A Strategic Approach to Philanthropy

In 2020, Americans gave a record $471 billion to charities according to Giving USA.

As we approach giving Tuesday this year it’s time to take a fresh look at our own plans for giving back for the remainder of this year and into 2022.

Goal Setting

In 2020, the majority of charitable dollars went to religion (28%), education (15%), human services (14%), grantmaking foundations, (12%) and public-society benefit (10%) (Giving USA). Whether you’re just beginning on your philanthropic mission or reviewing an already established plan, it’s helpful to start with a little self-reflection. You need to explore your goals and decide what matters most to you. What is your personal philanthropic vision and purpose?

Implementation – Structuring Your Plan

Once you’ve decided where you want to make an impact, you need to consider the question of how and how much to give.

Tax Deductibility

For those earning $500,000 to $2,000,000, the average charitable deduction was $25,510 (Giving USA). To increase the efficiency of your plan you may want to review the options for tax-advantaged giving. Organizations that are eligible for tax-deductible gifts are generally categorized by the IRS as 501(c)(3) non-profits. It’s important to note that contributions to political and lobbying organizations are not eligible for a tax deduction. Nor are contributions directly to individuals or for-profit organizations.

Asset Choice

Determining which assets to give is next. Cash is convenient but there can be tax advantages to considering other options as well, such as stocks or real estate that have appreciated in value.

Researching Non-profits

There are 1.5 million non-profits registered with the IRS in America. You may already have one or more causes you want to support, but you can also turn to online sources like The Council on Foundations, or Candid’s Guidestar tool, which includes a full list of U.S. charities searchable across a range of criteria.

Picking the Right Charitable Vehicle

Annual contributions into donor-advised funds were $47.85 billion in 2020 (National Philanthropic Trust).

Beyond giving directly to non-profits, there are several vehicles available to give assets.

• Donor Advised funds, specialized accounts set up for the sole purpose of charitable giving, are a popular and convenient way to give.
• Private foundations allow you control over the grantmaking process and can be set up to span generations.
• Certain trust structures offer opportunities for tax-advantaged giving, including Charitable Remainder Trusts, Charitable Lead Trusts and Charitable Gift Annuities.

Gift Terms, Frequency and Results

Over three quarters of HNW donors in 2020 gave unrestricted gifts to favorite charities (BOA and Lilly Family School of Philanthropy).

When you give a gift to a non-profit organization, you typically can designate it as either an unrestricted gift or a restricted gift. An unrestricted gift allows the organization’s management to decide how best to use it. A restricted gift is given for a specific purpose, generally for the implementation of particular programs or activities. The choice is up to you and depends on how much control you wish to have over how your dollars are spent.

For reporting purposes as well as to help you measure the impact your contributions are making, you should record and document all contributions and follow the activities of the organizations you support to track their accomplishments.