What Do I Need to Consider When Making End-of-Year Charitable Gifts?

As originally published in Worth

The holidays bring out the giving spirit in all of us, and as the year comes to a close, many people look to make a charitable donation to their favorite cause. These end-of-year gifts are always well-intentioned but should also be well-planned. Fortunately, there are many resources available to help donors make responsible, informed decisions.

To ensure you’re gifting to a reputable charity that deploys funds responsibly, take time to check that an organization’s approach to a specific social problem aligns with your own. For example, if your inspiration is to help homeless families, do you want to donate to an organization that provides food and safe shelters or to a group that focuses the majority of its resources on job training?

A number of websites enable you to compare nonprofit organizations so that you can navigate options more easily.

  • Guidestar (guidestar.org): Guidestar helps donors evaluate nonprofits and determine the impact of their giving. It’s good for finding financial data and metrics for assessing the health of an organization and how a nonprofit utilizes revenue.
  • BBB Wise Giving Alliance (give.org): This Better Business Bureau council reviews a number of national charities. Additionally, local BBBs sometimes offer reviews of local charities.
  • Charity Navigator (charitynavigator.org): This service breaks down charities’ financial filings and delivers an easy-to-navigate picture of an organization’s financial health as well as sources and use of funds.
  • Charity Watch (charitywatch.org): This charity watchdog provides an in-depth look at nonprofits and assigns each a letter grade.

Beyond online research, you may want to do some of your due diligence directly—especially if an organization is local and you want your multi-year gift to have a more concentrated impact. As a donor, some of the most rewarding charitable endeavors are those where you make both a personal and financial connection with the organization.

Here are some issues to consider as you evaluate different charities:
  • Understand how funds are being used and what is needed to support the work the organization is doing. Some experts recommend that no more than 20 to 25 percent of the organization’s budget go to administration. Take that advice with a grain of salt. In some organizations, for example, a nonprofit that needs a highly trained doctor or psychologist on staff, the biggest expense may be the administration but those skills are critical to their overall mission. So, be aware of how funds are used but also recognize the context.
  • Look to see who is on the board of directors. Ideally, these will be people who are involved with the organization’s mission or have other deep connections to the cause.
  • Be wary of charities that seem to want to get your money in the door as quickly as possible. Good nonprofits will partner with you and your financial advisors to make sure your gifts are made efficiently and in a manner that is helpful to the donor from a tax standpoint.
  • Watch out for “sound-a-like” charities. Sometimes, organizations that lack the best intentions will disguise themselves with names that sound like those of more reputable organizations.
  • Give directly to the organization. Sometimes, charities employ professional fundraisers who can keep upwards of 40 percent of your donation as a commission.

Finally, if you are ready to make significant charitable gifts and want expert guidance on developing a long-term strategy, there are philanthropic consultants that work with families and family foundations to create customized giving and funding plans. A few to investigate include: Strategic Philanthropy, Ltd., Arabella Advisors, and the Philanthropy Advisory Group.

You can also explore the website resources and take advantage of the programs of organizations like the National Center for Family Philanthropy which focuses on the needs of donors and giving families.

The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice.  Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training.  While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented.