When I got married my wife, Lynn, told me she wanted to tithe a percentage of our income. I thought I was going to have a heart attack. A traditional tithe of 10% doesn’t sound like much at first. “It’s just a percentage,” she said after all. But when you do the math and add up the dollars, it can be intimidating.
We are not at 10%, but we do try to include charitable giving in our budget and financial plans. You may do the same. According to Charity Navigator, total giving for 2012 was $316.2 billion, with 72% of that coming from individuals.
December is likely the most important month of the year when it comes to charitable giving. Below are 4 ideas to consider as you make your year end charitable gifts.
First, be selective. Carefully consider who you give to. There are a lot of ways to research your favorite charity. Charity Navigator at www.charitynavigator.org is one resource. There, you can research over 6,000 of the country’s largest charities and get insight on their financial stewardship and how well they use your dollars.
Second, be efficient. A while back a major investment firm published a study among their investors that showed that of those who gave to charity, most were unaware that you could give gifts of highly appreciated stock or other securities. By giving stock or other highly appreciated gifts, the donor sidesteps the capital gains tax on that investment making their gift more “tax efficient”. By being more tax efficient, the true cost of giving becomes less after you factor in the tax benefits. Donating appreciated assets is just one way to increase the efficiency of your charitable giving.
Third, don’t be afraid. I think the primary obstacle when giving is fear. That’s understandable. Giving away money that you have worked hard to earn or accumulate over the years shouldn’t be taken lightly. After all, how do you know you won’t need that money some day? Having a written financial plan that helps clarify your goals and shows that you are well positioned to meet them can help. Once you are confident that your own needs will be met, you are in a better position to be able to share your resources to help others meet their needs.
Fourth, share your charitable intentions with your adult children. I was recently involved in a case with a local non-profit in which a major donor had passed away. Naturally this was a financial blow to the organization. The surviving children were sympathetic, but when Dad’s money became their money they began to question why Dad was giving so much, and whether they should continue his legacy in this way. If you intend to include a charitable gift in your financial or estate plan, it is in the interest of your family and the charities you support to share your intentions with them. That way there are no questions or hard feelings when assets do pass to your favorite charities in the future.
How do you include giving as part of your financial plan?
Be sure to consult a qualified attorney or tax professional for specific legal and tax advice.
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