Roughly $400 billion was donated by Americans to charitable causes last year. That’s about 2% of the U.S. gross domestic product. These donations came in many forms, like personal checks and distributions from trusts.
According to Morningstar’s recent article, “7 Tips for Better Charitable Giving,” creating a long-term charitable or philanthropic plan means careful consideration with your family, as well as professionals. You want to develop the right giving strategies that address estate, tax, and investing issues. Here are a few ideas to make certain that your money is donated wisely.
Make a Plan. Some donors feel they should leave large, one-time gifts to colleges, hospitals, or other charitable institutions. Others divide their donations among multiple causes over a period of time. Start with a "goals analysis" of your charitable strategy and implement a basic financial plan. Write down your charitable priorities and look at which have the most immediate need and where a donation can do the most good.
Research Your Causes. Look at how much the charity spends donor funds on marketing and administrative expenses. It is important to see the percentage of donations that actually goes to the programs. Some charities have very high administrative costs, while others run lean operations.
Determine the Timing. Some people choose to leave some of their estate to specific causes after they die and others donate while they're still alive. How might this impact your retirement income? You should also consider whether you want to make ongoing contributions or a lump sum.
Work with Professionals. An experienced estate planning attorney can help you with your charitable-giving strategy. An attorney will analyze how your donations impact your estate and heirs, potential tax benefits during your lifetime and the types of donations you can make. Your charitable giving should be a component of your overall estate planning strategy.
There are many ways to donate, depending on when you want to give and how. Work with your attorney to develop a plan that makes sense from a tax and philanthropic perspective.
Reference: Morningstar (July 29, 2017) “7 Tips for Better Charitable Giving”