Family around a table making a giving plan

5 Steps to Starting a Giving Plan

Every Thanksgiving, one of the families I work with goes beyond acknowledging what they are grateful for. They look for ways to give back. Both the older and younger adults go around the table talking about what charitable causes are really important to them and why. From that conversation, they list their philanthropic goals and plan for the coming year.

At Aspiriant, helping clients set up a charitable program is one my favorite things to do. It’s exciting to sit down with families and discuss what’s truly important to them and all the inspirational ideas they have. Many families are strongly motivated to share their success to help make the world a better place, and they approach the mission with a serious sense of responsibility.

But even for families used to giving, beginning the formal process can seem overwhelming. Families typically start off with more questions than answers. What charities are the most important to us? How often do we want to give to them? How much can we afford to give? What type of giving vehicle is best for our family’s long-term financial goals?

I find that the process of establishing a giving plan is a lot easier — and can even be more fun — if you break it down to these five simple steps.

1. How do you want to help?

The first thing you need to do is decide the manner in which you want to give. It doesn’t have to be simply money. Are you willing and able to spend a lot of time running an organization? Would you like to use your celebrity or business influence to promote a cause? Or would you rather give anonymously? Is this something you’d like to set up for a limited number of years or in perpetuity?

While you may have ambitious goals and desires, the key to answering these questions is to be true to yourself and realistic about what you can and cannot reasonably do. For example, a C-suite executive may not have much time to devote, but she may have a chunk of stock she could donate, which would help to diversify her portfolio and potentially reduce her tax liabilities, while also providing a long-term income stream to the charity.

2. Who do you want to participate?

Once you’ve decided the primary manner in which you want to give, look around to see if there is anybody you’d like to help support your endeavor and select specific causes. Do you have a spouse who would like to help out or maybe even take a leadership role? What about children? Would you like to involve your broader family, like parents, grandparents, siblings, nieces and nephews? If so, how much time or money do they have available to give?

3. What specific causes do you want to support?

Now that you know how large of a network you have, it’s time to start working on a mission statement. A mission statement helps to hone in on the causes and communities that are most important to you, it also creates a road map to help you be more effective and empowered in giving.

Start by focusing on your family values and the impact you would like to have. Give thought to where you want to dedicate your efforts — locally, nationally, internationally or a combination of all three.

I find that kids and young adults have very particular ideas of which causes matter most to them.

If you want to have a lasting impact, then you need to be more specific about the cause. For example, rather than going for the larger “cure for cancer,” you can focus on a particular type of cancer, finance a cancer center at a local hospital, or help families pay for treatment and other ancillary costs.

Involving your family in this step can be really rewarding. I find that kids and young adults have very particular ideas of which causes matter most to them. And it’s important to respect their wishes if you want their involvement and to instill long-lasting values of philanthropy. I recommend getting everyone’s buy-in on the overall vision, but also allow room for some flexibility.

For example, one family I serve is heavily involved in cancer research and education. But they also contribute to other charities that the kids think are important. They work through an elaborate process to make sure all of their interests are fairly represented.

4. Which charities best serve your mission?

Once you’ve developed a mission statement and figured out how to get involved, you can select the specific charities. This can be the most overwhelming part of the process because there are so many worthwhile organizations out there, and unfortunately, some that are ineffective or worse.

Say you want to end world hunger. That’s great, but that’s a pretty lofty goal. Which groups can best help with that? Most of my clients want to directly see the benefits of their benevolence. They also are very intentional about the resources they give being used directly toward the cause and not spent on a bunch of overhead. Unless you have a great deal of money to give, it might be difficult for you to know the impact and feel a connection with a global organization.

I often advise clients who are just getting started to go local. Find organizations within your community that you are already familiar with. Consider looking at charities affiliated with your church, university, work or some other group you trust. Starting small and building from there is the best way to go about it.

Families can also leverage the research capabilities of their local community foundations or organizations such as Charity Navigator to get performance metrics, such as percentage of dollars spent on administration versus the target beneficiaries.

5. What type of giving entity should you establish?

Finally, it’s time to set up the proper vehicle that will not only help you reach your philanthropic goals but also benefits your broader financial situation. It’s at this point where level of control, taxes and paperwork fit into the equation.

The three primary ways of giving are direct gifts to charity, establishing a donor advised fund (DAF) or a private foundation.

Direct giving is the easiest thing to do, but you give up the ability to potentially implement better tax planning. For example, gifting securities may be more tax-efficient, but not all charities are set up to receive stock.

With a DAF or foundation, you may contribute marketable securities. You can also control the timing of your gift and the year you claim a deduction. For example, you can fund a DAF in one year, then decide later where the money will go.

Foundations offer the opportunity to leave a legacy and provide a great platform for you and family members to develop a robust mission and giving program. But foundations also require more administration, separate tax filings, and compliance with an array of rules.

DAFs tend to be the most flexible. As a general rule, I believe that unless you have at least $5 million to give, it’s better to use a DAF than a private foundation.

More than giving thanks

As the holiday season approaches, a feeling of gratitude tends to spark a desire to give back to others in a big way. This is a great time of year to start thinking about establishing a charitable plan that will benefit the causes you believe in for a long time. A financial advisor experienced in philanthropy can make it easier by guiding you through these steps, then helping you set up and maintain your giving plan according to your wishes.