Another joyous holiday season is upon us, and it’s such a great time because of our natural desire to give and share. That’s why I want to discuss bigger and better ways to give back. We all have charities that are dear to our hearts, but donating to them can be cumbersome and in some cases, time consuming. In order to ensure that you’re donating and documenting appropriately, allow me to answer a few of the more common questions I receive from my more philanthropic clients surrounding charitable giving:
How can I easily donate to all the charities on my list?
Donating a large sum to a single charity doesn’t have to be complicated, and it is tax-effective. But what if you want to spread the wealth (and the love) by contributing lesser amounts to numerous charities? From children in third-world countries to cats in animal shelters to cancer-fighting causes, so many charities need help, and we often find ourselves wanting to help them all.
This process can be simplified through what are called donor-advised funds (DAFs). This cost-effective donation method allows you to easily dictate how funds are distributed while reducing any legal and administrative pitfalls that may arise with making a large or multiple donations.
How do I give strategically?
Some philanthropists make annual contributions to the DAF, and then arrange for legacy grants to be deployed throughout the year or over a number of years. Or if you’re anticipating a particularly large tax bill, consider making a significant tax-deductible gift to help offset that burden. DAFs also allow donors to give anonymously, and if they wish, in automatic increments over a set period of time.
Why is it important to have a plan?
More and more people are choosing the convenience and ease of DAFs instead of family foundations. According to the National Philanthropic Trust, DAF assets reached $45.35 billion in 2012; up 19% from 2011. By moving funds immediately into a DAF, donors can then defer and take the time to decide which charities to support.
How can my financial planner assist?
Not all donor-advised funds are created equal, so it’s best to shop around, which is what any good CFP would recommend and research for you. In addition, some clients may want to pursue other avenues of social good by engaging in impact investing – which is another way to effect social and environmental change, using these factors to select investments while continuing to seek a good rate of return. That’s my focus as a financial planner, to help you determine where to invest and what to avoid.