One of the most rewarding aspects of anyone’s successful annual financial management process is deciding how, and when, to give back a little – or a lot – to worthy non-profit causes and organizations. For young investors just starting to build their careers and wealth, charitable contributions typically, and naturally, consist mostly of modest impulse cash donations made without much forethought.
As careers mature and personal portfolios increase, the size of donations grow and philanthropic decisions usually become more thoughtful and purpose-driven. In fact, larger contributions are often based on direct personal knowledge and relationships with non-profit leaders.
Whether donations are large or small, there is a profound richness derived from helping worthy causes. With a well thought out plan, your investments can be tailored and managed to help achieve your goals. Objectives, strategies and timing are all important aspects of maximizing the impact of philanthropy.
Effective and efficient giving begins with defining your goals and your strategies. Ask yourself a series of questions:
Contrary to popular notions, the best time of the year for substantial charitable giving is definitely not December! While the spirit of giving is in the air, and many of us may have a better idea of the size of the qualified tax deductions we want, in many ways December is too late to make large or complex charitable donations.
This is especially true if you intend to use capital from investment accounts – such as transfers of stocks, bonds or mutual fund shares – to make a charitable contribution. Most financial custodians have made it clear that after December first, all bets are off in terms of guaranteeing completion of complex asset transfers.
Making large cash donations is much easier, but if your gift is to a new recipient bear in mind that it can take up to 10 days to arrange an initial electronic transfer. This can become even more complicated and delayed in the midst of the end-of-year December frenzy.
It is always best to start earlier with large and/or complex donations. As a general rule, by Halloween you will have met with or scheduled a meeting with your financial advisor and perhaps discussed your generous gift with the recipient organization, if appropriate (they need to plan, too!). By Thanksgiving week, plan to make your decision and execute the necessary transactions. You can still arrange to have the gift delivered in December if you prefer but to ensure a smooth delivery, try to make the arrangements before sitting down to Thanksgiving dinner.
There are many benefits to donating stocks, bonds and/or mutual fund shares instead of cash. Two Point Capital Management can work with you to maximize your charitable impact over time, while helping you minimize tax implications. Non-profits appreciate donations of equity, and most of them have a system in place for accepting and managing them. Think of equity donations as the gift that keeps on giving.
Giving back is, indeed, among the greatest joys for successful investors every year, and over time. This joy can be especially powerful when philanthropy is based on personal relationships with non-profit leaders, whether their organizations are focused on a local community, a remote region of the world, or global progress toward your favorite cause.
But remember that the engine of your philanthropy is the investment portfolio you have built up over the years through careful planning and strategy. This is what enables you to make, and continue to make, purposeful and effective donations now and in the future.
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