5 Ways innovators can enrich their philanthropic giving this year

Key takeaways

Embracing an organized approach to philanthropic giving can help increase your impact on the charitable organizations that are most meaningful to you.
Using a structured selection process can help you balance the emotional side of giving with a rational evaluation of each charity’s performance.
Making non-cash donations such as stocks and private securities can help amplify the value of your charitable gift by potentially reducing the tax liability for you and your recipients.

An organized approach can help innovators like you give back with more impact

Working closely with our innovation economy clients, my colleagues and I have found that decisions regarding which charities to support and how much to donate are often driven by emotional as much as rational reasons.

Frequently a donor gift begins with a deeply personal connection such as a family illness or a friend in need – rather than a desire to reduce income or tax liability.

However, there is one potential issue with emotional donation decisions: The risk of having a haphazard approach to philanthropy–especially when the donor may be a business founder with an atypical income stream. To balance the emotional side of giving with a rational evaluation of charity performance, we recommend employing a structured selection process. The structured approach we typically take with clients follows the five steps summarized below.

Increase the impact of your charitable giving with these five tactics

1. Define your values and reasons for giving
First, consider the causes that are most important to you. Are they global or local? Do they align with the mission of your business? For example, are you passionate about women’s issues, animal rights, the environment, social justice, education or the arts? Reviewing the values you have established at your company or revisiting past volunteer efforts are effective ways to determine what causes are most critical to you.

Focusing your philanthropy on your personal and family values and the causes you are passionate about can help guide your giving decisions. You may also want to include your children during this part of the process if you would like them to carry on your philanthropic legacy.

2. Create or refine your mission statement
Once you have a clear picture of how you would like to make a difference, consider creating a brief written philanthropic mission statement to guide your giving decisions. It may be as simple as “support the welfare of animals,” “help homeless women and children” or “fund research to cure Alzheimer’s.” Like the mission statement for your business, your philanthropic mission statement can help focus your attention. If your initial mission statement includes several goals, try not to spread yourself too thin. Concentrating your attention on a few key causes can help you have a greater and more lasting impact.

If your initial mission statement includes several goals, try not to spread yourself too thin. Focusing your attention on a few key causes can help you have a greater and more lasting impact.

3. Research the most effective ways to address each area of need
After defining your own charitable mission, it pays to do some research and see which organizations support the causes you’ve identified. Be sure that the charities you select are registered 501(c)(3) tax-exempt organizations, so your donations are deductible for tax purposes.

Helpful websites for evaluating a charity’s financial health and accountability practices on your own (or with your advisors) include:

Another effective way to learn more: Checking in with friends, family and fellow business leaders can also help you uncover suitable organizations to support. Your contacts throughout the innovation economy can be a great source of worthy charities.

4. Decide how and when to make your donations
Instead of using checks or a credit card to make your donations, consider giving assets that can deliver significant tax advantages to you as well as the charity. Your SVB Private wealth advisor can help you manage charitable giving activities to offset potential tax liabilities for the current tax year or shift assets from one tax year to the next if that makes more sense. For example, you may:

Give highly appreciated stocks (or highly concentrated stocks) directly to the charity without selling them first. If structured correctly, you may be able to contribute the full value of the shares without paying capital gains on any appreciation and take the full value as a tax deduction. Under current tax law, itemized charitable deductions for appreciated stock held more than one year are limited to 30 percent of your adjusted gross income per tax year, and unused deductions can be carried forward for five years. Your wealth and tax advisors can help you determine the amount and timing of your gifts to maximize their tax and/or portfolio balancing benefits.
Give private securities or fund interests. Private securities, carried interest and restricted stock are all potentially eligible for donation with careful tax and legal planning. You will likely need to obtain a qualified valuation for the securities being donated along with consideration of voting and ownership rights. Although they are more complex to execute, larger charities and donor-advised funds generally have the capacity to accept these types of assets.
Use a donor-advised fund to receive your tax-deductible donations of cash, stocks or other assets and give them the potential to grow until you’re ready to make gifts (or “grants”) to other IRS qualified charities. When you contribute to a donor-advised fund, your contribution is tied to the year it was donated for tax purposes; however, your grants can be made over several years and to multiple charitable organizations.

With a donor-advised fund, all transactions and required documentation for IRS reporting are handled by the fund sponsor, and you receive tax-ready confirmations of your contributions and grants and quarterly investment statements for the account.

Donate the required minimum distribution (RMD) from a traditional IRA. If you give these distributions directly to a qualifying charity, you will not pay taxes on the income, nor will the charity. In 2023, you may direct up to $100,000 of an RMD to a qualified charity. If you file jointly with a spouse, the spouse also has the ability to make a qualified charitable distribution (QCD) of up to $100,000 from their own RMD. Under the Secure 2.0 Act, the $100,000 QCD RMD exclusion will be indexed for inflation beginning in 2024. Keep in mind that you must qualify for all QCD requirements to be eligible for income reduction.
Create a private family foundation to donate substantial assets to charity, keep your donations private, involve your family in the giving process and create a legacy for future generations.
Purchasing shares in a socially responsible fund that invests in companies based on their commitment to the environment, social justice, or workplace diversity is another effective way to fulfill your mission, while delivering competitive investment returns. Your wealth advisor can help you select a fund that aligns with your values.

5. Evaluate the impact of your gifts
Like your own business initiatives, it’s important to regularly monitor your charities to determine if they are making meaningful progress toward fulfilling their missions. Be sure to review the communications and reports you receive from each organization regarding donations.

If you would like confirmation that your contribution will be used as you intended, your lawyer can submit a Grant Agreement with your donation. The agreement can require the organization to report back on how your dollars were allocated to their programs, so you have the information needed to decide if the charity is meeting your expectations. Your SVB Private wealth advisor can also help you evaluate the performance of the charities you’ve chosen.

More ways you can give
Finally, consider donating your time and expertise. Many of today’s charities are focused on providing mentors and internships to provide underrepresented groups access to business, education and cultural opportunities they may not otherwise get. As a business leader, consider contributing your knowledge, skills and network connections as they can make a large impact in your community.

For help with your charitable giving plans, contact us today.
For more information regarding philanthropic strategies designed for business founders, executives and investors, reach out to your SVB Private advisor.