by Kathleen Longo on August 17, 2014
Charitable discussions are frequently part of the planning process. Here are my thoughts about the most common mistakes I see in charitable giving, and some suggestions on alternatives to consider.
Waiting until the end of the year to give:
Many individuals think about giving at the end of the year. The challenge with waiting until the end of the year is that most people feel pressured with holiday gatherings and year-end deadlines, and they are not able to think strategically about their giving. By picking a date earlier in the year, they can have more time to focus on creating a meaningful giving plan that is focused on organizations and causes that are most important to them. An earlier date also benefits many charities by smoothing out their budgets during the year.
For those feeling pressured to get the charitable deduction by the end of the year and not sure about where to give, they should consider using a donor-advised fund which allows an individual to make a gift to a charitable account, get the charitable deduction, and determine how the funds get distributed to qualified charities at a future date. These funds are offered by financial institutions such as Fidelity, Charles Schwab or local community foundations.
Responding to every mail, telephone or friend request for giving:
It is very tempting to respond to every request with small gifts, as there are many great causes. These gifts can add up to significant dollars! Instead, I encourage clients to think about their total giving. Instead of giving a small amount to many organizations, they may be able to give an amount that is more meaningful and can have a greater impact for an organization as well as to the client.
Not involving the family in the charitable giving conversation:
Charitable giving is a great opportunity to talk as a family about what values are important and learn about the needs of others. I recommend scheduling time as a family to look at charitable requests, do research on the organization online, or even visit the organization to see the work that is happening. Parents may also consider giving the kids decision making ability on a portion of the charitable dollars.
Only giving cash:
Cash is great, but it is not the only form of giving. The markets have had a great run and investment accounts should have appreciated securities that would be great for charitable giving. The tax advantage is that the individual avoids capital gains tax by gifting the security directly to the charitable organization and still gets a tax deduction for the full value of the gift.
Giving too little:
Clients often ask “am I giving enough?” or “how much should I give?” Unfortunately, there is not an exact answer. It truly is a personal choice, but I would say that I see clients get tremendous joy by increasing their giving and knowing that they are still fine financially.
