Wrapping It Up at Year End: How to Allocate Your Charitable Giving by Nancy B. Gardiner

The other day my daughter called me in a quandary about how much to give away to charity this year.  When I paused, she said, “Why don’t you have an answer? Isn’t this what you do for a living?” I had to explain that this is not an easy question to answer, even for those of us who spend a good deal of time advising individuals and families on how to allocate their philanthropic dollars. So, as stores advertise yet another markdown and nonprofit organizations send their final appeals for the year, many donors are still wondering, “Have I done enough?”  What is enough?

There are no hard and fast guidelines, as every donor’s situation is different. Surveys by major foundations and other philanthropy-serving organizations vary, but show that on average most adult Americans give away between three and five percent of their adjusted gross income every year. There are a couple of guideposts that you may have heard about.  For example, in the context of private foundations, there is a 5% distribution requirement, although this is a floor, not a ceiling. Some donors are tax driven and make donations to new or existing donor advised funds with an idea that they will allocate the dollars to organizations later, perhaps in the new year when things aren’t so hectic. Some apply traditional religious tenets about giving and allocate a percentage of their income

Donation Guidelines

Over the years, we have developed some “rules of thumb “when advising clients at this time of year, or any time of year for that matter.

  1. Giving is good:  Giving to a legitimate charity is positive, no matter what the size of gift.
  2. Giving is personal: Every gift is made in the context of the donor’s life and circumstances. This is what makes the gifts so meaningful. Do you have a personal family situation that compels you to give? Do you have student or other debts to pay and therefore feel a bit constrained this year? Are you engaged in personal, family giving by supporting aging parent or an ailing friend? Do you volunteer regularly, or have you chosen a public interest career that leave you with less disposable income to give away?
  3. Gifts are made in the context of your overall “helping” allocation:  Just as you consider how to allocate your retirement or other investment assets, so too you can consider your overall “compassion” or “helping” activities. Think of your charitable giving, volunteer work and helping others together and make sure that you are satisfied with your total giving. This helps to account for those who have less cash, but who help in other ways.
  4. Gifts to both large and small organizations make sense:  Consider where your gift is going.  Are you giving to a large organization where your gift may feel like a “drop in the bucket?” Perhaps it will, but perhaps this is a moment in time when such gifts are very important, such as gifts to the American Red Cross following Hurricane Irma. That said, some donors prefer to give locally, to a smaller organization that does not have the budget to attract larger gifts from donors who are “ from away.”
  5. Gifts to organizations you “know” can be meaningful:  Do you or your friends volunteer for the organization? Is it well regarded in your community?  These considerations can provide assurance that your gift will be put to good use.  That said, don’t be afraid to respond to thoughtful outreach from someone new.
  6. Large or small, the gift should be “right sized”:  As noted above, the size of the organization to which you make the gift is important. You should also consider how the gift “fits” in the context of your own personal expenses, whether large or small. This will help you arrive at an amount you feel comfortable giving. If you were to allocate the cost of your weekly coffee purchases, for example, would that feel right-sized?
  7. Finding ways to “leverage” your gift can make a difference:  Perhaps the organization to which you are giving has received a challenge or matching grant from another donor. This might make your gift more meaningful, generating two, three or even four times the amount of your gift in additional donations. Will the very fact of your gift inspire other donors, large or small? Successful campaigns have a way of generating their own forward momentum. Perhaps your family wants to combine and make a gift together, to honor a family member, or in lieu of holiday gifts. Perhaps you have appreciated stock. Giving shares of such stock, instead of selling it, can increase dollars to charity and reduce your overall tax burden.
  8. You can take steps to ease the burden on organizations you like:   Regular giving helps organizations budget and plan. Whether you make a multi-year pledge or simply give regularly each year, without being asked, you take some of the fundraising pressure off of an organization. Allowing your name to be used can inspire others to give. Just as you look for the names of people you know when you choose to give, so too your name may inspire others.

In the end, donors want to make a difference. Exercising your giving muscle will indeed increase your giving strength and will help you support others in need of your help. The packages that we share with one another at this time of year come in all different sizes.  There is no “rule” to tell you how much to give. Allocate your time and resources wisely and remember that, in the end, the important thing is that the season is about sharing and good will.

About the Author

Nancy Gardiner is a Partner and Director of Family and Office Services at Hemenway & Barnes LLP. She works with families on legal, tax and investment aspects of governance, succession and all facets of family office creation, operation and management.

Nancy helps clients meet their philanthropic goals by advising them on all aspects of charitable giving, including creating charitable vehicles, such as private foundations, advising families and individuals regarding areas of interest and structuring of individual gifts. Additionally, Nancy counsels development offices on issues relating to major gifts.

Read Nancy’s full biography here.

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