The earthquake that hit Haiti last week prompted a flurry of charitable donations that vastly exceeded the amount raised for previous international catastrophes, according to The Chronicle of Philanthropy. Within a week, more than $150 million had been contributed to major U.S. relief groups.
It’s a shining testament to the generosity of Americans to give so much, especially in light of the financial strain many have endured themselves during the recent economic downturn and sluggish recovery. Historically, Americans give generously, in good times and in bad. A survey by Johns Hopkins Comparative Nonprofit Sector Project reported that three out of every four Americans give to charity, including families with household incomes of less than $10,000. Collectively, Americans give more than $210 billion to charitable organizations each year, according to the American Association of Fundraising Counsel.
Although many families and individuals give generously, however, the vast majority doesn’t give in a planned way. Most employ a charitable-giving strategy often referred to as checkbook philanthropy. This really isn’t a strategy, but rather the unplanned giving of small amounts to a variety of charities, commonly in cash and often in reaction to disasters such as the Haiti earthquake.
Yet, those who plan their charitable giving enjoy many tangible benefits, in addition to the satisfaction of assisting the charity of their choice.
Develop a Plan for Charitable Giving
Planned giving is an organized approach that evaluates your personal values, selects charitable organizations and gift-giving vehicles that best reflect those values, and maximizes the financial and tax benefits of the gifts.
Our reasons for giving to charity are as individual as we are: Many contribute out of a desire to give something back to communities or organizations that have helped them in the past, such as an alma mater, a youth organization or a hospice. Some give because of personally held values, principles or religious convictions, or to create a legacy that will last long into the future. Still others hope to provide life-saving support to others when disaster strikes.
According to the authors of Giving: Philanthropy for Everyone (published by Denver-based Quantum Press), making planned charitable gifts during your lifetime can increase the value of your estate to pass to your heirs, can convert non-income-producing assets into an income stream for you, and can delay capital gains taxes on the sale of highly appreciated property. It can also help you achieve specific education, business and family goals.
Before you can develop a charitable giving plan, you must first understand the extent of your financial resources. This is realized through a detailed analysis of your current situation, as well as development of a retirement plan. The easiest way to accomplish this is to schedule some time with a fee-only financial advisor who will help you review your net worth and cash flow statements to determine the resources available to you.
Winston Churchill so eloquently said that we make a living by what we get, and we make a life by what we give. By creating a thoughtful charitable giving plan, we can all enjoy the benefits of making both a fine living and a rewarding life.