We often think of Thanksgiving and Giving Tuesday as ushering in the year-end charitable giving season. Year end, of course, is not only a time for gratitude, as families gather for the holidays, but also a time to start organizing financially for the close of the calendar year. But year-end giving does not need to be short-term giving. So even as you strive to be tax-efficient and timely in your year-end giving, those gifts can be part of a longer-term charitable giving strategy.
How do you get started on charitable giving for the long term?
First and foremost, as a donor you need to determine which charities to support and how much to give. You can engage your family in the process by taking the approach that larger foundations often take: looking at your overall charitable giving budget and deciding rather deliberately how much to support the local community; how much to focus on a particular passion, such as the arts or the environment; how much to give nationally; and how much to support institutions that have played an important role in your life, such as colleges, churches and synagogues, or hospitals. By making giving more intentional, you and your family can think collectively about your values and create a meaningful long-term giving plan.
The second important decision is what to give. Rather than reaching for the checkbook at the end of the year, annual giving can be part of a long-term plan to take advantage of tax-efficient opportunities to transfer assets other than cash to charity. But of course, planning noncash gifts takes time. It’s important to allow enough time before year end to analyze the best assets to transfer and to develop a long-term plan for transfer. Annual giving can carry out a long-term plan to reduce the low basis stock in a donor’s portfolio, transfer a collection or business interests, or even to manage tax-efficiently an Individual Retirement Account (IRA) required minimum distribution. Charitable giving with noncash assets is a complex topic and well beyond the scope of this article. But just as it is important to be deliberate in selecting what charities to support, it’s equally important to adopt a plan for efficient giving over a relatively long time horizon.
Once your charitable goals are set, and the assets available to give are selected, it is also important to think about ways to structure your giving so that it can have a continuing impact. A gift made to a private foundation or donor advised fund established by the donor or a family member can provide a long-term vehicle for charitable giving, which can be funded annually. Alternatively, you may want to establish a fund for a specific purpose at an existing charity, such as a college scholarship fund, which can be added to annually. Some of the structures discussed below will take enough advanced planning that they can’t be accomplished by year end. But they may become goals for charitable planning for next year.
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