More On Tax Planningfrom The Advisor's Professional Library
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- Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.
Most charitably inclined Americans make gifts to their favorite organizations and causes toward the end of each year. Often their giving decisions are less than well thought out in the rush to beat the Dec. 31 deadline for tax purposes.
Eileen Heisman (left), president and chief executive of National Philanthropic Trust, has made a career of helping donors across the wealth spectrum make smart decisions about their giving. In a recent telephone interview with AdvisorOne, Heisman offered some tips for thinking about and planning for year-end donations.
Start by making a budget. This will be relative to your wealth, and may be based on your emotions or your finances. “If you just got a big raise or a new job with a big increase, maybe your budget doubled this year,” she aid.
Next, think about causes that are really important to you. Be aware that the list may change over time, as “causes that were important to you when you were 25 probably are not as important to you when you’re 45.”
Be smart and strategic: make fewer, larger gifts to causes you strongly favor. Look at just three. Two is probably not enough, but more will tend to dilute the effect, as most people’s budgets are not large. “And if you really love an organization, you should stay with it for a while. I wouldn’t change them 100% and flip them every year,” Heisman said.
Decide whether you want to be global or local. Global philanthropy has gotten really popular, but you may want to do something in your home town or region or for your alma mater. “There’s no right or wrong answer; it’s what you think is important,” she said.
Choose a vehicle for your giving. You may write a check, give away appreciated securities if you have them or donate through an online giving portal. Or you may use a donor-advised fund or a private foundation. Heisman, said, “The vehicle doesn’t matter as much as the fact that you need to do something and act on your wishes.”
Over the course of the year, check on the charities or causes you give to and see how they are doing. You can look for information on the charity’s website. Or you can examine its Form 990, Return of Organization Exempt from Income Tax, which is available on GuideStar, to see the kind of work it is doing, and how its finances fared during the past year.
You can also get information by word of mouth from other donors, or by talking to or visiting the charity. “If they’re doing a great job, you may want to increase your gift next year or fund a specific project or bring
For charitably inclined people who are confused or do not know where to start, Heisman recommends looking at online portals, which can provide lots of information about different causes. She likes portals such as Crowdrise, Causes and Network for Good, and sites that focus on specific causes: Kiva for international microloans, DonorsChoose for education, Global Fund for Women for grants that help women in developing countries.
Finally, she finds Network for Good an effective and secure way to make a gift to any charity in the U.S. “It will give you an annual list of all your gifts that you can print out and give to your accountant to get your entitled deductions,” she said.