In the Washington, D.C. metro area, residents give more than $6 billion every year to charitable causes, according to an analysis by the Chronicle of Philanthropy. That’s a big number. What does it mean for us?
Navigating Charitable Giving Before the Holidays
Now that it’s December, many of us are thinking about charitable giving. How much is the right amount? How can we do it in a way that is effective, mindful, and meaningful? For most people, there isn’t an obvious person to ask for help figuring it out. Perhaps you belong to a church, synagogue, or mosque and there is someone to ask there. Even if there is, clergy folks probably won’t discuss the tax questions any more than accountants would give advice on theology. It’s probably best if accountants avoid religious instruction and religious leaders avoid tax advice. Unless you are planning to contribute tens of thousands of dollars or perhaps hundreds of thousands of dollars each year, engaging a philanthropic consultant is probably cost prohibitive. So what to do?
Potential Approaches to Charitable Giving
Here are two approaches to consider:
- Learn about it yourself
- Engage a financial advisor who understands these issues and can be your thought partner
Learn about it yourself
Of course you can learn about it yourself. I have a guide to help with that and I’ll link to it later in the piece. This approach works very well if you are organized, have the time, have the interest, and are good at following through on things. If you are interested in the topic and want to be very engaged in research and implementation but don’t want to go at it alone, building a group, sometimes called a giving circle, can help by creating a structure and giving you natural thought and accountability partners.
Engage a financial advisor who understands these issues and can be your thought partner
As with many financial topics where most people need help making a plan and following through on it, your financial advisor might be able to help with charitable giving as well. Our firm and many others work with clients on defining giving goals, giving-related tax analysis, and building charitable giving practices that are mindful, tax-efficient, effective, and fun.
Our Approach to Charitable Giving
At Values Added, my financial planning firm in Washington, D.C., we serve mostly charitably-inclined clients. That makes sense because Ari Weisbard (the other managing partner) and I both have backgrounds in economic justice as well as evaluating social impact and are giving-oriented ourselves. We like to share our expertise so that anyone can benefit. So I recently released a five-part series on giving well. Each section has a core question. Here they are:
- Why should I give?
- How much should I give?
- Who should I give to?
- How can I make giving a meaningful part of my life?
- How can I maximize the tax benefits of giving?
Many terrific advisors work on these kinds of questions, including many of my wonderful colleagues in the D.C. Financial Advisor Collective.
Defining What Charitable Giving Means to You
Many clients want to give away enough to make a difference, perhaps enough that they really feel it, but not so much that it threatens the future financial security of them or their children. Defining that level is difficult for several reasons. First, it’s hard to know what the client’s needs will be in the future. Second, it’s difficult to anticipate how income will change in the future and also how assets will fluctuate in value. As with other financial planning areas, it’s often best to start with a good guess and iterate over time as your life evolves.
This is a challenging process for anyone to do on their own, especially because of the emotions involved. It may help to have a thought partner and also a follow-through partner. You may be able to find them in your personal life but you also might want a professional. In the latter case, ask your financial advisor if this is an area they have expertise in. If you are considering hiring a financial advisor anyway, consider asking whether charitable giving is a topic they can support you on. If you’d like to get started on making a giving plan that is mindful, tax-efficient, effective, and fun, our giving guide might help.