Charitable giving in the United States keeps growing
Based on the constant negative news cycle, you might not know that charitable giving reached an all-time high in 2020 at over $470 billion in donations despite global uncertainty in the past two years. Individuals and foundations gave more than ever before, and this trend is expected to continue. Giving is part of wealth management, so put this topic on your list.
National campaigns like Giving Tuesday have also helped drive billions of dollars in donations. After a weekend of eating, relaxing, and a little bit of retail therapy, the Tuesday following Thanksgiving is now a day when many choose to give back and join what has become a global movement. Mark your calendars for November 30th if you plan to participate!
There are a few helpful tips to keep in mind if you’re considering more active charitable giving this year or next. This article will briefly review why giving back is important and provide three recommendations for simple ways to support the causes that matter most to you.
Why do charitable giving?
There are many reasons to give back beyond just being a good citizen. The positive effects on you, your family, and the broader community go well beyond just material support.
Giving back is a fundamental way to find meaning, and the physiological impacts of charitable work and giving are enormous. Yes, your time and money can significantly impact others, but it can also be an incredibly healthy exercise for you! A 2020 study from the Cleveland Clinic supports this and found the following health benefits were associated with increased giving:
- Lower blood pressure
- Increased self-esteem
- Less depression
- Lower stress levels
- Longer life
- Greater happiness and satisfaction
Working with people less fortunate than you makes a real-world difference. The outcomes of these efforts are visible for organizations that directly support people in need with material items like water filters, homes, vehicles, or employment opportunities. When we give our time, money, and resources, it can make a tangible difference in the life of the their communities.
Involving your family and sharing charitable goals and ideas helps create meaningful traditions. The impact of these traditions can last for generations. A study conducted by the National Philanthropy Trust found that adults are more likely to give to charity if their parents also did. This type of giving sets a great example of social responsibility and supports your children in building good habits based on your model.
Three simple ways to give charitably
Are you considering more meaningful ways of giving back? If so, make sure that you know which steps to take that will help you take advantage of available tax incentives and make the whole process as easy as possible.
Here are three commonly used ways to donate money regularly.
- Set up a family charitable fund/trust. There are several different ways to set up charitable trusts, but they typically help reduce the taxable assets of an estate. In some cases, one or more family members contribute funds individually. While in other cases, the estate of a family member who has passed away funds the trust. Investment returns realized from the trust can be distributed to charities first (charitable lead trust) and then to family members or vice versa (charitable remainder trust), depending on the family’s goals. Some families use these trusts as a reason to get together, with the specific purpose of gift-giving. Trusts can be an excellent option for a longer-term legacy of giving that involves family members in its growth, management, and impact.
- Create a donor-advised fund. Donor-advised funds are structured as a separate investment account through a sponsoring organization and can include various assets (cash, bonds, mutual funds, etc.) Donations to the fund are then used to make grants to eligible charities. Some people prefer a donor-advised fund because they can make a significant contribution all at once and receive the tax deduction, which is helpful when there is a substantial capital gain or income to offset with an itemized deduction. This approach provides some flexibility, as which organization(s) will receive grants from the donated funds doesn’t need to be decided until a later. Additional contributions can be made at any point, and the fund can continue to grow tax-free and used to support IRS-qualified charities.
- Contribute something every year to an organization whose mission you support. Most charitable organizations run annual or bi-annual fundraising campaigns. Putting a check in the mail or donating online is probably the easiest way to offer support; however, be sure to record your donation amount for your records! The organization you support will likely also send you a document listing your donations in the prior year. You can use this when filing your tax returns.
No matter what option works best for your family, it’s wise to consult with a financial advisor who can provide the full context you need for making an informed decision and help manage a family trust or donor-advised fund. A qualified financial advisor can also help you look at options like donating portions of your retirement assets from a 401k or similar account.
Give back to charity with your time and resources
Organizations like Goodwill and other non-religious retail outlets often donate most, if not all, of their proceeds to charitable causes like clean water, sustainable employment opportunities, and many others.
How can you help?
First, think about shopping at these organizations for needs like everyday household items or apparel. A bonus feature of this approach? A much more sustainable retail choice. Second, you can easily take your gently used clothing and other things that might be thrown away and donate them! These nonprofit stores rely on high-quality inventory donated by community members.
Also, don’t forget that giving can also come in non-monetary forms. In many cases, helping out in person is more valuable and meaningful to those in need than simply cutting a check. Showing up shows you care! This is an excellent option if monetary support isn’t realistic for you or your family right now.
Many national organizations exist that help with everything from affordable housing to community improvement, youth counseling, and more:
Other helpful resources include services such as Charity Navigator and Great Nonprofits, which can help you sort through a variety of nonprofits that align with your passions and values or identify ones that are located locally.
If you have further questions about charitable giving or general financial management for individuals and small businesses, let’s talk! Reach out today and let’s start building your financial future.