreciated stocks, mutual funds or other non-cash assets can often help donors avoid capital gains or other taxes while the organization they support receives the full value of whatever is being donated.
Vehicles for Giving
The tools to execute your charitable giving plan are readily available and more user-friendly than ever.
While there are too many to cover today, one great example we implement here at TAAG is the donor advised fund, which we can help you establish through our custodians, Fidelity & Charles Schwab, or community partners like the Greater Cincinnati Foundation and the West Chester-Liberty Foundation.
Gifts are made directly to the fund and then the donor, over time, can requests gifts to be made from the fund to organizations of their choosing.
While these funds are commonly established in years where a business is sold or some other significant financial windfall occurs, there are other reasons why one might want to establish a fund.
Some of the complexity referenced above in the giving of non-cash assets can be made much simpler by establishing these funds. For those who like to think of their money in different buckets, a fund can help separate out those funds intended for charitable giving. They typically come with fairly reasonable fees and, in turn, typically assist in delivering the gift along with a letter identifying the donor and the intended use, help you track where gifts have been made, etc. Meanwhile, all you have to report to your CPA or remember to hang onto at tax time is the one amount contributed to the fund. Simple.
Involve the Family
Sitting down with your children, grandchildren or other relatives to talk about why and how you give can be a great appetizer to discussing larger financial issues down the road. Just like teaching healthy savings habits, getting family members to think about philanthropy as part of their overall financial plan is a great lesson to pass on and can help make giving that much more fulfilling.
As with any decision in life where money is involved, we’re here to help. If you have questions about how to set up a charitable plan, establish a donor advised fund or just walk through some ideas about different giving opportunities in your life, don’t hesitate to contact us today.
Have a great week!
*Households with net worth > $1 million not including a primary residence and/or income of >$200,000