With its blinking lights, family traditions, and festive music, December is the most wonderful time of the year. And according to Charity Navigator, the month of December really is wonderful because December sees approximately 30% of all annual charitable giving occur.
Unfortunately, despite the greatest of intentions, many will inevitably make mistakes in how they give, especially if they wait until the last minute. So as a financial advisor, I wanted to assemble a list of things for you to think about as you consider your year-end charitable donations.
Last year, donations from America’s individuals, estates, foundations and corporations reached approximately $375 billion, according to Giving USA in their Annual Report on Philanthropy for the Year 2015. Hoping that 2016 is similar, that means you and your neighbors will donate over $110 billion dollars this month!
How much of this was more impulse-giving vs. a well-thought-out charity plan?
Ideally, at the beginning of every year – with your financial advisor – you would map out a plan to maximize the tax benefits of your giving. Really think through what is important to you and what you want to support. Is it an organization that supports literacy? Or provides food? Or shelter for families? Creating a plan will help you be less reactive and feel less boxed in when friends ask for your charitable support.
It’s easy to get fooled by a charity’s name so you need to do your homework. And beware of scam artists pretending to represent an organization that doesn’t exist. Read a charity’s financial statements to see how they spend their (your) money. Even better, volunteer before you write a check.
If you have owned stock for more than a year and it has appreciated, then don’t sell it first and then give the cash to charity. Those appreciated assets can be donated directly to charity without you or the charity incurring capital gains taxes (consult your tax professional to be sure).
Remember, for charitable contributions of $250 or more, you need a donor’s acknowledgement letter. And generally it’s a good idea to obtain receipts, especially when donating goods.
Shockingly, a whopping 12% of all giving occurs in the last 3 days of the year! But if you mail a check postmarked after December 31st, then you might run into trouble. Make it easy on yourself and don’t wait until the last minute.
Consider research from Elizabeth Dunn of the University of British Columbia, Lara Aknin at Simon Fraser University and Michael Norton at Harvard Business School. Essentially what they found in their study is the following:
If you have any questions or need help mapping out your Charitable Plan, set an appointment to discuss.