Saturday, September 5 , 2015, 3:35 am | Fair 60.0º




Cynder Sinclair: Three Steps to Creating Your Own Charitable Giving Plan

By Cynder Sinclair |

“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it’s the only thing that ever has.”Margaret Mead

This time of year, thoughtful, committed citizens find their mailboxes overflowing with donation pleas. Sure, you want to change the world — or at least make a difference in our community. But where do you start?

You have your favorite charities you give to each year around holiday time, but it seems that the number of requests multiplies each year. How can you be sure you are giving to the organizations that will make the biggest difference in causes close to your heart? How can you be sure your donations will have the greatest impact? Knowing how much to give and what charitable vehicles to use can also be daunting.

Since a well-thought-out Charitable Giving Plan is more important than ever before, consider using this short three-step process to tailor your own approach. Taking the time to work through these three steps will help you create a tailor-made Charitable Giving Plan that reflects your interests and your passion in a way that results in the biggest impact for your gifts.

Step 1: Identify Why You Are Giving

People make charitable donations for all sorts of reasons. Some believe passionately in a particular cause and want to do all they can to make a difference. Others donate because giving is a deeply held family tradition. Some businesses make charitable donations because they know it will increase their bottom line while benefiting their community. Still others want to do all they can to be part of the solution for a certain problem in their community. There are a few who like the prestige of seeing their name high on a public listing of donors.

All reasons for giving are valid, so you need to identify exactly what motives drive your own giving engine. Your reasons for giving will provide a foundation for your own Charitable Giving Plan. I invite you to spend some time asking yourself why you are giving. You might find some surprising answers, but identifying why you are giving will be the first step toward making the greatest impact.

Many of us give because certain causes pull at our heartstrings. If that is true for you, you might feel daunted by the sheer number of good causes to choose from. But sitting down with pen and paper to examine your heart will reveal your basic areas of interest.

Ask yourself which causes you hold dear. For example, are you passionate about causes that help keep women and children safe, such as CALM, CASA or DVS? Do you care more about providing housing, through Habitat for Humanity, Peoples’ Self Help Housing or Transition House? Is your biggest interest animals, like the Wildlife Care Network or the Santa Barbara Zoo? Are you interested in end-of-life care, like Hospice of Santa Barbara? How about helping people recover from addictions, like CADA or the Rescue Mission? Perhaps you prefer to donate to environmental causes such as the Community Environmental Council, or maybe you are more drawn to the arts such as Music Academy of the West or the Santa Barbara Museum of Art. Or perhaps older adults concern you most, like at the Friendship Center. You can also consider museums such as the Museum of Natural History or the Maritime Museum.

You will find a plethora of nonprofits in the Santa Barbara area to choose from. In fact, Santa Barbara County has the second-highest number of nonprofits per capita in California, with Marin County slightly edging ahead.

You can’t give to every solicitation that fills your mailbox, so be proactive. Decide which causes stir your soul. Make a short list of your categories of interest and then begin to make a list of the organizations that address those areas of need. Next, it will be time to do a little research.

Step 2: Determine Which Organizations You Will Give To

Once you have identified exactly why you want to make charitable donations, it’s time to decide where your gifts will go. Take a look at the list of nonprofits you compiled from Step 1. Rank the organizations in order of their priority to you. Step 2 will help you choose charities that are truly making a difference and are going to be around for a while. You want to be sure that any donations you give support organizations that are financially stable, well-run and achieving results for their mission.

Nonprofits can be more complex than for-profit businesses, so it’s important to check some key indicators of success. Whether you are considering giving to a small community nonprofit or the local chapter of a nationwide organization, it’s a good idea to take a closer look. First, get to know your local charities — meet the executive directors, take a tour of their facilities and pay attention to their actual work within your community. Find out who serves on their boards of directors and whether the board members are donors to the organization.

If board members aren’t willing to contribute to their own organization, why should you? Do you see the agency making a difference locally? Ask around — do they have a good reputation? Find out if they follow a current strategic plan. Maybe you would even like to volunteer to get a closer look at their operations. Of course, all this takes time that you may not have. So, doing your research in other ways can be helpful, too.

You can review the finances of any nonprofit with a 501(c)3 tax exempt status by examining its 990 tax return at www.guidestar.org. Pay special attention to Guidestar’s new product, Financial Scan, which focuses on each organization’s impact and financial health.

While the rule-of-thumb is that a charity should spend no more than 25 percent of their budget on fundraising and administration and 75 percent on programs, the more important indicator is the result the organization is making in the community. Another important consideration is whether the organization can sustain its programs over time. Their 990 will reveal whether they are able to grow their revenue at least at the rate of inflation, continue to invest in their programs and maintain an appropriate reserve account for unexpected expenses. These are all indicators of economic sustainability and accountability.

Logging onto www.charitynavigator.org will yield a treasure trove of valuable tips on philanthropy. Keep in mind that a nonprofit’s full cost of doing business includes: 1) direct costs of delivering programs; 2) indirect costs to support effective program delivery such as fundraising, marketing, management salaries, occupancy, and infrastructure; and 3) costs related to strengthening the balance sheet such as investments in facilities and other fixed assets and reduction of debt. Don’t be surprised by high percentages spent on personnel costs. It’s common for human service nonprofits to spend 52 percent to 75 percent of their management and general funds on personnel expenses since this is usually the vehicle for delivering their services.

Now that you have identified your personal motives for giving, made a list of your areas of concern and organizations that fulfill those missions, and investigated the financial viability of some of your favorite organizations, it’s time to decide how you will give and how much you will ultimately donate.

Step 3: Choose the Best Giving Vehicles for You

So far you have laid the foundation for your Charitable Giving Plan by identifying your motives for giving — or what you want to accomplish through your gifts. Next, you determined which organizations you plan to contribute to. Before you decide how much you want to give to each organization, you will want to take a look at the possible vehicles or ways of giving to determine which ones are best for you. Charitable giving can help reduce your income taxes, estate tax and capital gains tax, so it is crucial to think about how you can best leverage tax rules to expand your philanthropic impact.

Everyone can give something and each method of giving has its own benefits. Here are some of the more popular giving vehicles for you to consider:

» Writing a check offers a quick and easy way to donate. You can mail this in to the organization in response to its annual appeal or you can donate through its website. This is an immediate income tax deduction and removes the value from your future taxable estate.

» Giving assets such as cars, real estate, clothing or household goods can be deducted based on the full fair market value of the items.

» Including the charity in your will makes the donation exempt from federal estate tax and allows you control of your assets for your lifetime.

» If you have reached 70½, you can make cash donations to IRS-approved charities directly out of your traditional IRA.

» Donating securities eliminates tax on long-term capital gains and offers an immediate charitable deduction.

» Gifting your retirement assets allows you to make the gift from the most highly taxed assets.

» Making a gift of life insurance offers a current income tax deduction and allows you to make a large gift with little cost to yourself.

» Setting up a family foundation appeals to some high net worth individuals because it is the best way to make sure your donation totally matches your values and interests.

» Donating through donor-advised funds is becoming more popular. These funds are charitable giving accounts offered by a sponsoring organization, such as the Santa Barbara Foundation, that are designed as an accessible, simple and less expensive alternative to private foundations. Put your money in, let the sponsoring institution manage it, and then make a donation to the cause of your choice.

» Giving circles such as the Women’s Fund of Santa Barbara, which is under the auspices of the Santa Barbara Foundation, are relatively new to the philanthropic scene but are gaining ground rapidly. Making your donation through a giving circle is both fun and practical.

» Arranging for a planned gift such as a charitable remainder trust, a charitable lead trust or a charitable gift annuity has a variety of benefits and is best handled by a financial professional.

» Remember that volunteering your time doesn’t cost you a dime. Whether you have one hour a week or one day a year to give, you can donate your time to a cause that inspires you.

By the time you complete Step 3 of this process, you will have thought deeply about your own motives for giving, identified causes and organizations that pull at your heartstrings, and evaluated the impact those organizations are having on your community. Hopefully, this three-step process has helped you create a Charitable Giving Plan that reflects your unique interests and passions.

You will now be ready to make your contributions with the certainty that they will make a significant impact in your community. Your gifts will make a difference and the organizations you give to will be the ones that are strong and viable for the long term.

— Cynder Sinclair, Ph.D., is a local consultant to nonprofits.




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