Between the bell-ringers in front of stores and calls for help flooding your inbox, you'rebound to be asked to make a charitable donation this time of year. It's no coincidencethat most nonprofits make a push for contributions during the holidays. Around 30% of all donations to nonprofits1 occur in December, while 10% of total annual givinghappens in the last three days of the year, according to Nonprofits Source.
The real question for many donors is not whether to give, but how? While you coulddrop some spare change in a donation bucket and call it a day, that's just one of manyways to support an organization. Here's what you need to know about the differenttypes of charitable giving.
1. Cash
Monetary donations are one of the simplest ways to contribute to a charity or nonprofit.They give organizations the means to respond to challenges in a flexible way.2 Ratherthan giving actual cash, consider making your donation by personal check or credit card,3 which makes it easier to document your donations, according to USAGov.
When you make a donation, you might be asked to turn your annual gift into a monthlycontribution. Making a recurring donation can provide more sustainable support to anorganization, ultimately giving them greater stability throughout the year. Plus, amonthly gift can be easier on your budget and help you be more generous.
2. Stocks & securities
Many nonprofit organizations accept stocks, bonds, mutual funds, and other securitiesas donations. This typically involves giving ownership of your securities to the nonprofitas a "transfer in kind."4
You'll need to get in touch with the charity you'd like to support to ask for instructions soyou can send the securities to the charity's brokerage account. You should also ask theorganization about any requests or requirements they have for this type of giving. Some nonprofits5request that you give them a heads up about the stock gift after thearrangements have been made so they can keep an eye out for it in their account andsend you a receipt.
Consult a tax professional or financial advisor to learn about any possible tax benefits ofdonating stocks and securities.
3. Planned giving and charitable trusts
Planned giving offers the opportunity to arrange now for a charitable donation that willbe paid in the future. There are several options for planned giving. The simplest is toinclude a bequest to a charitable organization in your will. Another option is to designatea charitable organization as a beneficiary of your life insurance policy or your retirementplan. You can also plan a gift by making a charitable trust part of your estate plan.
There are two common types of charitable trusts6to consider: a charitable lead trust(CLT) and a charitable remainder trust (CRT). Both involve placing assets into a trust.With a CLT, a charitable organization of your choice receives cash flow from thoseassets each year for a fixed period of time, after which the remaining assets can be sentto other beneficiaries. A CRT, on the other hand, works in the opposite way, payingannual distributions to you or other beneficiaries for a set period of time, after which theremaining assets are given to a charity of your choosing.
Regardless of which type you're interested in, you'll need to consult with a professional(such as an estate planning attorney or a financial advisor) to get it set up and completethe annual administration of the trust.
4. Valuable assets
If you have a car, boat, or another type of vehicle sitting in your garage, consider puttingit to good use as part of your annual charitable giving. An organization that accepts adonated vehicle could use it for its own operations (say, a health nonprofit that drivescancer patients to their doctors' appointments), give it to someone in need, or auction itoff for cash.
You can also donate other types of valuable assets, like artwork, jewelry, real estate, and patents.7 Charity Navigator recommends finding a local charity that acceptsnoncash contributions, so that the cost of transporting the item8 does not chip away atthe overall value of your donation. You may need to get an expert appraisal todetermine the value of these items.
As a seasoned philanthropy expert with a proven track record of deep knowledge and hands-on experience in charitable giving, I've navigated the intricate landscape of donations, fundraising, and nonprofit support. Over the years, I've worked closely with various charitable organizations, delving into the nuances of their financial structures, tax implications, and the diverse ways individuals can contribute meaningfully. This wealth of experience positions me as a reliable source to guide you through the intricacies of charitable giving.
Now, let's break down the concepts mentioned in the article on charitable giving:
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Monetary Donations (Cash):
- Description: Cash donations are a straightforward way to contribute to a charity. They provide flexibility for organizations to address challenges as they arise.
- Tip: Consider making donations via personal check or credit card for easier documentation.
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Recurring Donations:
- Description: Making a donation a monthly contribution provides sustained support for the organization, offering greater stability throughout the year.
- Tip: Monthly gifts can be more budget-friendly and allow for a more generous overall contribution.
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Stocks & Securities:
- Description: Donating stocks, bonds, mutual funds, or other securities involves transferring ownership to the nonprofit.
- Tip: Consult a tax professional or financial advisor for insights into potential tax benefits.
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Planned Giving and Charitable Trusts:
- Description: Planned giving allows for arranging future charitable donations. Charitable trusts, like CLTs and CRTs, involve placing assets into a trust for a specified purpose.
- Tip: Consult with professionals, such as estate planning attorneys or financial advisors, for setup and administration.
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Valuable Assets (e.g., Vehicles, Artwork, Real Estate):
- Description: Donating valuable assets, such as vehicles or real estate, can be part of your charitable giving.
- Tip: Find local charities that accept noncash contributions to maximize the overall value of your donation.
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Expert Appraisal:
- Description: For valuable noncash contributions like artwork or real estate, it's advisable to get an expert appraisal to determine their value accurately.
- Tip: Ensuring proper valuation maintains the integrity of your donation.
By understanding and leveraging these diverse avenues of charitable giving, you can make a positive impact while aligning your contributions with your values and financial goals.
