Maximize the Benefits of Charitable Gifts for Your Charity

Many people include some level of charitable giving in their financial and estate plans, but too often they don’t develop a giving plan that optimizes the impact of their donations.

A solid giving plan can increase the effect on charities and the causes that most interest the donor while ensuring the benefits to the donor are maximized.

Few people are deliberate and strategic in their charitable activities. Many gifts are “one-off” events that don’t involve a lot of planning. Others are made routinely or reflexively.

Before we look at the specifics of a giving plan, always keep in mind that it’s quite common for a person’s charitable interests, goals and plans to change over time. The reasons for a person to give and the objects of contributions change as the person’s life changes, he or she learns more, or the external environment seems to change.

That’s why a giving plan should be reassessed at least every couple of years, if not annually. Determine if you are satisfied with how your gifts are being used and what their impact is, if the causes still are your focus, or if other causes are drawing your attention.

It is valuable to decide at the outset how you’ll determine if a gift has impact or is effective. With some gifts, that’s easy. For example, a cash gift might provide a certain amount of meals to those who can’t afford them.

But the effects of gifts that have indirect or long-term impacts, such as donations to medical research, might be harder to assess. Decide on a way to measure the success of a gift.

Also, consider if your gifts would have a bigger impact if you structured them differently, which we’ll discuss shortly.

The first step in an effective charitable giving plan is to develop a philanthropic purpose or philosophy. As with other financial plans, a donor should have goals and objectives.

One question to consider is whether the impact of your gifts should be local or broader based. Broader-based impacts can be regional, national or global. If you want both local and broader-based impacts, determine the percentage of giving you want in each category.

Then, determine the causes or interests you want to support.

It is common for people to be interested in diseases or medical conditions that run in their families or affected people they care about.

Some people favor art, entertainment or other cultural activities. Others seek to support education at certain levels or environmental causes.

Of course, faith organizations are significant beneficiaries of charitable giving.

Some donors want to help people who are in a particular situation while others want to focus on solutions to the causes that put people in the situation. That’s why some people donate to a facility that treats cancer while others fund research into cancer cures and prevention.

A decision to make early in the process is whether to target a small number of causes or give to many different causes.

Some people care deeply about one or two causes or simply want to be identified with them and focus their giving in those areas. Others want to give smaller amounts to multiple causes.

A benefit of targeted giving is you give more to a particular charity. That’s good for the charity, of course. But it also can give you a higher profile with the organization. You might be able to learn more about what it does and how it is run, among other things. Some people prefer that, while it doesn’t matter to others.

Another step is to decide if you want to do more than contribute financially.

Giving can be supplemented with volunteering. Higher-level donors often are offered seats on boards or committees, where they can learn more about the organization and perhaps influence policies and activities.

But you might learn more about an organization and the cause by being a volunteer who helps in the day-to-day activities.

Some people can offer their professional expertise to an organization. What you can offer depends on your background and the charity, but it is something worth exploring.

Whatever role you take, volunteering is likely to introduce you to interesting people who have at least one pursuit in common with you.

The final step is to determine how you want to give. Often, both you and the charity receive more when you don’t simply write a check.

Consider first how to maximize the tax benefits of your donations, which can allow you to give more.

In the past, I discussed qualified charitable distributions (QCDs) from traditional IRAs (see the February 2024 issue of Retirement Watch). I also reviewed the benefits of donating appreciated investment property instead of cash (the May 2024 issue).

You also should consider long-term gifts that provide you with tax deductions and a long-term stream of income while benefiting the charity, such as charitable gift annuities and charitable remainder trusts (the June 2023 issue). Donor-advised funds are another popular giving vehicle (the July 2023 issue), and very wealthy people often create private foundations.

You can work with a charity to determine the best way to give.

For example, some charities aren’t set up to accept donations of certain types of assets while others can accept many types of assets and help with all the tax-advantaged charitable vehicles.

Of course, decide whether you want to make primarily lifetime gifts or bequests through your estate.

Another good step is to find one or more mentors, or at least some people who are on the same journey as you, so you can learn from each other.

Donating is easy. But making effective gifts and optimizing their benefits requires some work. Your donations can have bigger impacts and help you make more of a difference when you do the work.