When it comes to supporting charitable causes, many of us practice what is sometimes referred to as “checkbook philanthropy”. This means we simply donate cash by writing a check in response to a specific appeal. Charitable giving can also be more strategic though. Doing so may enable you to maximize tax benefits and create a bigger impact with donations.
The first step in developing a strategic approach to giving is to determine where your donations do the most good – where do you care about making a difference in the world? The point of charity is to help others. Donating to a charity effectively means that you are taking steps to make sure you are helping others the most for every dollar you give.
Start by
- Identifying a promising cause to support;
Then
- Choose an excellent fund or charity working on the cause;
What are the best charities to donate to in 2023?
https://www.givingwhatwecan.org/en-US/best-charities-to-donate-to-2023
Search for the charities that save or improve lives the most per dollar.
https://www.givewell.org/
And then
- Pick an efficient way to donate.
In the U.S., $471.44 billion was donated to charities in 2020. 30% of annual giving occurs in December, while 10% of total annual giving happens in the last three days of the year. 69% of the population gives, and on average each person supports 4.5 charities. – Nonprofits Source Ultimate List of Charitable Giving Statistics for 2023.
The real question for many donors is not whether to give, but how? Here are some of the most common vehicles for charitable giving:
- Cash, check or credit card
- Retirement accounts – if you have reached the age where you need to take required minimum distributions (RMDs), donations from an IRA qualify, and you can avoid paying taxes on the money by donating it to charity.
- Stocks and securities – these typically involve giving ownership as a transfer in kind.
- Planned giving – including bequests in a will or living trust, beneficiary designation of a life insurance policy or retirement plan, charitable lead trusts or charitable remainder trusts, donor-advised funds and private foundations.
- Valuable assets – such as real estate, vehicles, artwork, collections, and intellectual property rights.
- Volunteering.
Donation strategies and vehicles offer different benefits, but in the end, what really matters is helping an organization that matters to you. The tax benefits from a donation are just icing on the cake! Surveys and experiments suggest that spending money on others makes people happier than spending it on themselves (https://www.givingwhatwecan.org/en-US/get-involved/giving-and-happiness). So, compare your options and talk with your estate planning attorney, financial planner, tax advisor, and a philanthropic advisor to help determine the best way to give for you.* * * * *