Your Guide To End-of-Year Giving

This is the time of year when your mailbox starts to fill up with requests from dozens of needy causes, asking you to get into the holiday spirit by writing a check to help fund their charities.

It can be tough to say no to the appeals, but saying yes to all of them is generally not a wise (nor often even feasible) fiscal move. “As much as we want to be charitable and we are more aware of that during the holidays, we can’t possibly donate to every cause out there,” says Bellaria Jimenez, managing partner of MetLife Solutions Group. “It can be overwhelming.”

Follow these steps to take the stress out of giving this year:

1. Make a budget. Rather than giving out money ad hoc, think through how much money you’d like to contribute to charity in a given year and set it aside. It’s easier to say no to additional requests if you know you’ve already given the amount you had intended to donate this year. Consider setting aside a certain portion of that money to give to disaster relief or other one-time events that might crop.

2. Give more support to fewer charities. There are processing costs associated with every donation you make, so limiting the number (if not the amount) of contributions you make, makes each gift more effective. If you’ve decided to give away $1,000, for example, you’ll lose less money to processing by giving two $500 donations than giving 10 $100 ones.

Once you’ve found a charity that you like, consider making an unrestricted gift and doing so again annually over the next few years. “It’s very expensive for a charity to find new donors, and it’s hard to raise unrestricted money,” says Eileen Heisman, president and chief executive officer of the National Philanthropic Trust. “By doing that, you’re really helping a charity to manage what it needs to do to grow and look at problems in new ways.”

3. Vet the organization carefully. Use sites like GuideStar and Charity Navigator to dig into an organization’s financial records and tax returns to get a sense of how it spends donations. While it’s preferable to see an organization that has low overhead, it’s also worth remembering that certain types of charities may have higher fixed costs than others, even when making prudent financial choices. If you’re donating to a local charity, spend some time on site to really get to know the organization and the folks who run it.

4. Get your tax benefits. In most cases, if you’re itemizing your taxes, you can write off any charitable contributions you make up to 50 percent of your adjusted gross income. In order to get the donation, the organization must be an IRS –approved nonprofit (check here), and you’ll need a receipt of the transaction. Making donations through a charitable giving portal like NetworkForGood makes it easy to keep track of receipts.One way to get an even better tax deduction is to give appreciated stock rather than cash to a charity. You’ll get to write off the fair market value of the securities (even if you paid much less for them). “Donating appreciated securities really is the smartest gift to give because of the tax advantages,” says Amy Danforth, president of Fidelity Charitable.

5. Consider a donor advised fund. If you’ve got at least $5,000 to give away but aren’t sure just yet how you want to distribute it, consider using a donor advised fund. You get tax benefits in the year that you put money into a donor advised funds, but you can donate the funds at any time in the future. In the meantime, they’ll continue to grow tax-free. “Opening a donor-advised fund alleviates the pressure of having to make a gift when you’re coming up against the tax deadline,” says Sara Montgomery, senior manager in philanthropic services at Wells Fargo. Before you open an account, take a look at the investment options, fees, and any requirements for giving.

6. Get the kids involved. It’s important for children to learn about the importance of philanthropy as early as possible. Children whose parents talk to them about giving are 20 percent more likely to give to charity than children whose parents do not discuss giving with them, according to a 2013 report from the Women’s Philanthropy Institute at the Indiana University Lilly Family School of Philanthropy.“We encourage clients to start that conversation early,” says Andrew McPhail, a senior wealth planner with SunTrust Private Wealth Management. “Even young kids can understand the concept of sharing, and if you can extend that into giving, it’s a nice way to introduce these concepts.”

By Beth Braverman

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.