By Lorie Ham
This year is quickly coming to a close, and one of the things on many people’s minds right now is charitable giving. During the holiday season, we tend to think more about those in need, also, a lot of people like to give extra at the end of the year for tax purposes. But how do you decide who to give to?
We chatted recently with Mennonite Insurance’s Financial Consultant, R. Michael Burton, CFP®, CEPA®, from Everence, about some of these questions. Everence is a faith-based financial services organization with a mission to help people and institutions integrate their faith and values into their financial decisions to accomplish their stewardship goals.
Q: What are the benefits of year-end giving?
Michael: Reducing taxes is a common financial reason. However, while many people are happy to reduce their tax burden when and where possible, we find that most of our clients are not primarily motivated to give solely for tax reasons. Instead, we find that many find joy simply in giving back to God of their “first fruits” out of gratitude for God’s abundant generosity to us.
Q: What does one look for when choosing who to donate to?
Michael: We often talk to our clients about giving to the “people, causes, and organizations that are important to them.” For many, this starts with tithes and offerings to their local church, often extending to other local ministries and organizations. Most find comfort in this “closer to home” approach, trusting that their local church or ministry organizations will wisely steward their gifts.
Q: How do you know if they are a legitimate charity?
Michael: People often feel a higher sense of trust for their local church or local ministry partners when they have some sort of engagement with the people and mission of those ministries. Additional common resources for extra “due diligence” can include charitable ratings agencies, such as Charity Navigator and others. Everence does not endorse any particular charitable ratings agency; we do encourage clients to get to know the organizations they wish to support.
Q: Is there a way to know exactly what the money is going to?
Michael: Several charitable ratings agencies will report this kind of information. One might also consider researching the charity’s website or speaking with the charities directly.
Q: Can you share some other good resources for finding charities of various types that we can know are legitimate?
Michael: In addition to charitable ratings agencies, many denominations sponsor or partner with missionaries or charitable agencies. This is often a great place to start.
Q: Anything you would like to add?
Michael: Qualified Charitable Distributions from IRAs (or “QCDs” for short) can be a great way to give. We’ve been using this technique for nearly 20 years, and the idea has been especially increasing in popularity lately. Keep in mind there are several rules that have to be followed, so we always advise clients consult with their tax advisors when considering a Qualified Charitable Distribution from an IRA.
Beyond just month-to-month or year-end giving, it can be surprisingly simple to multiply the impact of generosity even further. Adding a “tithe” component to estate planning can be popular, and there are ways to give gifts that charities receive when the donor eventually dies but can provide a retirement income stream in the meantime. A reputable financial advisor (such as a CERTIFIED FINANCIAL PLANNER™) or planned giving advisor can help provide valuable guidance and insight here.
In more complex situations, a knowledgeable, qualified advisor can recommend specific tax planning and estate planning tools, techniques, and strategies. For example, in certain cases, clients may be able to reduce, defer, or even eliminate certain taxes when selling or transferring highly appreciated assets, such as shares of closely held businesses, highly appreciated securities, highly appreciated real estate, as well as any number of other non-traditional but highly appreciated assets. Of course, proper planning is critical. Just know that, whether simple or complex, you don’t have to go at it alone.
We thank Michael for taking the time to share some advice on the subject as we plan our end-of-the-year giving! We would love to hear about some of the charities you have donated to through the years—feel free to share on the Mennonite Insurance Facebook page.