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Cynder Sinclair: Philanthropic Giving — Create Your Own Plan

Will you be giving to your favorite nonprofits this season? Do you always give to the same charities or, like many, are you sometimes baffled by the sheer number of donation requests? Hundreds of compelling causes tug at our heartstrings every day, especially this time of year. Deciding which organizations to give to can be more confusing than in the past, particularly when you read about the latest trend of giving for social impact.

Should we be doing more than just writing a check? Should we find a way to measure the work of nonprofits? You can gain clarity and feel more effective in your giving by carefully crafting your personal philanthropy plan.

Most people simply give from their heart to those organizations and causes that resonate with their interests and experiences. Perhaps we have been touched personally by the good work of the Friendship Center or the Scholarship Foundation. Or maybe a loved one has Alzheimer’s disease, or possibly we highly value the work of our Santa Barbara City College Foundation, or we have a soft heart for the homeless children cared for by the Storyteller Children's Center.

Design your own giving plan that reflects your values and passion by following these three easy steps.

Step One: Identify why you are giving and which causes stir your soul.

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, but you need to identify exactly what motives drive your own giving engine. Your reasons for giving will provide a foundation for your own philanthropy 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.

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 like CALM, CASA or Domestic Violence Solutions? Do you care more about providing housing like 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, the Rescue Mission or Casa Serena? Maybe you are most interested in helping the poor like Unity Shoppe or Casa Esperanza. Perhaps you prefer to donate to environmental causes like the Community Environmental Council. Or maybe you are more drawn to the arts and music like the Music Academy of the West, the Santa Barbara Museum of Art, the Santa Barbara Symphony, the Lobero Theatre or the Ensemble Theatre. Or perhaps older adults concern you most like at the Friendship Center or Visiting Nurse & Hospice Care. You can also consider museums such as the Natural History Museum 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 what causes stir your own 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 Two: Do your research to determine which organizations you will give to.

Once you have identified exactly why you want to make charitable donations and which organizations resonate with you, it’s time to do some research. Some people will want to do more research than others, but everyone can benefit from looking a little deeper than the donation request in your mailbox.

Take a look at the list of nonprofits you compiled from Step One. Rank the organizations in order of their priority to you. Step Two will help you choose charities that are truly making a difference and are going to be around for awhile. 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 director, take a tour of the facility and pay attention to its actual work within your community. Find out who serves on the board of directors and if the board members are donors to the organization. If board members are not willing to contribute to their own organization, why should you? Do you see the agency making a difference locally? Ask around — does it have a good reputation? Find out if it follows a current strategic plan. Maybe you would even like to volunteer to get a closer look at its 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 GuideStar.org. Pay special attention to Guidestar’s new product, Financial Scan, which focuses on each organization’s impact and financial health. While in the past donors focused on the percentage of overhead, many now realize the more important indicator is the result the organization is making in the community (also referred to as social impact). Another important consideration is whether the organization can sustain its programs over time. Its 990 will reveal whether it is able to grow its revenue at least at the rate of inflation, continue to invest in its programs and maintain an appropriate reserve account for unexpected expenses. These are all indicators of economic sustainability and accountability that will give you a sense of its effectiveness and staying power.

Logging onto 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 misled by charities that claim unusually low overhead expenses, and 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 Three: Choose the best giving vehicles for you.

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 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 years of age, you can make cash donations to IRS-approved charities directly out of your traditional IRA.

» Donating appreciated stocks and mutual funds 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 like 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 Three 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 philanthropy 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 and deeply resonate with your own spirit. 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 and founder and CEO of Nonprofit Kinect. She can be contacted at 805.689.2137, or .(JavaScript must be enabled to view this email address). The opinions expressed are her own.

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