October marks the beginning of the fourth quarter of the year. As people examine their financial records, plan for the remainder of the year and take a look at 2021, philanthropic donors should do the same.
According to Mary Durra, vice president and senior financial adviser at NCA Financial Planners in Mayfield Heights; Joel Fox, chief development officer at the Menorah Park Foundation in Beachwood; and Angela Parsons, vice president for donor services at the Columbus Foundation in Columbus, donors should start their end-of-year gift plans now to avoid problems.
“In a very basic way, you plan so you don’t spend all your money and then not have it available to give at the end of the year,” Durra said. “Planning allows you to commit to doing it, and then the charity is more likely to benefit from your gift.”
Durra added planning now also allows for them to review any tax benefits or changes that can come with a philanthropic gift, as well as what deduction they plan to take in 2021 as it could allow for more money in the gift pool.
Parsons said planning can also make sure nothing causes the gift not to be received by the intended organization, especially if they are going to give an asset other than cash.
“The sooner you start, the better,” she said. “We’ve had donors who transfer mutual funds which can be hard at times and take longer than most other transfers of assets or stock. So, it’s important to take that extra time and plan.”
With only two months left in the year, Fox said donors should be aware that there isn’t that much time left to allocate gifts for 2020.
“We don’t want people to be rushed, but good donors should be talking with their organization’s representatives about the current needs now,” he explained. “And perhaps that is especially true for this year as the needs of many organizations have changed due to the pandemic. So, you as a donor should be learning about what those needs and changes are, and how you can be the most helpful. That takes time.”
Planning for end-of-year gifts can also allow donors to use their assets better in ways that make a difference.
“You have to take time yourself to find out what you want to achieve as a donor, and then you have to give your favorite charity time to propose something meaningful to you,” Fox stated. “With a planned approach, I can argue you can make the funds mean more for you and the organization because you’ve taken the time to learn about the needs, not just arbitrarily giving.”
Waiting until the 11th hour to give also forces people to think more tax-oriented instead of giving to give, Parsons said.
“You’re not giving yourself enough time to make sure you’re making maybe the best, most effective gifts because you’re really more worried about making sure you get the tax deduction,” she noted. “Give yourself the gift of time to be able to do that research and reach out to folks. Find out where the highest need is, as most organizations have that right now. That gives you the benefit of time to make good decisions.”
As a financial planner, Durra frequently works with clients to determine their finances and deciding their giving plans. She usually looks at how much money they have left to draw from their IRA and compare that with how much they want to donate to charity before the year’s end. Unique to this year, there is no required minimum distribution for IRAs, due to the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), she said.
“It leads to how can we save (the client) money on taxes by doing that,” Durra explained. “Administratively, we can also help them find out how to get their money from an IRA to the charity, whether it is having to check writing privileges or doing a special distribution.”
To keep the planning process simple, the professionals offered advice.
“Do some research to determine the best place to put your money, but also understand the tax laws and how you might be able to take advantage of those, paying as little in taxes and get the most money to charity as you can,” Parsons said.
Fox added, “My advice to the donors is don’t only be driven by today’s news, but also be aware that the basic ongoing needs always continue. You should be willing to address those even when there is all the extra motivation to give what is immediately needed today.”