The Heart of Giving Part II: Effective and Efficient Charitable Giving

charitable giving
SAGE Advisory Group: Efficient & Effective Giving
In our last post, we covered an important part of charitable giving: ensuring that your gifts bring joy to you and your intended recipients in equal measure. Meaningful charitable giving is an admittedly qualitative, “Venus” measure of success. Today, we’ll visit “Mars,” where we explore some of the more quantitative components of your philanthropic plans:
  1. Effective Charitable Giving – How do you assess potential charitable organizations you’ve identified to ensure they will make good use of your generosity?
  2. Efficient Charitable Giving – Are you making best use of available tax-efficiencies, so both you and your recipients can make the most of the dollars spent?

Effective Charitable Giving
In the land of make-believe, every non-profit organization is squeaky clean, fiscally responsible and wholly devoted to its mission. Here on planet earth, it’s best to confirm these ideals before you open your checkbook too widely.

To begin with, you can assess an organization’s rating at www.Charity Navigator.org, which positions itself as an unbiased, objective “guide to intelligent giving.” Besides offering a handy rating system, the site also includes a library of helpful articles and ongoing tips and advice well worth browsing.

With the assistance of a qualified financial professional (to help translate the numbers as needed), you also can inspect a non-profit’s Form 990, if it has one. The Form 990 is an information return that must be filed each year by organizations exempt from Federal income taxes under section 501 of the Internal Revenue Code, and whose annual receipts are “normally” more than $25,000 a year.

These initial inspections can weed out organizations that have obviously troubled track records. But especially if you’re planning to make a significant or lasting commitment to an organization, it’s worth going deeper.

Charity Navigator’s ratings represent an evaluation of each organization’s (1) Financial Health and (2) Accountability and Transparency. These are good starting points, but even the most stellar rating system must boil down highly complex qualitative and quantitative assessments into a common benchmark “grade.” As anyone knows who has ever had a disappointed child come home with a B+ instead of that A he’d been working so hard for, a lot can get lost between the full value of an effort and the grade bestowed. The B+ may be objective and well-intended, but inaccurate once the finer points are understood.

For example, consider an organization’s administrative costs, which may impact an organization’s end grade by being higher or lower than average. But why are they higher or lower? Is the extra infrastructure justified by demonstrably improved outcomes, or is it just money wasted? It’s hard to truly assess an organization’s worth on a stand-alone statistic; worst case, it can even be misleading.

Efficient, Tax-wise Charitable Giving
Few of us are charitably inclined strictly in pursuit of big tax breaks. That said, it’s reasonable for tax planning to factor into your decision-making. After all, the less you pay in taxes, the more assets you’ll retain for directly benefiting your chosen philanthropic interests.

Whether you’re an occasional donor or considering loftier goals such as legacy trusts and foundations, helpful tools exist for maximizing tax efficiency. To name a few:

  • Gifting appreciated securities is a tool we use a lot among all levels of charitable giving, making onerous capital gains magically disappear. Michael Chamberlain provides additional elucidation in his post “Gifting Appreciated Securities: A Win-Win-Win Scenario.”
  • Consider a donor-advised fund if you face a particularly high-income year in which a deduction would pack extra power on your tax return.
  • With extension of the qualified charitable distribution (QCD) rule, opportunities remain for IRA owners ages 70 ½ and older to make IRA distributions (otherwise taxed at regular income rates) directly to eligible charities. Michael Kitces sheds more light in his post “Special 2012 Lookback Rules To Make A Qualified Charitable Distribution (QCD) From An IRA In 2013.”
  • The “Pease Limitation” reinstated in the American Taxpayer Relief Act of 2012 (ATRA) sounds, well, limiting. But thoughtfully managed, it can be an opportunity in disguise, as described in this Vanguard blog post, “3 considerations for giving in 2013.”

We won’t dive deeper into the details of tax-wise giving here and now. Each family’s needs vary widely from any sort of norm. The point is, while you’re planning to enhance your life and the lives of others through meaningful giving, SAGE stands ready to help you make the most of it.


SAGE Serendipity: It started with a cup of tea with one of her patrons, a student at nearby Georgia Tech. Next thing she knew, Atlanta tea shop owner Katrell Christie was on her way to India, to help orphaned girls achieve higher education. “It’s not that hard to help people,” says Christie. “I sell cupcakes for $3.” Sounds to us like the best investment in a cupcake, ever.


Sheri Iannetta Cupo, CFP®, is Founding Principal of SAGE Advisory Group, based in Morristown, NJ, an independent, Fee-Only Registered Investment Advisory firm, specializing in providing busy professionals and their families with holistic financial life planning and investment management services. You can find more here: www.sageadvisorygroup.com where this post originally appeared. You can also connect with Sheri on Twitter, Google+ and LinkedIn.

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