The Giving Tree

February 24, 2021
Cheryl Langston, CFP® West Financial Services
By Cheryl Langston, CFP®

While the past year was difficult, incredible stories from 2020 highlight how people were able to give time, talents and resources to help those less fortunate. Whether you support shelter for the homeless, nutrition for those with food insecurity or universal access to healthcare, these stories demonstrate the importance of resolve, kindness and compassion in restoring resilience. If these stories inspire you to give back, we have a few thoughts and suggestions.

There are economic benefits to charitable donations.
The 2020 CARES Act allows taxpayers to make cash donations to a charity and deduct up to 100% of AGI from their income taxes. In addition, gifting securities or other appreciated assets avoids capital gains, gift or estate taxes and allows investors to re-balance portfolios with minimal tax consequences. Other gifting strategies can unlock income from underperforming assets, increase inheritances for beneficiaries and build retirement security.

There are also non-economic advantages with charitable giving.
Cleveland Clinic research shows charitable actions release endorphins and oxytocin in our brains, creating feelings of exhilaration and tranquility. Researchers at Chicago’s Rush University System documented several health benefits in volunteers, noting lower blood pressure, cholesterol, blood sugar, less depression, decreased stress and increased self-esteem. Within the family dynamic, a philanthropic focus can establish a shared mission and reinforce values. For heirs, a charitable strategy can establish accountability, give purpose/meaning in life and avoid “affluenza.”

When giving, consider the following:

  • Do you prefer to give publicly or anonymously?
    Many donors give publicly to show support for a charity, connect with other like-minded donors and help the charity attract additional donors. Alternatively, some donors give anonymously to limit more solicitations, keep their wealth private and avoid a possible security threat or scam.
  • What is your purpose and motivation in giving?
    Some may focus on a population, geographic area or a specific cause. Others seek to make an enduring legacy or to honor a loved one.
  • Will you make lifetime gifts, bequests at death, or both?
    MacKenzie Scott, ex-wife of Amazon.com CEO Jeff Bezos, recently made headlines for giving $4.2 billion to charity. The rest of us need to balance our financial well-being while gifting. While post-mortem gifts do not impact current finances, you also do not get to see the impact of your gift. Incorporating a gifting strategy as part of your financial plan can allow you to balance current cash flow with the desire to do good.
  • Will you gift without restrictions or do you retain some use of the asset?
    A gift is usually complete when all rights to the asset transfer. If you are not sure that you have sufficient resources to make a gift, this can cause some stress. Split interest gifts and deferred gifts are options that allow donors to achieve two otherwise mutually exclusive objectives.
  • How involved will you be?
    Ability to contribute time and talents can be meaningful support for some organizations. Volunteering is an opportunity to experience first-hand the needs and accomplishments of an organization, while also feeling connected to those who share a passion in the organization’s mission.

The Urban Institute’s National Center for Charitable Statistics records over 1.54 million charitable organizations in the U.S. With that many charities vying for your dollars, you should develop a methodology for choosing which charities to contribute to. Factors to consider include how the charity is organized, how effective it is in achieving its goals, how well it provides for the population it serves, and how the charity uses donations.

Charitynavigator.org and Guidestar.org are two popular websites that allow you to independently verify a charity’s standing. The Better Business Bureau also has the Wise Giving Alliance, a national charity monitoring organization. When researching charities, know that a portion of donated funds go toward operating costs. Administrative and fundraising costs should ideally be 35 percent or less of donated funds.

If you want additional information about gifting strategies, or if you would like to explore a planned giving strategy, contact us. We will be happy to assist you.

Meet Cheryl Langston, CFP® »

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'What the CARES Act Means for Charitable Giving', Fidelitycharitable.org.
'Why Giving is Good for Your Health', health.clevelandclinic.org.
'The Health Benefits of Giving', rush.edu.
'MacKenzie Scott Has Donated More Than $4 Billion in Last 4 Months', npr.org.
'The Nonprofit Sector in Brief 2018: Public Charities, Giving, and Volunteering', nccs.urban.org.
'Best and Worst Charities for Your Donations', consumerreports.org.

Important Disclosures

  • West Financial Services, Inc. (“WFS”) offers investment advisory services and is registered with the U.S. Securities and Exchange Commission (“SEC”). SEC registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the firm has attained a particular level of skill or ability. You should carefully read and review all information provided by WFS, including Form ADV Part 1A, Part 2A brochure and all supplements, and Form CRS.
  • Certain information contained herein was derived from third party sources, as indicated, and has not been independently verified. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any information presented. Where such sources include opinions and projections, such opinions and projections should be ascribed only to the applicable third party source and not to WFS.
  • This information is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product, security, or concept. These materials are not intended as any form of substitute for individualized investment advice.