Lauer supports this as a smart financial strategy as well. “Planned giving helps charitable organizations prepare rather than react,” she notes. “And it also gives you extra time to find charities that support your family’s values and are delivering the best benefit on a dollar-for-dollar basis.”
Know why you donate
Giving throughout the year instead of focusing on year-end donations can also help your family manage its philanthropy as part of its general budget. “Families have increased budget pressures at year-end with holiday travel, entertainment, and spending on presents,” Lauer says. “Giving midyear can help avoid that cash crunch.”
The extra time also allows donors to consider strategies beyond simply writing a check. For instance, donating appreciated securities owned for more than 12 months can be a tax-efficient way to give: You may be able to deduct the full market value of the securities (subject to adjusted gross income limitations) while avoiding capital gains taxes on those assets. But the process takes time, and a late start in December could mean missing out on that year’s income tax deduction. Working with your tax advisor early in the year can help you determine your potential tax benefits.
Organize your giving
If philanthropy is important to you, use this opportunity to incorporate it into your overall financial strategy. At the beginning of the year, set a total for your annual charitable giving based on your budget and the causes you want to support. But leave a little aside for sudden catastrophes so that you know how much you can afford to give regardless of the time of year you make the donations. Your financial advisor can help you work through this process.
“Incorporating charitable giving into your investment plan helps you know how much you can afford to contribute, regardless of when you give it,” Lauer says. “That way, supporting humanitarian causes is not just an emotional decision, but a deliberate one.”
After you identify which organizations will benefit from your donations, conduct due diligence to ensure the group is likely to use your donation effectively and efficiently. The Internal Revenue Service provides Tax Exempt Organization Search, a searchable web database of organizations designated as qualified charities. Verifying that your chosen group is on the list can help you avoid donating to a fraudulent organization.
Understand that giving abroad is complex
Each year Americans make significant donations to victims of disasters around the world. But such giving is complicated: Donations to foreign charities are generally not deductible for U.S. federal income tax purposes. If you do want to support relief efforts abroad, consider donating to a domestic charitable organization that has foreign partners active in disaster relief. Also, check the IRS website for guidelines in making international donations.
Charities and victims alike depend on the kindness of strangers for support after a disaster. If you make contributions throughout the year, your support will be available when needed the most, and you can make your generosity an integrated part of your financial strategy.
¹Defined as Level 2+ disasters, with costs of $10,000 or more; https://www.redcross.org/content/dam/redcross/about-us/publications/fy18-disaster-update.pdf, page 1
²Defined as Level 4+ disasters, with costs of $250,000 or more; https://www.redcross.org/content/dam/redcross/about-us/publications/fy18-disaster-update.pdf; page 1
³https://www.redcross.org/content/dam/redcross/about-us/publications/fy18-disaster-update.pdf, page 6