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Financial Planning > Charitable Giving

Addressing the Worries of Charitable Clients

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Many charitably inclined Americans have concerns about their giving, according to UBS CIO Wealth Management Research, which has published the second edition of “Your Wealth & Life” focused on these issues.

Ninety-five percent of U.S. households donate to charity annually, the report said. Last year, charitable giving totaled $335 billion.

UBS said its clients raised concerns about the effectiveness of their philanthropic endeavors.

One factor that limits effectiveness, it said, was unstructured annual giving that may include making decisions as requests come in, not receiving transparency from recipients about how donations are used and not including giving as part of a financial plan.

According to the report, the best way to ensure that philanthropic goals are met is to work closely with the financial advisor, the accountant and the attorney to craft a giving strategy.

Along the way, the donor and the advisory teams should address several questions:

  • Why are you making the gift?
  • To whom are you going to give?
  • Where is the charity located?
  • What are you going to give?
  • When are you going to give?
  • How will the funds be deployed, to a charity or to a donor-advised fund or family foundation?

Another concern of UBS clients is the timing of giving for the greatest impact. Should they give now, or save and invest assets and give later?

The report noted that “every dollar given today is one less dollar that can be invested and grown into a potentially larger gift in the future. Conversely, no dollar that is invested today can fund an immediate and possibly urgent gift to a charitable cause.”

Again, planning is crucial in finding a trade-off between giving now and giving later. It must take into account the donor’s the donor’s preference, the needs of the charity and the return that could be earned on the money earmarked for future gifts.

Still another concern of donors is that many households are not sure how much they can prudently give.

The report said that giving through a bequest is one possible solution, but noted that doing so has been less effective than giving during a donor’s lifetime.

In fact, the report said, 75% of charitable giving is done during the benefactor’s lifetime, while only 10% of all giving occurs through bequests.

The current investment environment, too, presents challenges, according to the report. Private foundations and charities operating in perpetuity will have a hard time meeting their return objectives.

As well, because of modest return expectations, households may increasingly find their giving has more impact when they donate smaller sums sooner rather than invest the money and donate a greater amount later.

The report also address millennials’ role in philanthropy. It found that millennials are getting involved early and intend to integrate causes that they believe in with everyday aspects of their lives.

“They’re carrying on the deeply rooted philanthropic tradition in the U.S., but in their own way.”

— Check out Post-Recession Corporate Giving Increased at Biggest Companies on ThinkAdvisor.


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