Charity as a Part of Your Legacy

 |  News

How do you effectively make charity a part of your legacy? You want to donate with your head as well as your heart, making sure a charity is legitimate, well-run and aligns with your values.

Before contributing money, volunteering time, or opening mail from another charity, you should clarify your values. For example:

  • What is important to you? Your neighborhood? Region? The nation? The globe?
  • Do you support a large or small charity, a new or old one?

Your next step is to evaluate charities that meet your criteria.
Charity Legitimacy
Follow these steps to determine a charity’s legitimacy:

  • If it is a nonprofit, does the IRS recognize the organization as tax exempt? Ask to see a letter of determination.
  • If it is faith-based, ask to see its official listing in a directory for its denomination.
  • Get hard facts. A reputable organization will define its mission and programs clearly, have measurable goals, and set concrete criteria to describe achievements.
  • Compare charities that do the same kind of work, especially when delving into their finances. The work affects operating costs.
  • Avoid charities that will not share information or try to pressure you. Reputable nonprofits will discuss their programs and finances. They should be willing to send you literature about their work or direct you to a website.
  • Trust your instincts. Do not contribute if you have doubts.

Now the hard part. Can you deduct your giving for next year’s taxes? The tax overhaul makes the standard deduction much larger; meaning, fewer filers will choose to itemize, eliminating one incentive for deductions. Itemized deductions will have to be greater than the new standard deduction to benefit from listing deductions separately. For a tax break from your charitable donations, you can:

  • Bunch donations every few years to surmount the higher standard deduction. You will itemize every other year, claiming the standard deduction in years you do not donate.
  • Consider so-called donor-advised funds that enables you to bunch smaller gifts into one large amount and take a deduction in the year you are gifting. You can designate charities as recipients later. The assets can be invested and grow tax-free, but the accounts have fees.
  • If you are 70 1/2 or older, you can benefit from contributing up to $100,000 of IRA assets directly to one or more charities.

Smart Research
There are rating sites that show how much a given charity spends on overhead and highlights red flags of possible mismanagement. However, these sites do not state how much a charity accomplishes with donations.

One of the best sites to help with evaluating donations is Charity Navigator, which rates more than 9,000 charities, giving them scores on accountability and transparency. You can find out how much a charity spends on actual good works, as opposed to administration and fundraising. Does the charity have a conflict-of-interest policy? Audited financial statements? A formal process of determining CEO compensation? These items are listed on Charity Navigator.

Your legacy, now and after you are gone, is important. When it comes to charity, choose wisely. Contact us for additional guidance.

Need Guidance and Help?
If you need advice, give us a call and we will be happy to discuss your situation.