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Financial Planning > Charitable Giving

Give Wisely in 2018

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The new year is a great time for giving, for businesses and individuals alike.

Whether you are advising the business owners who buy insurance products or annuities through your firm, or you are simply looking at a stack of pleas for donations addressed to your firm, there are important factors that you and your clients should consider, to ensure that you and your clients are giving wisely and efficiently.

1. Develop a charitable giving plan.

Charitable giving should be efficiently planned for just as any other business expense. Donations should be built into one’s business plan, especially if the business intends on making regular, recurring donations.

(Related: 20 Most & Least Charitable States)

Although brand awareness and other marketing elements will factor into charitable giving decisions, final decisions should be based on the philanthropic goals of an organization, and the desire to help the greater good.

2. Build in at least one layer of review.

When writing a check or finalizing a business donation, there should always be a checks and balances process, similar to any other major cash outlay. One person should not be responsible for writing and distributing a large company donation without approval of a multi-person team.

3. Think about the tax implications.

While businesses are donating to truly help a cause they believe in, it is ill-advised to do so without taking advantage of the appropriate tax deduction.

Regardless of how the money is donated or in what amount, businesses should maintain proper documentation and retain it for the IRS for a deduction. Proper documentation includes a receipt, cleared check or credit card statement.

If, however, any reward, such as a meal, round of golf, or any other benefit was received as part of the donation, the amount of the deduction must be decreased by the value of the benefit received.

4. Compare different giving strategies.

If you are a charitable giving advisor, you may know all about this.

Even within the life insurance field, however, other financial professionals may not know much about the ins and outs of various charitable giving vehicles.

Determining the most efficient way to make the contribution is just as important as setting the percentage or amount you want to give as a company. There are other alternatives to consider besides a cash donation, such as stocks, or other appreciated securities, with a lot of unrealized gain. In fact, it might be of greater impact to give stock, instead of cash, at year-end because it can result in a larger deduction and more money for the charity in the long run.

Aside from appreciated securities, a business can also consider opening a turnkey charitable gift fund, which works like a charity investment account. Businesses can put cash, securities or other assets into this account. Through immediate tax deduction, businesses can accelerate the deductions into the current year and invest the funds for growth in order to maximize contributions. Then, at any given time, they can select which charity or charities they would like the money to go toward.

Additionally, businesses can maximize donations by creating matching gift programs in coordination with employees. This strategy is also an opportunity for businesses to show their commitment to their employee’s passions, and both the employee and employer may be eligible for a charitable deduction.

5. Make sure the charity is a real charity.

Before donating to a charity, I always recommend businesses look for third-party endorsements and use a tool to identify the legitimacy of a charity.

There are many online sites that have excellent charity verification tools to ensure every dollar donated goes toward the cause it is intended to. Local chapters of The United Way or Community Foundation are also great resources that can share information on smaller, hyperlocal charities.

—Read Women Drive Philanthropy in the U.S. on ThinkAdvisor.

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