Year-End Giving Considerations

Year-End Giving Considerations

We have just flipped the calendar to December. That prompts many of us to ponder our year-end charitable giving.

Some people dash off checks to the same organizations year after year, presumably after giving a bit of thought to the list and making sure their opinions of those groups remain the same.

Others survey the landscape of groups doing good work and quickly become overwhelmed. How do you choose whom to support?

Ultimately, only you can answer that particular question, but we have identified four items to consider as you work through the process.

The common thread? A donor-advised fund account makes achieving all these steps easy, and offers a tool for a long-term, strategic, smart way to handle your philanthropy.

(content for this post is drawn from a booklet DonorsTrust put together at the end of 2016 called Considerations for Year-End Giving, which you can download here.)

Consider Supporting Liberty

Let’s start with focus. At DonorsTrust, our clients take the view that supporting limited government, personal responsibility, and free enterprise with their charitable dollars maximizes the impact that a free society has on our collective ability to prosper and flourish.

The principles of liberty frequently face attack. Why not use your charitable giving to serve as a bulwark against this?

Lawson Bader put it this way in the first article in the Considerations booklet:

Donors today have a role to play in turning the tide. I’ve met many people who lump their giving to such policy fights as part of their “political giving.” Those same people often think much bigger when it comes to gifts to their giving to “real charities,” the civic, religious, artistic, and medical non-profits that also do important work.

I propose that this is a mistaken way to see things. Good policy enables citizens to make their own choices, to determine their own path and to create a richer and more prosperous society.

Our clients at DonorsTrust want to see civil society strengthened, and they give to a wide range of causes – many in the public policy space – that support allowing people to embrace their freedom, take personal responsibility, and operate with a sense of self-determination.

As you survey the many charities requesting grants, ask yourself which ones most specifically work to preserve the ideals you most cherish.

Consider Simplicity

Giving should not be overly cumbersome. Yet, sometimes we make it hard on ourselves.

Don’t.

That my sound overly simplistic. A giver has a lot to think about including assessing funds available, knowing where to send a check or where to donate on the website, remembering to make time to do it, keeping up with the receipts, and in some cases ascertaining the tax implications (more on that in the next section).

Then there is timing. One feels the need to make all these decisions before the clock strikes midnight to ring in the new year, lest we forfeit any tax deduction we might otherwise get.

A donor-advised fund minimizes all these worries. At first glance, it seems counter-intuitive to add a tool when you are attempting to simplify. In truth, like any tool, a donor-advised fund gives you a platform to meet your tax and timing needs while also turning over the work of check writing, due diligence, and correspondence to someone else.

That certainly sounds easier to me.

Consider Tax Savings

If you’ve read this far, you likely aren’t the sort of person who makes charitable donations simply to save a little on taxes. You have real charitable intentions.

However, being selfless in giving doesn’t mean you need to completely ignore self-interest. Tax benefits come with making charitable donations, so we shouldn’t ignore this practical aspect of giving.

The trick, as we alluded to earlier, is ensuring your donation gets to the charity, or is at least postmarked, before January 1st – otherwise, the gift rolls over to the next tax year, delaying your deduction.

Donors giving significant portions of their income to charity have other considerations. DonorsTrust CFO, Jeff Zysik, explains in reference to donating to donor-advised funds and other public charities:

Cash donations of up to 50% of your adjusted-gross-income (AGI) can be deducted in the year the cash is contributed to a DAF account; and you can donate long-term capital gain property, such as publicly traded stock, avoid capital gain on the sale of the stock, and claim a deduction of up to 30% of your AGI in the year of the donation.

This compares to a 30% AGI limitation on cash gifts and a 20% limitation on gifts of long-term gain publicly traded security donations to a private charity, such as a private foundation.

From a tax planning perspective, a donor-advised fund is particularly helpful when a donor has charitable assets to give in the current tax year, but needs more time to determine exactly which organizations will ultimately receive that charitable gift.

Don’t ignore the tax side. Giving in an advantaged way allows you to give more overall.

Consider Legacy Security

Your gifts this year will likely influence your future philanthropy. As you contribute to o an organization, you build a relationship and a history. However, it can be hard to break that cycle of giving – even when your interests change.

For this reason, we recommend focusing not just on who you are giving to, but why you are giving in the first place. What is the change you wish to see in the world?

This is the first step in clarifying your donor intent.

The idea of donor intent sits at the heart of DonorsTrust’s mission. Kim Dennis, our co-founder and chairman, had a front-row seat to the John M. Olin Foundation’s rise and eventual closure, a planned sunsetting that ensured Mr. Olin’s original vision could never go off the rails.

Kim advises all of us to think in terms of how we preserve our legacy:

You don’t need a large foundation to create a road-map for your giving. No matter your giving vehicle, and no matter the size of your estate, you have the power – and, I would say, the prerogative – to define the charitable legacy you wish to leave behind.

Her article in the Considerations booklet suggests some ideas for spelling that legacy out.

Why pause to do this now? First, don’t assume it needs to be perfect. It is, however, important to thoughtfully consider your charitable goals in a big-picture way. That exercise may change exactly how you allocate your donations.

Perhaps, instead of supporting a handful of organizations at a small level, you might take all those funds and give them to a single organization right in the sweet spot of your goals.

When you are clear on your intent, seemingly difficult decisions such as this become much clearer.

This Year’s Giving

Our giving will never be perfect. Too many organizations do good work, and our financial resources can only go so far.

That said, with a bit of planning and a smart tool, we can stretch your year-end giving to achieve a greater impact than it might otherwise have. Download the full Considerations for Year-End Giving booklet and boost your giving this December.

About the Author

Peter Lipsett Peter Lipsett
Peter Lipsett is director of growth strategies at DonorsTrust. He also leads DonorsTrust’s Novus Society, a network of donors under 40 committed to growing their philanthropic know-how. He has a dual degree in political science and theater from Davidson College and finally got a practical credential with an MBA from George Mason University.

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