Creating a Charitable Giving Strategy

You have a financial plan, a retirement plan and an estate plan. But do you have a charitable giving plan? Given the wide variety of options you have when it comes to charitable giving, it can be difficult to know what causes are most deserving of your money and your time. That's where a charitable giving strategy comes in. [Tweet "Whether you give a little or a lot, a charitable giving strategy helps ensure that the money you share is having a positive impact."]

Who Needs a Charitable Giving Strategy?

If you have significant wealth and plan to give some of it away, a charitable giving plan is a must. A plan will give you more control over how your dollars are used and can also help you manage potentially complicated tax issues. Whether you give $10,000 a year or $1 million, a charitable giving strategy helps ensure that the money you share is having a positive impact.

Determine Your Goals

Before you open your wallet, think carefully about what you hope to achieve with your gifts. Where do you want to make a difference? What issues are most important to you? Is there a specific goal you want to achieve (e.g., helping to eradicate a certain disease, increasing access to affordable housing or supporting a local museum's expansion efforts)? What kind of legacy do you want to leave after you are gone? Charitable giving is most effective when you have a clear purpose for your contribution.

Prioritizing Your Giving

While it would be nice to give generously to every worthy cause, most people have a limited budget for charitable contributions. That means it's important to prioritize your giving so you can make the greatest possible impact. After you've determined your annual charitable giving budget, choose a few causes that are most important to you and divide your money accordingly. For example, you may allot 40% to your alma mater, 40% to a local arts organization and the remaining 20% to miscellaneous causes.

Choosing just a handful of organizations to support can be difficult, but doing so means that your donations will actually be more meaningful. By limiting the number of groups you support, you can give larger amounts. That means your contributions will be more significant and are more likely to be noticed by the organization. If you earn a reputation as a reliable donor, the organization's leadership may be more willing to listen to your concerns, even if the amounts you give aren't huge.

Finally, remember that there are ways to stretch your donations if your giving dollars are limited. Some employers offer matching programs, where they'll match employees' charitable donations dollar for dollar. Many charities also appreciate in-kind gifts, such as office supplies or gently used clothing and household items. Finally, don't forget about the value of your time and expertise. In some cases, volunteering can have a far greater impact (and be more emotionally rewarding) than simply writing a check.

Advanced Giving Strategies

If you're ready to make a large contribution to one of your favorite causes or want to give away a substantial amount of your wealth, it may be time to pursue advanced giving strategies, including:

Lifetime gifts:

  • Donor-advised funds: A donor-advised fund allows you to make a charitable deduction today and receive a deduction on your current-year taxes while also having the opportunity to make suggestions about how those funds are used. Donor-advised funds are typically offered by community foundations such as The Greater Cincinnati Foundation.
  • Family foundations: Private foundations are tax-exempt entities that make grants to charitable organizations. Founders can determine how funds are granted to charities. Foundations allow you a great deal of control over your charitable dollars, but they also involve significant start-up, legal and management costs.
  • Charitable trusts: Trusts are a popular way to give money to charity. They come in different forms.
    • Charitable lead trust: You make a gift to the trust, and a charity of your choice receives interest from your gift for a set period. The amount that remains in the trust after that period ends goes to your designated beneficiaries.
    • Charitable remainder trust: You make a gift to the trust, and you receive interest payments in exchange. At the end of the term, the charity receives the assets.

Gifts at death:

  • IRA beneficiary gifts: Name a charity as a beneficiary of part or all of an IRA (not recommended for a Roth IRA).
  • Life insurance beneficiary gifts: Name a charity as a beneficiary of a life insurance policy no longer needed for other beneficiaries.
  • Investment account or bank account transfer-on-death designations: A simple form to transfer all or part of an account to a charity at your death.
  • Bequests in a will: A bequest in your will is one of the most straightforward and traditional ways to share a portion of your wealth with a charitable organization.

If you're ready to implement a charitable giving strategy, give us a call. We can help you design an approach to charitable giving that fits with your financial and personal goals.