Charitable Giving

Have a Plan in Your Charitable Giving

As we move into the holiday season, Americans are being called upon to donate to a variety of philanthropic causes and nonprofit organizations. While charitable giving is a year-round consideration for many, holiday charity appeals and the desire to receive year-end tax deductions make it top of mind at this time of year. According to the Blackbaud Index, which tracks $20 billion in U.S.-based charitable giving, 34% of all donations are made in the last three months of the year and roughly 18% are given in December alone. What's more, a large percentage of charities depend upon a generous holiday season for a significant portion of their annual fundraising. Although you may have traditionally done the bulk of your charity giving at the end of the year, we'd like to encourage you to do things differently. Much as with open enrollment season, it's advisable to plan ahead with your charitable giving instead of leaving it as an afterthought for the year's end. This article outlines why allocating your resources throughout the year is a better way to go, as well as gives tips for selecting the beneficiaries of your charity dollars.

Charities Need Donations All Year Long

While many givers only think to donate to philanthropic causes around the holidays, charities need resources to facilitate their operations all 12 months of the year. They often find it difficult to plan for their yearly needs and allocate proper funds for outreach when the bulk of their donations comes in at the end of the year. In addition, when charities are inundated with donations during the short holiday time window, they may have to contend with resource allocation issues. For example, a food bank may receive so many boxes and cans of food that it doesn't have space to store them all, which can result in waste and missed opportunities to feed those in need.

To help mitigate donors' tendency to give mostly or solely during the holidays, some nonprofit organizations have shifted their fiscal year-ends from December to an earlier month, such as September. This change enables them to better budget their holiday donations throughout the year to cover key services. Donors can also benefit from changing the way they manage their charitable donations. Contributing year-round instead of only at holiday time can help you better budget your finances and prevent you from falling short at the end of the year.

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How to Choose the Charities to Give to

Even if you're resolute in your desire to donate to charity—at holiday time or throughout the year—you may wonder how to decide which charities should receive your donations. Here are some suggestions to help make the selection process easier for you:

Consider your passions: Take a few minutes to think about the causes you're passionate about. Do you want to help children, senior citizens, animals, the environment or a religious organization? Or would you like to contribute toward the research and treatment of a disease that has affected your life or the lives of your loved ones? Think about the causes you'd like to champion this year. You can always shift your focus next year or beyond.

Narrow the field and think outside the box: Within your top one or two areas of interest, select a small number of charities to support. It's better to give to three or four charities generously than to 10 organizations nominally. It's also a good idea to support less popular charities, perhaps those that are community-oriented, as such groups generally have a harder time meeting their donation goals. While a national cancer charity may have no problem raising money, for example, a local hospital may be struggling to raise funds for its new cancer wing and would really appreciate your contribution.

If you would like guidance on selecting reputable charities, here are a few websites that can help:

  • The Greater Cincinnati Foundation: If you want to focus your charitable giving locally, the GCF Community Funds are an excellent place to start. These funds are organized around seven of the Cincinnati area's greatest needs, including cultural vibrancy, economic opportunity and educational success.
  • Charity Navigator: This is the country's largest and most utilized evaluator of charities. Charity Navigator's rating system examines the financial health, accountability and transparency of each evaluated organization. You can search charities by name or browse 11 key interest categories.
  • CharityWatch: The groups included on CharityWatch's top-rated list generally spend 75% or more of their budgets on programs and have met key governance benchmarks. Top-ranked organizations are listed within 35-plus interest classifications, and each group is given a letter grade.

Once you're clear on the charities you're going to contribute to, it's a lot easier to turn down any additional donation requests you receive. You can simply state, “I'm sorry, but that's not one of the causes I'm supporting this year.”

Decide how much and how to give: The average American gives about 3.1 percent of his or her pre-tax income to charity, and the average household donates $1,620 each year. Of course, how much to give is a very individual consideration and can vary over time and based upon life circumstances. Charity Navigator offers a simple calculator that uses your federal income tax bracket to help you decide the best charitable giving amount for you.

In terms of the logistics of making charitable contributions, many organizations are now set up to accept monthly donations. You can sign up to have your desired donation amount processed each month via an automatic checking account deduction or credit card payment. This helps with your monthly budgeting while assisting charities in planning for their revenue. With automated donations, charities know how much will come in from donors each month, so they won't be caught short in funding their operations and outreach.

We hope we've convinced you of the value of creating a plan for your charitable giving. As 2016 draws to a close and you're writing out your holiday donation checks, we encourage you to take some time to think about what your plan is going to be for 2017. Allocating a short period of time now for these considerations will enable you to begin next year powerfully and help make your charitable giving more focused and impactful.

How Do You Give? Ways to Help Your Favorite Charities

If you’re like many Americans, you want to give to the causes and charities you believe in. Generosity is a tradition in America, after all—and one that’s getting stronger. Charitable donations last year reached an all-time high of $373.25 billion, according to Giving USA 2016: The Annual Report on Philanthropy for the Year 2015. But how do you give? Do you write a check to a charity you like? Do you set up a donor-advised fund? Or do you do something else altogether?

Your answer depends on the amount of involvement you want. Obviously, donating a one-time gift to the Red Cross is less complicated than creating a family foundation that you envision your great-grandchildren running. In addition, you want to consider the kinds of assets you’re giving and the tax advantages you’ll receive. Developing a charitable giving strategy can help you refine your goals and priorities, making it easier to decide on the how of your philanthropy.

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Following is a list of opportunities for giving, ranging from the least complex to the most:

Outright gifts: You can use cash, write a check or pay with your credit card—the result is the same. You support a cause you like as little or often as you like, and you don’t have to be involved in any other way. Assuming the organization has 501(c)(3) tax-exempt status, you get a tax deduction up to 50% of your adjusted gross income (AGI).

You don’t have to limit your gifts to cash. You can also give appreciated stock and other long-term capital gain property. By donating the stock directly rather than selling it and donating the proceeds, you can give a big boost to your charity. That’s because by donating the asset, the capital gains that selling it would trigger no longer apply. Meanwhile, you can get a tax deduction up to 30% of your AGI.

Donor-advised funds: DAFs are becoming an increasingly popular way to give, especially for people who don’t want the regulatory and administrative hassles of a private foundation. DAFs, such as from the Greater Cincinnati Foundation, are flexible. You can donate everything from cash to long-term capital gain property to life insurance policies—and in some cases, even bitcoin—and you will receive an income tax deduction for your donations. Any gifts that cannot be deducted in the current year can be carried over and deducted for up to five years following. And you can give now but decide later who receives your money. DAFs are particularly convenient for making a gift of appreciated stock or mutual fund shares and then granting gifts to several charities. So one gift of $25,000 can be split multiple ways with less paperwork. You can also manage the timing of gifts to make a large gift now for immediate tax benefits but spread the disbursements out several years in the future.

DAFs are popular because they are flexible; however, if you want absolute control over the charities that receive your donations, you might want to reconsider. DAFs are called “donor-advised funds” because your role is to advise. You advise the organization holding your account about the charities you want to give to. The organization ultimately decides. However, it’ll generally follow your wishes for qualified charities.

Private foundations: Setting up a private foundation allows you a long-term—even multigenerational—way to build a legacy. It allows you to involve your family members, thus passing on your values to the next generation. A foundation is similar to a DAF in that it allows you to fund it immediately and choose recipients later. However, private foundations are more expensive to operate and have more legal restrictions than DAFs, and the income tax deductions you can take are generally less. Where the administrative and legal requirements of a DAF are handled by the charity managing it, with a private foundation the responsibility is yours. However, unlike a DAF, you retain control over the distributions, making this setup especially attractive for ultra-affluent individuals and families who want to make philanthropy a cornerstone of their life.

When it comes to generosity, there is a universe of options you can consider. In addition to the above possibilities, you can employ charitable lead or remainder trusts, IRA rollovers and bequests in your will. When deciding what avenue works best for you, consider your personal and financial goals, the level of complexity and control you want, and the amount of time you can invest. Regardless of your decision, you get the pleasure of knowing you helped someone who needed a helping hand. And that makes your time, effort and expense worth it.


Creating a Charitable Giving Strategy

Whether you have $1,000 to give or $1 million, a charitable giving strategy can help you allocate your donations so they have the greatest impact.

In the Spirit of Giving, Consider Your Community Foundation

As the holidays and end of year quickly approach, many people turn to thinking about charitable gifts. The Thanksgiving and Christmas season is a popular time for charitable giving, both for expressions of gratitude and giving as well as income tax deductions for the current calendar year.

The most universal guideline of how much to give to charity is the biblical principle of tithing 10% of your income.
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Develop a Charitable Giving Plan

Ideally, you should first develop a plan for how much to give and to what organizations or causes. Ideally, the amount you give will be commensurate with your income and assets, so the higher your income and assets, the higher your charitable gifts are as a percentage of your income and assets. The most universal guideline of how much of your income to give to charity is the biblical principle of tithing 10% of your income. As always, the best advice is to set a goal and have a plan.

Cash (in reality, money given via checks and credit cards) is the most common form of gifts. (We are addressing financial gifts here, but gifts of time and services are equally important.) If you have appreciated stocks or mutual funds, however, giving appreciated securities has an additional benefit: avoiding capital gains tax. If you give an appreciated investment to a tax-exempt charity, they can sell the investment and convert it to cash without paying any capital gains tax.

Giving appreciated stocks or mutual funds to charity can become administratively difficult if you give to multiple charities during the year. An attractive option is a donor-advised fund (DAF) at a community foundation, such as The Greater Cincinnati Foundation. Many communities have a community foundation. A DAF offers tremendous ease and flexibility. You can make one gift to your DAF at the community foundation and then request that grants be made to your list of charitable organizations. A DAF also allows you to separate the timing of gifts for tax purposes. For example, you can make a gift to your DAF this year for the income tax deduction, and either request grants to your favorite charities this year or in the future. A DAF also allows your stock or mutual fund to be sold and invested in a more diversified portfolio pending future distributions to charities.

Consider a Donor-Advised Fund

We are happy to help you learn more about a donor-advised fund at a community foundation. There are many uses and advantages of a donor-advised fund at a community foundation and we have only highlighted a few of them here. Most important, develop a goal and a plan for your charitable giving—it's the gift that keeps on giving.