Updated November 2016 — It's become an annual tradition: rivers of mail flowing into our mailboxes around the holidays. They arrive from dozens, or perhaps even hundreds, of good causes. Many of these charities are skillful in their emotional appeals, playing on our natural sympathies at year-end. And so we write a check. Something similar happens after natural disasters, when charitable organizations come out in full force to provide relief to stricken areas.
The causes may be worthy and the donations may be put to good use, especially in an emergency situation — but is that really the most effective way for you to accomplish your philanthropic goals over the long term?
Specialists in philanthropic giving think not. They counsel clients to take a more proactive approach, crafting a strategic plan for giving. That way, clients can better focus their giving for greater impact, and to the causes about which they care most.
Thoughtful giving can help lead you to a more impactful legacy.
Katherine Anderson, a Philanthropic Specialist in the San Diego office, and Sara Montgomery, a Denver-based Regional Philanthropic Manager, both with Wells Fargo Private Bank, offer some tips on how to be more strategic about your philanthropic efforts.
- Dig deep to understand what's most important to you. Even the most well-intentioned people "tend to be unfocused" in their giving, especially when they're responding to unsolicited appeals, says Anderson. Without an overarching plan for their charitable giving, people may end up supporting more causes than they truly care to endorse, including groups they may know little about. A good advisor will ask you to compare the causes most important to you with the list of charities you've supported. Faced with the comparison, many people are surprised by the apparent disconnect.
- Consider your particular financial circumstances, including tax planning. "It really makes for an efficient plan if you are working toward the charitable interests that are most important to you, but at the same time you're doing it in a way that makes the most sense for your own financial circumstances, and from a tax-planning perspective," says Anderson. Adds Montgomery: "What we have found is why people give is not driven by taxes, but what, how much, and when they give might be impacted by a tax consideration."
- Use the proper philanthropic vehicle. There are many vehicles for supporting good causes. It's crucial to fit the right one with your giving plan and financial circumstances. As Montgomery puts it, "Maybe you set up a charitable lead trust, but you really should have thought about a private foundation. Or maybe you set up a private foundation but you maybe should have considered a donor advised fund. And in your haste to get something established, maybe you didn't have the opportunity to take the steps that suit your long-term and your short-term goals." She notes that donor advised funds are increasingly popular, in part because they offer the flexibility of taking a tax deduction in the year they're established, while allowing donors time to consider how and to whom they'll disseminate the funds.
- But mostly, just be sure to begin. If you're not sure you're ready for a fully thought-out, long-range plan, dipping one's toe in the philanthropic waters is often a good initial strategy, Montgomery says. "You can get a sense of what you want to accomplish, and build upon a good first experience. And if the experience has been good, you can make more of a commitment, and if not, then it's not as if a big opportunity has been lost, because it wasn't a major commitment of time or money."
Thoughtful giving can help lead you to a more impactful legacy. In the end, it's all about working with a team to best accomplish your personal charitable goals. Says Montgomery: "We're here to educate and support clients, so when they're ready and they do decide to go down that philanthropy path, they're doing it with knowledge, confidence, and conviction."