Enid's Blog

Seven Steps to Better Charitable Giving

You make donations, but do you give well? Here’s a roadmap to better giving, now and later.

1. Capture your Commitments

Make a list of the organizations you have supported or plan to support in 2016 and the total amount you’ve given to each. Include walks, drives, sales, thrift store donations, fundraising events, auctions, and donations with cash, by check or by credit card. Then add the non-profits where you volunteer. Calculate the amount of time you spend each year, then multiply the number of hours by the value of an hour of your time. Add up all the subtotals to see your total charitable commitment.

2. Ask Yourself “Why?”

For each organization and with just a few words, answer the question, “Why did you make this gift?” Habit? Loyalty? Perceived obligation? Passion for the mission? To honor someone? Write down your primary motivation. Highlight or bold the gifts that have given you the most satisfaction. Why did you select each of them?

3. Make Mission and Metrics-Based Decisions

Can you identify the mission of each organization you support? Do you know how your charitable gifts are used by the organization? Do you care about the particular programs and how effective they might be? How closely aligned is your giving to your personal values? Hint: if alignment isn’t there, you probably have little satisfaction in giving and it feels more like paying a bill. Rate yourself by choosing one of these four categories for each entry: Mission alignment? Values alignment? Both? Neither?

4. Be Tax-wise and Leverage Your Giving

If you itemize, consider the value of your charitable income tax deduction and any Colorado child care charitable tax credit you might receive to figure out the actual net cost of your gifts. Look at whether this is a tax year where charitable deductions would reduce your overall tax rate. Calculate your tax savings and consider using your savings to enable additional giving.

5. Give from Assets too!

Now think beyond just your income about whether you have any appreciated assets that could increase your giving capacity further based on the net cost after possible capital gains tax avoidance. You may find you can be even more generous.

6. Get Tough

When you get this far, you are ready to create a focused annual giving plan that is based on an alignment of your values, the organizations’ capacity to deliver results, your understanding of your capacity to give from both income and assets and acknowledging the real cost of your gift after taxes. Eliminate the organizations where your alignment and satisfaction are low. Review the top few organizations on your spreadsheet and consider increasing your support. You may even want to look into related organizations or explore a new impact area. Make your giving thoughtful and purposeful.

7. Plan Longer Term

If you are already a significant, thoughtful donor with an annual giving plan, think beyond where you are now. Commit to multi-year gifts, restricted gifts for a purpose, gifts of complex assets, life income gifts and beneficiary designations/bequests. Consider gifts for capital projects and for endowments for the sustainability of the organizations you want to thrive.

Bottom line for better giving: if you don’t have a plan, create one. If you do, review it, prune it, and focus. Use your charitable deductions to leverage your gifts so you can give more. Think about giving assets, giving with impact now and planning ahead for yourself and the organizations that matter to you.

And remember, while it is never too early or too late to give, if you want a tax deduction for 2016, your transaction must be fully completed (postmarked, processed, transferred) before December 31st.

A Primer For Donors: 21 Ways To Make A Charitable Gift

Here are some of the ways you can think about strategic giving to a qualified non-profit.

  1. Give cash. (Up to 50% of your AGI can be a charitable deduction.)

  2. Write a check. (Same as cash, but be sure the check is mailed by Dec. 31 for the tax deduction in the same year.)

  3. Use your credit card for a one-time payment. (Ditto-same as cash, but be sure it is processed by year end for your deduction.)

  4. Sign up for a monthly automatic electronic funds transfer. (Easy, but it can feel like paying a bill)

  5. Sign a pledge, then pay it over one year or over multiple years. (Makes it easier to make a larger gift.)

  6. Donate stocks, bonds, mutual fund shares or other equities. (Check out the tax benefits of avoiding capital gains when giving appreciated assets.)

  7. Donate a car, boat, plane, collection (art, books, coins) or other tangible personal property. (Nice way to simplify your life and avoid the hassles of selling.)

  8. Give copyrights, patents, trademarks, or rights like oil, gas, water, or mining rights. (Nice way to give an income stream or illiquid asset.)

  9. Buy into a pooled income fund. (Usually a very low threshold for an income producing charitable gift)

  10. Buy a charitable gift annuity. (Be sure you are working with a reputable non-profit.)

  11. Create a donor-advised fund. (Strategic way to get a deduction immediately, then decide later how to distribute the charitable funds.)

  12. Set up a charitable remainder trust. (Complex but powerful planning tool for giving a larger gift and retaining a life income for yourself or others.)

  13. Set up a charitable lead trust. (Sophisticated tool for transferring assets with tax avoidance on appreciation through a charitable gift of the income from an asset for a period of years to a non-profit.)

  14. Create a retained life estate for your personal residence. (Give the asset, but continue to live there.)

  15. Give an outright gift of property you own free and clear. (Make a large gift, avoid selling hassles, and get significant tax benefits.)

  16. Sell a property to a willing non-profit through a “bargain sale.” (The lower than market value pricing creates the charitable gift.)

  17. Donate financial assets like bank accounts and certificates of deposit through a “pay on death” designation (easy, no immediate impact.)

  18. Name a charitable organization in your will for a dollar amount of money. (Make sure you actually have a will or the State will decide who gets your money.)

  19. Name a charitable organization in your will as a beneficiary of an asset or a percentage of an asset (Another way to designate your intentions)

  20. Name a charitable organization in your will as a beneficiary of a percentage of your estate. (A very effective strategy as it takes into account inflation as well as the possibility of a diminishing estate.)

  21. Name a charitable organization as a beneficiary of an IRD –Income with Respect to Decedent– asset such as an IRA account or retirement plan (Give what may be the highest taxed dollars first.)

Many of these strategies require some advance planning and may have complex rules attached to them, but don’t let that stop you. Freeing up unused assets, for example, can increase your capacity to give. So can life income gifts and/or giving from your estate.

Once you have figured out what to give, think about the kinds of support you can provide to the organizations that matter to you:

  • Funds for current operations of the organization
  • Expendable funds for the ongoing programs of the organization
  • Special funds for specific programs
  • Dedicated funds for starting new programs
  • Capital funds for physical plant construction, expansion or modernization
  • Endowments to provide unrestricted or restricted income

My advice?

Be values-driven, do your homework, and be generous.

Contact your legal counsel, your accountant, or your favorite non-profit for more information about strategic giving. If you would prefer to seek more information confidentially, send your questions to: [email protected].

Portions of the material above are excerpted from a Making Money Matter column originally published in the Boulder Daily Camera, October 17, 2012.