Establishing Criteria for Charitable Giving
According to the National Center for Charitable Statistics, the Unites States has more than 1.5 million tax-exempt organizations. Follow these steps to help you decide where to give.
- CREATE A GIVING STATEMENT.
With so many worthy causes to support, knowing where to donate can feel overwhelming. By taking time to articulate why and how you want to give, and identifying causes aligned with your personal interests, values, and passions, you can narrow the field and create a road map for your giving.
- IDENTIFY YOUR GIVING "BUCKETS."
Your giving will likely be divided among several types of organizations. Marilyn Zack, CAP, Vice President, Development, Grand Rapids Community Foundation, suggested following a system advocated by Jason Franklin, the W.K. Kellogg Community Philanthropy Chair at the Johnson Center for Philanthropy.
"He calls it the 50/30/20 rule," Zack explained. "He suggests focusing 50% of your giving on one or two organizations that are important to you; 30% of your giving on Community, like your church, temple, and schools; and 20% on Impulse giving, which covers your friend's golf outing.
Disaster giving also falls into the "impulse giving" bucket. "Spend a little time understanding what the community needs, find out what organizations are doing the work, and then decide what you want to do," suggested Jenine Torres, Development Officer, Grand Rapids Community Foundation.
"Do you want to give unrestricted dollars to that organization, or do you want to help stranded dogs or give blankets to the homeless, for example?"
- DO YOUR HOMEWORK!
Services like GuideStar, BBB Wise Giving Alliance, and Charity Navigator are good starting points to vet how charities use donations. They do the legwork—researching the charities' finances and providing quantitative financial information to help make your decision.
The next step is investing your time and energy into understanding the nonprofit organizations you choose to support.
"It's incumbent on each of us, as donors, to read the materials the nonprofit provides to us, like newsletters, annual reports, and websites," Zack said. You could also attend events the nonprofit hosts and talk to their leadership. "It's that personal analysis that will provide you the best insight into the organization."
- GIVE GLOBALLY—OR LOCALLY?
When deciding whether to give globally or locally, one option isn't inherently better than the other. It's more about the cause you choose to support and who's best suited to address it.
For large issues like climate change, a global organization may be best. To address the need for affordable housing in Grand Rapids, you might be more inclined to work with a local nonprofit. There's one unique advantage to giving in your community, Torres noted. "When you give locally, it's on a much smaller scale. So you see the change you're hoping to impact."
- CONSULT AN EXPERT.
Regardless of your income level, it's a good idea to talk with a CPA or Financial Advisor to determine your annual giving budget. "There also may or may not be tax advantages for you, and they can help with that," Zack said.
If you're planning to give a significant amount, Zack suggests talking to your CPA or FA about donor-advised funds.
"In this new tax environment, donor-advised funds are getting to be a more popular tool than ever before. They help people achieve what they want to and achieve some benefits, from a tax perspective, that might not otherwise be available to them."
- PLAN FOR YOUR ESTATE.
Many people who may not have the ability to make large donations during their lifetime would like to give through their estate plan. "The Community Foundation can be a great resource as you explore and gather information about how you want to make an impact either through lifetime or giving at death," said Zack.
It's a good idea consult a professional to create a plan. "You don't have to be a millionaire to give a significant amount. Talk to an estate planner about giving at death," Torres said. "There are so many reasons that people chose to give charitably. In general, we hope that people choose to give because they want to make the world a better place.
"The root of philanthropy is a love of humanity."
FINANCIAL RATIOS AND PERFORMANCE
Nonprofit organizations with expenses higher than 25% can still be mission-focused. If you love the cause, get involved and determine the reasons behind the expenses. "It's a complicated equation," said Marilyn Zack, CAP, Vice President, Development, Grand Rapids Community Foundation.
GIVING EVOLVES OVER TIME
As your interests and passions may change with time, so might your personal giving statement. Make sure to update it periodically.
THE GIFT OF TIME
While nonprofit organizations need donations, they also need manpower. Consider volunteering in addition to—or in lieu of—financial giving.
Kirsetin Morello is a Michigan-based author, speaker, writer, travel-lover, wife and grateful mom of three boys. Read more about her at www.KirsetinMorello.com.
This article originally appeared in the December/January 2019 issue of West Michigan Woman.