How to Establish a Charitable Giving Strategy

Giving more strategically can help you be more effective. It is frequently welcomed by those who are in a position to create a legacy of charitable giving and who also want to know how their donations are being used. Anyone who donates money on a regular basis to their favorite charities and causes, however, may refine their giving strategy. Planning your giving can not only make your donations more tax-efficient but also enable you to have a significant positive influence on the charity you want to support. You may develop a plan for charitable giving by using the following advice.

1. Determine a Cause
There are several reasons why people decide to donate. The first step in creating a successful strategy is identifying your reasons for giving. If you are a more seasoned giver, going over your prior donations will help you identify your areas of passion.

Irrespective of your prior experience with charitable giving, you may focus your philanthropic efforts by asking yourself a few specific questions to help you. For instance, what certain issues are you concerned about? What is it that you are hoping for the future generation? You could also think about how your own experiences have shaped you. Perhaps you were awarded a scholarship for college, which gave you access to a chance you otherwise wouldn’t have had. Maybe a loved one of yours battled addiction, and you want to help the recovery movement. All of these may be useful beginning points for figuring out your priorities, values, and interests, which can help you decide what you want to accomplish with your charitable giving strategy.

2. Select the organization(s) you wish to help
While there are a lot of good, deserving organizations to pick from, charity frauds can also be encountered. Make sure a charity is respectable by doing some research before you give to them. It’s critical to comprehend the following while you investigate charities:

• Mission –

What is the organization’s goal or mission? Does it match your objectives for charitable giving?

• Action –

What particular steps does the charity take to carry out its mission?

• Impact –

How does the charity evaluate its impact? Is there proof that the organization has made progress in fulfilling its purpose as a result of its past actions?

• Finances –

Is the charity financially secure?

• Leadership –

Are the leaders of the charity competent and trustworthy?

• Key Contributors –

Who are the organization’s core donors? Do these donors share your principles?

3. Choose your strategy
The next step is to choose the most effective giving strategy. There are several methods to give to organizations, and each has unique features and tax repercussions. Several ways to donate include:

• A direct gift of an asset to a charity –

Cash and marketable securities are the two most popular forms of charity giving. A lot of eligible organizations can also receive less common gifts like food and real estate. Unfortunately, some non-traditional assets, such collectible coins and works of art, might be more difficult to value.

• A gift to a donor-advised-fund (DAF) –

A private fund managed by a third party and established for the purpose of managing charitable gifts on behalf of a business, a family, or an individual is known as a donor-advised fund. It holds donations for both recent and upcoming donations. The donor who contributes to the fund retains discretion over the fund’s distribution schedule and the recipients of gifts.

Consider the case where Mark and Haley Jones gave $100,000 to a DAF at a certain community foundation in 2022. Mr. and Mrs. Jones are no longer able to utilize the $100,000 for their own needs. However, the Jones can decide when (2022, 2023, 2024, etc.) to make donations to their preferred charity. An adviser can manage the size of the donation and the underlying assets still present in the fund. There is no time limit for the money’s distribution, and the Jones are not required to choose just one charity; they are free to select a number of organizations, if they so like.

• A gift to a family foundation –

For the purpose of advancing the family’s philanthropic objectives, a private family foundation is created and supported by a family. A family foundation is typically started by extremely wealthy families, and it is frequently managed by family members who decide how it will be utilized. A family foundation’s charity priorities may shift as new family members manage its finances.

• A gift to charitable trust –

Trusts come in a variety of forms, and some of them can be utilized for charitable contributions. A charity lead trust and a charitable remainder trust are two examples.

In conclusion, charitable giving is a win-win proposition for both the donor and recipient if implemented properly. Seek professional advice from a qualified attorney or financial planner to help you optimize your gifting strategy.