Making the Most of your Charitable Giving

Americans are the most generous humans on the planet. In 2021, we gave nearly five hundred million dollars to about 1.5 million charitable organizations. The charities that received all this money are vital to the many critical programs that our society depends on. The pandemic has created an even greater need to support charities on all levels—local, national, and global.

Here are some ideas getting the most bang for your charitable giving bucks.

Start with “Why”

People’s reasons for donating money to charities vary, but studies show that most of us feel a duty to give back to society and to help others. Giving also plays a significant role in increasing our own well-being. Charity promotes happiness, strengthens empathy, and increases our sense of community. All of these are vital for a wealthy life.

We give with the hope that it will make a difference. We often identify with one or two specific causes and hope to contribute toward real change with those issues. Ideally, each dollar you give should produce as much benefit and positive change as possible. How can improve the effectiveness of our dollars toward actual results?

Start with knowing about the causes you identify with. What are the issues, and what solutions are being worked on to address them? It’s also especially important to choose good charities. Your charity of choice should be working on the things you care about and should be doing it effectively. How can you know how effective your charity is? Start by looking them up on a rating site such as Charity Navigator. Charities receive the highest rankings for being well-run, efficient, and demonstrating strong results.

Create a Giving Plan

Not only should we try and give to the most effective charities, but we should try to be highly effective ourselves. The more thoughtful and strategic we can be with the way we give, the more effective we can be at being part of the solution.

A sound giving plan will make sure you are being as effective as possible. The steps to a giving plan are: 

1. Set goals

Do your research to understand the issues you hope to help address. Decide what non-profits you want to donate to and how much you want to donate to each.

2. Decide what to donate

In addition to donating cash, you can donate investments or other types of assets. Which will be the most effective for you?

3. Plan your donations

Decide what charitable giving strategies you will employ to maximize your giving. Consider not only this year’s giving, but the next few years.

4. Implement your charitable donation strategy

Put your plan into place by getting specific. Will your donations take place year-round, at year-end or just around the holidays?

The attached checklist, what issues should I consider when establishing my charitable giving strategy? will help you build your charitable giving plan by considering your own unique retirement, asset, cash flow and tax considerations.

Expand your reach

In planning your donations, consider the ways you can leverage the tax-favored strategies allowed by the IRS. The amount you will save in taxes can make your charitable giving more effective by “expanding your reach”- that is, making you able to provide the maximum benefit to charities. Consider these highly effective strategies to expand your charitable giving reach:

Giving appreciated securities

By giving appreciated stocks, bonds, mutual funds directly to charities, you not only get to take a charitable deduction for the gift, but you get to avoid paying capital gain taxes on the appreciation. This double tax savings can be highly effective.

Donor Advised Funds

Donor Advised Funds (DAFs) allow you to build up funds to be given to charities, while receiving the tax deduction up front. This is particularly effective if a big deduction will be needed to offset a high-income year. You can donate appreciated securities to a DAF, getting the double tax benefit mentioned above.

Qualified Charitable IRA Distributions

If you are over age 72 and subject to a Required Minimum from your IRA or retirement plan, a qualified charitable distribution (QCD) from the IRA can be one of the most effective ways to give. A QCD allows you to donate up to $100,000 total to one or more charities directly from a taxable IRA. The distribution will not be taxable, yet it counts toward your required minimum distribution. The reduced IRA income can be more helpful than taking a charitable deduction, in some circumstances.

Charitable giving as part of your overall wealth plan

When you consider all the benefits of charitable giving, you can see why it is an important part of your overall financial well-being, and therefore should be part of your overall wealth plan. At Blankinship & Foster, our wealth management service helps you evaluate all the parts of your finances, clarify and organize them, and build sound financial plans designed to achieve your goal and objectives.

About Jon Beyrer

Jon Beyrer, EA, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Compliance Officer. As a lead advisor, he focuses on helping families achieve their goals with sound wealth planning. In the community, Jon serves on several boards and is co-founder of the Professional Alliance for Children, a legal/financial charity for families of ill children. He has been quoted in The Wall Street Journal, The New York Times, and the Journal of Financial Planning. Jon lives in San Diego with his family.

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