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What the One Big Beautiful Bill Act (OBBBA) Means for You
Considerations for your charitable donations
As you are preparing documents for tax filing — you may find donation receipts for a wide range of charities and other nonprofits. While your accountant tallies up your deductions, you may ask yourself some fundamental questions: Do you even remember all the charitable organizations that you donated to last year? Did you make a real impact on any of those organizations? And do you feel stressed about the growing pile of mail from worthy organizations that you didn’t even open?
If you’re like many people, philanthropic giving isn’t always a positive experience. In a recent Wall Street Journal piece, the author laments that he receives far more solicitations for donations from organizations than he could possibly ever support, along with a pile of “free” notepads, pens and return address labels. Instead of thinking about all the needy organizations he’s helped, he’s left feeling guilty and ashamed.
No one person can help every worthy organization, as even multi-billion-dollar foundations make choices on how to allocate their grants. But seemingly overwhelming requests for donations may focus your attention on all the places you didn’t help rather than all the places you did. We think it’s time to reclaim the joy of philanthropic giving.
The benefits of philanthropic giving
American families gave close to $500 billion in charitable gifts in 2021. As millions of people discover each year, there are both tangible and intangible benefits of philanthropic giving. In past fathom articles, we’ve emphasized some of these virtues, highlighting potential tax benefits and exploring the best ways to give. But beyond generating favorable tax deductions, many individuals and businesses simply want to know that their hard-earned dollars are making a positive impact.
That can be easier said than done. You could mail a hundred-dollar check to every organization that sends a “free” notepad but it’s unlikely that these relatively small contributions will make a real difference. Instead, we recommend making a few larger gifts to groups with missions that align with your values which can lead to better results for both you and them. But how do you identify these organizations, and how much should you give?
Developing a philanthropy strategy
To help you navigate these questions, we suggest putting together a philanthropy strategy. Like other financial plans, following a systematic approach can dramatically increase the chances of a successful outcome. While there’s no single path to creating a plan for charitable giving, the following four steps can help align your donations with your values.
Step 1: Identify your philanthropic goals and purpose
- What are you trying to achieve with your giving?
- What areas are most important to you?
- Whether you’re talking with your family or your employees, clearly articulating your beliefs and values can provide a roadmap for your giving efforts.
Step 2: Determine your philanthropic mission
- What organizations align best with your beliefs and values?
- How can you articulate your goals through a personal philanthropy mission statement?
- For details on how to create a philanthropic mission statement, check out this fathom article dedicated to the topic.
Step 3: Decide how to fulfill your philanthropic mission
- What types of charitable giving make sense for you? Are you planning on donating time, money or other assets?
- Which charitable giving vehicles should you use to make contributions? For instance, should you consider setting up a private foundation or family office?
- Does launching a donor-advised fund (DAF) — which streamlines record-keeping, eases tax preparation and lets you track giving over time — make sense?
Step 4: Define how you’ll measure success
- How will you determine if you’re making a real impact?
- How does your giving correspond to your philanthropy mission statement? Ultimately, do you feel good about saying “yes” to the organizations you’ve chosen?
- And can you feel confident — and NOT guilty — saying “no” to other donation requests?
Considerations for families
This general framework can work for both families and businesses but there are some nuances to consider. Asking key questions of your family can help guide your giving plan. For instance, is your family most concerned about helping people, animals, the environment, the arts, or some other area? Do you want to focus locally, nationally or globally? Are there particular organizations that resonate with your family? With a structured approach, you can narrow down the nearly infinite universe of worthy organizations to a few places where you can make a real difference.
You should also think about how you want to define your family’s legacy. Is it important to have your family name on a building, an endowed scholarship, a museum wing or another high-profile place? Is there an important educational or cultural organization that you want to cultivate? Again, answering these questions can help identify places where you can leave a positive mark over time.
Setting up a family or private foundation can have significant benefits for building a legacy. Foundations let you name successors to either distribute the remaining assets per your wishes or continue your charitable legacy while also providing your successors with the flexibility to make their own mark on charitable organizations that are meaningful to them.
Considerations for businesses
Businesses can use charitable donations to make a positive impact on their communities and their workforce. Just as you would with a family, you can get input from your employees about areas that matter most to them and then align your giving with their values. A 2021 study showed that more than 70% of surveyed employees stated that “it’s very important to work at a company that supports giving to and volunteering with nonprofit causes.” The study also showed that companies with corporate philanthropy programs and matching donations have higher employee engagement levels, and their employees stay 75% longer than employees at companies without giving programs.
Making a plan
It’s important to remember that charitable giving is a great thing. If you’ve lost some of the joy of giving because you’re overwhelmed with all the need in the world, burdened by the record-keeping and administration of giving or wish you had more confidence that your gifts are making a difference, crafting a philanthropy strategy can help you rekindle the joy of giving. But you may need some help along your journey. As you consider your giving strategy, we encourage you to meet with your Aspiriant advisor to craft your strategic giving plan. Cheers to a year of joyful giving!
