January 2025 Donor News: The benefits of charitable giving budgetingBudgeting has its benefits, even with charitable giving
Your family may be among those who are taking their charitable giving budgets more seriously this year, given uncertainty surrounding interest rates, potential new legislation, and possible stock market swings.
At the same time, you also know that our community’s needs continue to rise. As 2025 gets into full swing, your favorite charities will be relying on additional resources and support from philanthropic sources.
Against this backdrop, a budget has benefits!
Here are a few steps to consider as you build a 2025 budget for charitable donations that can help you continue to support your favorite causes and remain fiscally cautious.
–Review all your charitable donations from the last three years and compile totals for each organization. This can be an easy exercise if you use a donor-advised fund at the community foundation because the data can typically be pulled directly from the community foundation’s donor portal or requested from the our team.
–Carefully review the list of organizations you’ve supported over the last three years. Regardless of your donation levels, which charities are the most important to you? Are you serving on the board of directors of any of these organizations? Do you regularly volunteer at any of them? Is there a personal connection?
–Are there any organizations on your list that you supported primarily because the organization was raising money for a capital campaign, or because you were helping out a friend who is involved with that organization? If you anticipate household budget constraints in 2025, these may be organizations to possibly put on hold and then revisit supporting again in future years.
–Add up your total giving over the last three years and then divide it by three to get your average. Is that number doable this year? If not, reduce it to a level that fits within your financial situation to arrive at your tentative 2025 giving budget. Or, if you expect your income and assets to increase this year, consider taking your charitable giving budget up a notch. And always remember that there are tax advantages to giving highly-appreciated publicly-traded stock to your fund at the community foundation.
–Consider whether to keep certain organizations at historic levels of giving, such as those you’re personally involved with. Or on the flip side, you may decide to temporarily reduce your level of giving to organizations for which you are providing other types of support, including volunteering or board service.
–Review your list to see if there are any organizations you’ve supported that you’d like to learn more about. The team at the community foundation is extremely knowledgeable about charities in our region and would be happy to provide information on how a particular organization spends its money and how it measures impact.
–Finally, do the best you can to set targets for the amount of support you’d like to provide to each organization—and perhaps even set targets for the timing of your gifts. You can change these targets at any time, of course. The point here is that the planning and budgeting process is a great way to create more intentionality around your giving. Intentional giving is not only more rewarding for you, but it is also likely to increase your level of engagement with the recipient charities and enhance your understanding of how dollars are being deployed to meet the mission. This, in turn, helps your favorite organizations get better at carrying out their programs and serving those who rely on their work.
We look forward to working with you throughout the year!
Philanthropy: it’s a family thing
If you’ve not yet involved your children or grandchildren in your charitable giving, this may be the year to consider it! Children of all ages can benefit from learning even just a little bit about philanthropy and how charities improve the quality of life for everyone. Indeed, many parents and grandparents believe that some level of community involvement is crucial for young family members’ personal growth and future contributions to a more compassionate society.
We are always happy to help you explore best practices for helping shape the young people in your life into caring, responsible adults and inspire your extended family to get more involved.
Increasing a family’s role in charitable giving often leads to broader questions about estate planning, such as:
–How to structure legacies to favorite charities so that heirs can stay involved in your priorities across generations
–How to ensure that children and grandchildren will be financially secure but still motivated to pursue independent personal and professional growth
–How to foster and support the self-directed charitable passions of children and grandchildren
The team at the community foundation is happy to work alongside your tax and estate planning advisors to address questions like this. We understand that you may be concerned that leaving millions of dollars, or even hundreds of thousands, to your children could backfire and hinder your kids’ ability and motivation to achieve financial independence. You might even be among the growing number of baby boomers who are considering pushing out distribution dates of inheritances and gifts.
In addition to concerns about fostering entitlement and dependency, many parents and grandparents are concerned that their children will miss out on the satisfaction of knowing they built wealth on their own. These parents believe that the challenges and struggles along the way will ultimately enrich their children’s lives with intangible benefits that are far greater than the obvious benefits that come with gifts or an inheritance of significant financial resources.
If you find yourself feeling this way, please reach out to the community foundation. Every day, our team works with families who are in this exact situation. We’ll help you evaluate strategies such as:
–Establishing philanthropic components of an estate plan so that children receive only the amount that can pass to them free of estate tax, with the rest passing to a charity, such as a donor-advised fund at the community foundation.
–Setting up a fund at the community foundation to allow you to support favorite causes and charities during your lifetime; if the fund is a donor-advised fund, you can provide that your children step in as successor advisors following your death.
–As successor advisors to the donor-advised fund, your children can work with the community foundation to recommend grants to favorite charities, support interest areas you’ve pre-selected, or both.
Many people are attracted to this type of structure because not only could it avoid estate tax, but it also allows their children to stay involved with all of the family’s wealth, work together and keep sibling bonds strong, and get involved in the community.
Please reach out to the community foundation team anytime. We look forward to exploring strategies to help you meet your financial and tax goals, as well as honor your wishes for your children to live happy and productive lives.
Doing your due diligence
You’re ready to roll into a new year, and that includes staying involved with the charities you love, whether as a donor, volunteer, board member, or all of the above.
Our team at the community foundation is here to support your charitable endeavors, no matter where your passions lie. Our region is full of charitable organizations that are doing amazing work to improve the quality of life for everyone. Indeed, across the country, there are hundreds of thousands of charities making a difference every single day.
Occasionally, you may be asked by a friend or colleague to donate to a charity you’re not too familiar with, or perhaps a charity that’s not been around very long asks you for financial support. Please reach out to us with your questions. We are happy to help you gather the information you need to be confident in your gifts to any organization, large or small, new or well-established.
The overwhelming majority of charities are above board, ethical, governed by top-notch board members, and run by highly-qualified professionals. Unfortunately, though, every once in a rare while, there are instances when a charity might not dot all the i’s and cross all the t’s. Although very infrequent, it’s still worth considering leaning on the community foundation to help you with due diligence for a few reasons:
–You’ll want to protect your reputation against damage if you were to wind up supporting a charity that later becomes tainted by a scandal.
–You’ll want to validate that the charity is not facing significant or unusual legal or financial risks.
–You’ll want to avoid scams, which, unfortunately, are on the rise.
A big perk of organizing your giving through a fund at the community foundation is that our team always has its finger on the pulse of what’s going on with charitable organizations in our community. We can research the status of longstanding organizations, check into a brand new organization, and everything in between. Our goal is to help ensure that your charitable contributions have the greatest possible impact. We look forward to hearing from you!
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.