Creating a Strategic Giving Plan

Whether it’s dropping spare change in the Salvation Army bucket during the holiday season, responding to a national or international crisis by donating to disaster relief or volunteering at your church, most people have at least some interaction with charity on an annual basis.

Donating can come from many sources of motivation such as improving the community, helping the poor, inspiring others to give and allowing for a break on your tax return, but chances are your reasons for charitable giving are a combination of these and probably other factors as well. However, simply giving as you see the opportunities arise will likely not satisfy these motivating factors.

Just as you’d want to make your invested funds work hard to ensure the maximum return, you should make sure your charitable donations are as effective as possible too.
A charitable giving strategy is about making your donations more intentional and less random to maximize your contribution to society. Moving toward a strategic form of charitable giving can help ensure that your charitable dollars are doing the most good possible while still leaving you feeling fulfilled and providing you with a tax benefit.

How strategy can make a difference

Strategic charitable giving means a shift away from giving gifts to varied causes as they come to your attention and a shift toward concentrating on specific, definable charitable goals. Creating a charitable giving strategy will help you regulate the amount you give year to year, which will help you estimate and carry out a more accurate tax benefit. It can also help you become more familiar with the charities you support as well as provide a way to measure charitable progress as proportional to the money you’ve invested in the charity.

Additionally, creating a charitable giving strategy forces you to become a more informed donor, as it enables you to make educated decisions about where your money should go and discover ways to make your money go further. No matter how much you can afford to give, by setting realistic charitable goals and putting in place a system to track your progress toward those goals, you can help your money do more for charity and gain the long-term fulfillment of achieving a major goal rather than the short-term fulfillment of writing a one-time check to charity.

The strategic process

Creating a charitable giving strategy will take effort, but if you put in the work, the financial benefits to you and the causes you donate to can be more than worth it. Creating a charitable giving strategy should help you do the following:

Enlist others.

Especially if you will be donating using charitable vehicles such as trusts or annuities, you will likely want to consult your financial advisor, attorney and tax professional when constructing your plan.

Involving your family in your charitable giving plan can also be important, as it can help you come together to create a charitable legacy. By giving money to charity, you can legally ensure that your assets are passed on, but by involving your family, you can ensure that your charitable values are passed on as well.

Set goals.

Before you get into any of the details of your charitable giving plan, you first must consider where you want your plan to take you.

In addition to an end goal, such as donating x percent of your income every year or claiming an x amount deduction, you should have clear, measurable goals along the way.
These goals and the way you measure them will likely be specific to your charitable interests. For example, if you are interested in donating to a charity focused on providing vaccines to people without proper access to medical care, your goal could be to provide x vaccines per year. Your goals may also be unrelated to the charity itself; perhaps one of your goals is to engage your family more actively in charity within the next three years. For these types of goals, you may need to devise your own system of measurement to determine your progress. Setting goals that are measurable and have a clear timeline can help you match your giving behavior with your ideal charitable outcome.

Budget.

Your charitable giving strategy should be a balance of what you hope to accomplish in the world and how much you can reasonably afford to give. The average American gives between 3 and 5 percent of his or her income to charity each year, but you can give depending on what’s right for you. Setting a budget can help you make your giving more intentional by providing you with a set amount you can afford to give each year.

Since it’s unrealistic to expect that you won’t run in to any situation that might cause you to donate money on the spot, you may want to establish a percentage of your giving budget for reactions to requests or emergencies.

Evaluate possible organizations.

Your goals will likely narrow your search for charities considerably. If your goals pertain to a area, such as helping animals that have been abused, you will want to focus your search only on charities that support that cause.

Once you have a list of creating potential charities, you will have to rely on research to determine the best candidates for your charitable investment. You can use resources such as the IRS website to verify any tax-exempt organization’s legitimacy by searching for its publicly listed employer identification number (EIN).

You can also consider each charity’s records to see its fiscal reports, list of affiliated charities, goal statements and more to determine how efficient it is with its funds and the kinds of causes it supports. This information, along with the age, size and community standing of the organization, can help you determine how worthwhile it will be to donate your funds.

Decide on giving tools.

Beyond simply writing a check to the organization(s) of your choice, there are many ways to give to charity. You can donate cash, appreciated securities, real estate, clothing or furniture, art or even vehicles. You can donate using a charitable trust or annuity or even set up your own private foundation or donor-advised fund, if you have the means.

The way you choose to donate will depend on your budget and your tax situation, as well as the assets you have available. While the tools each donor uses will likely vary, it’s important to explore all your options and determine which tool will provide the most benefit for the charity and for yourself.

Define success.

How you measure the success of your charitable strategy will be closely tied to your goals, and will therefore be different for each donor.

You should periodically assess your charitable plan, considering the following questions: Did you reach your overall goal? If not, did you reach most of your goals along the way? How can you help improve the success of your plan for the next year?

Keep in mind that your measure of success may be tied not only to what the organization can accomplish on your behalf, but also on how giving to that organization affected your life or made you feel.