Philanthropic giving during times of crisis

During times of need, it's especially important to donate to worthy causes and organizations, but it can be difficult to narrow down your choices. If you already have a family mission or goal statement, there are many creative ways to fulfill that statement without spreading yourself too thin. Focusing your attention on a few key causes helps to concentrate your donations for a more lasting impact. Here are a few considerations to keep in mind about the benefits of philanthropic giving — during a crisis or otherwise.

Researching organizations

If you give to an established nonprofit organization, it's relatively straightforward to learn more about their history, as well as their past and current performance. You can go to sites such as Charity Navigator, GuideStar or the charities and nonprofits section of the IRS site to review their reports and accounts. By comparison, newer methods of giving such as GoFundMe or crowdsourcing don't have that kind of transparency.

That doesn't mean you can't give to a GoFundMe cause, but you'll need to do some extra legwork. If it's not a traditional 501(c)3 organization, I always tell clients to verify that the organization exists. Two years ago, it may well have been a tax-exempt organization under IRS rules, but it could now be disqualified. The IRS website allows you to search by a tax ID number and see the organization's current standing. Short of that, talk to people in the organization to understand what they're doing and how they're planning to spend the money that gets raised. Contributing via nontraditional vehicles can be worthwhile, but it requires more research on the part of the donor.

Tax considerations

Donations can take on many forms — cash, credit card, real estate, stocks or other assets. Keep in mind that cash and credit cards are the fastest for organizations to accept and put to use during times of crisis. There's also an extra incentive for gifting cash this year. As a donor, you can receive a federal tax deduction for up to 100 percent of your adjusted gross income (AGI) through the CARES Act. Therefore, you can offset your AGI via every dollar that goes toward charitable contributions.

Other assets may only offset up to 30 percent of your AGI. Sometimes donors will gift other assets such as real estate; however, these assets have capital gains, so when they're donated, the donor no longer has to pay the capital gains. Instead, the charitable organization will liquidate the asset and the donor will get a general deduction that needs to be used within five years.

If you're looking to make a substantial gift, your wealth advisor can help offset potential tax liabilities. When we help our clients make large gifts, whether through a foundation or donor-advised fund, we look at what the income projection will be for the next five years to ensure that the charitable deduction generated can be used within the next five years.

Getting the family involved

If you want to get your family involved, a foundation is an excellent choice because it gives them more opportunities to play a role in deciding how and where to direct the funds. By contrast, all transactions are handled by the fund sponsor in a donor-advised fund.

If you have younger children or grandchildren consider starting by reviewing the organization's mission statement together to understand what work they're doing. Site visits and interviews are also excellent ways to make things a bit more real.

Being more proactive in this way helps children learn about the whole process and piques their interest on a long-term basis. I've also had clients bring their kids to a women's shelter to talk to some of the people living there who are seeking help. By asking them what kind of support they need, what's working and what could be improved, that can get donors and their children thinking creatively about how their donations can be spent. Families with older children can get them involved in creating grants, or grant-reviewing or making decisions.

Gauging results

Most of my clients like to exercise some control to better understand where and how their donation is being spent. If you're supporting women's causes and/or supporting an organization that helps women further their careers — figure out what that really means.

Once you've gone on a site visit and you have a better understanding of how an organization does its work and provides services, it's easier to keep things moving forward. Every year, if you have a certain amount set aside for a few favorite organizations, ask them for a request for proposal. They'll let you know how much they're asking for and for what purpose.

While it's understandable for donors to attach a specific goal to their donation, we recommend building some flexibility in the language. If the money is earmarked for only a particular use — say hospital beds — and when the hospital's needs change, those dollars then sit idle. Building some flexibility into the gift can mitigate that issue.