Tips for Charitable Giving in Times of CrisisSeptember 17, 2018 12:00 am
In 2016, over $390 billion was donated to charitable causes in the US. Many people donate money and time to their favorite charities throughout the year. Some choose to set up scheduled giving such as a monthly donation, while others make their donations at the end of the year. When unexpected events, like Hurricanes Harvey and Irma occur, you may make an unplanned donation to help those affected by the storms. Charitable donations may also provide tax savings to the donor. Here are some things to consider when making your charitable donations.
Choose Your Cause
There are no shortages of organizations that can use financial help. You may make donations to many charities or have one or two that you like to support regularly. Most donors choose their charities based on how the organization supports a cause or group that is important to them such as animal welfare, education, church or religious organizations and the like. You may also choose to donate to an organization that has helped you or a loved one at some point in your life, perhaps during an illness or during a time of struggle, as a way of giving back.
Local or National
Some charities take a national or broad view while others can be doing work right in your hometown or community. The American Red Cross is an example of an organization that will use your donation to help Americans all over the United States and even in other parts of the world. If you prefer to make your impact more locally, you can choose to donate to a food pantry in your city or neighboring town, a local animal shelter, or the local chapter of a national organization like Boys & Girls Clubs of America.
Even in times of crisis, you can keep your donations focused on your chosen effort or cause. If you want to support relief and recovery efforts for Hurricane Florence and normally support an animal shelter in your home state, consider giving to a shelter located in one of the impacted cities or towns. When residents are displaced during and after a hurricane food and water are needed, so supporting a food pantry that is operating in the area would be helpful. Local organizations probably have a better understanding of the needs of the affected area and may be able to put your donation to use faster than a national organization in some instances.
Research Your Charity
Of course, we want to be sure that money we donate is being put to good use and getting into the right hands. It’s important to determine that the charity you are donating to is in fact a legitimate organization and not a scam. You may also wish to inquire as to how that funds that you donate are allocated. The Federal Trade Commission offers a helpful advice in steps to take in order to confirm that your charity is legitimate.
Charity Navigator is an organization that evaluates and scores charities, and may also provide you with useful information about charities you are considering.
Turn Your RMD into a Qualified Charitable Distribution
There is an option to turn your Required Minimum Distribution (RMD), which is the mandatory withdrawal that must be taken annually from your IRA after turning 70 ½, into a donation. Each taxpayer has the opportunity to make a charitable donation of up to a maximum of $100K per year and have that amount count towards satisfying your RMD. The benefit of doing so is being able to support your favorite cause while having the amount donated excluded from your taxable income. Please note that the donation must be a direct transfer in order to qualify, meaning checks should be made payable to the charity.
Charitable giving is an important part of your financial plan. Your intended donations should be addressed annually to have the greatest impact to the cause you are supporting and to be sure you are taking advantage of potential tax benefits. Talk to your financial advisor to explore your individual options for giving.
The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Chrissy’s opinions and comments expressed on this site are her own and may not accurately reflect those of the firm or our parent company, Focus Financial Partners. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference.