Charitable Gifting
Hello again! ‘Tis (almost) the season and we’re about to embark on Thanksgiving gatherings and a new season of giving as we head into the holidays. With all this in mind, we want to discuss Year End Gifting to Charitable Organizations.
Whether charitable donations are part of your traditions or not, this is a subject that inevitably pops-up at this time of the year, so let’s give it some thought. The first step in our process is establishing your INTENT: is making charitable donations one of your callings or not? If it is, when is the best time to give (now or later? in life or in death?).
If gifting is one of your callings in life, here are some pointers for you to consider:
Have a giving strategy
Establish an annual budget for charitable contributions that is in line with your financial plan (give us a call, we are happy to help you with this!)
Mindfully choose organizations that you feel connected to (want to promote medical research? Give back to the children’s hospital that helped save your life? Help prevent animal cruelty? You get the idea…)
Decide how to allocate the resources: you can select a few names to give larger contributions and make a bigger impact OR- cast a wider net making smaller but still valuable contributions to many organizations that need your help.
Having a giving strategy allows you to fulfill the desire to give while keeping your financial objectives in check, and it helps honor your intent by donating to organizations that are important to you, as opposed to caving to social pressure every time someone randomly solicits a donation. Honestly, nobody should guilt you into making any donations but if you are prone to feeling guilty for not following through when asked, having a giving strategy shatters any potential guilt and empowers you to say “No, not today” as you know you are already doing your part in other ways.
Be mindful of the tax consequences:
Donating is great, but donating with an eye on tax efficiency is even better! There’s nothing wrong with wanting to derive a tax benefit from your donations.
Consult with your CPA so your giving strategy is compatible with a tax efficiency strategy; the less money you give to Uncle Sam, the more you can donate to make an impact!
To be tax deductible, donations have to be made to a 501(c)(3) organization. Make sure you provide a valid receipt that certifies that classification for the recipient, as well as the date and amount of the donation to your CPA so the deduction can be claimed if applicable. If you like to make donations throughout the year, keep those receipts in a file so nothing gets misplaced when tax time comes.
Check your employer’s matching policies: if your employer has a donation matching policy, make sure you leverage your gift by having them match it so you can create a bigger impact together.
Set up a DAF (Donor Advised Fund): if you want to make charitable contributions but don’t have a specific organization in mind yet or you want to make a significant contribution to an organization but need to save money to get there, ask your financial advisor to help you set up a DAF. This account allows you to set aside tax exempt funds that are earmarked for charitable contributions that can be distributed in the future. It’s a similar concept to that of an HSA account but for charitable contributions instead of health expenses (tax exempt, specific purpose, restricted beneficiaries, future allocation).
If charitable gifting is important to you, consider adopting a gifting mindset not only during your life but also after your death. Make it part of the discussion with your financial advisor and your estate planning attorney. Once again, your intention for giving is the main driver when setting up the strategy as it will determine the beneficiaries, amounts, timing and vehicles established for the execution of your will.
Consider other forms of giving: not everybody has extra cash to go around, fortunately there are alternatives to monetary gifts to contribute to society. Consider in-kind donations (goods, time, talents and other resources) to fulfill your donating bucket.
If making charitable contributions of any kind is not your cup of tea, that’s OK as well! It’s your right to make different choices with your money.
Ultimately, there’s no right or wrong way to give. You can do it now or later, in life or after your death, in cash or in kind or not at all. Whatever your inclination is on this topic, think about it thoroughly and make a plan on how to proceed. If donating is not for you, know that’s totally OK as well!
Reach out if we can help you come up with a plan to run by your CPA, to ensure your gifting strategy allows you to meet your giving intent all while keeping your financial plans in check and achieving tax efficiency.
From everyone here at White River, we want to wish you the happiest of Thanksgiving’s. It is truly our pleasure to serve you and we are thankful to be a part of your families lives.