I was intrigued by a recent Wall Street Journal article, Tis the Season to Be Stupid that offered tips to givers on avoiding financial mistakes in giving. The article’s tips serve as good reminders and things we should be aware of but at the same time remember that God designed giving to be an opportunity for us to engage with Him. Don’t forget the cheerful part!
Below are their top 10 financial mistakes people make when giving to charities – I’ve added some of my thoughts.
1. Giving on impulse
Certainly, planning to give is a good thing – especially when it comes to leveraging your giving. At the same time we want to be open to the moving of the Holy Spirit. One giver I know does a great job in ‘planning for spontaneous giving’. They are very intentional about their giving and plan accordingly. But they also plan for spontaneous giving by setting aside an amount of cash designated for giving and they look for opportunities to give throughout the day.
2. Donating stock you’ve held for less than a year. .
The point here is that if you donate stock that you’ve owned less than a year you miss out on the ability to deduct fair market value. Look for stocks that you’ve held for more than a year and are worth more than you paid for them.
3. Or, giving away a stock that tanked
A depreciated stock is an example of when it’s better to sell then give. You may be able to claim a capital loss for the stock and receive a charitable deduction for the cash gift to charity.
4. Missteps over tickets
This is a great reminder about the tax rules surrounding tickets to charity events. Only the charitable portion of the price can come from a donor advised fund.
5. Donating property that won’t be used for it’s intended purposes
When giving a non-cash gift to charity, it is important to know if it is considered an in-kind gift that will be used in the ministry or will be liquidated for funds for the charity. Types of assets have different rules when it comes to tax-deductibility. For example, when giving a car to charity with the intent of it being sold, the allowable deduction is what the car sells for.
6. Opting for gift annuities when interest rates are low
It’s important to look at all the options for meeting your charitable and income objectives. In an economy where interest rates are considerably low a gift annuity may not be the best option. As the article suggests, a charitable lead trust may be a better option.
7. Fixating on charity ratings
Keep in mind that some of the rating programs look merely at numbers and not necessarily the information behind the numbers. For example a maternity home may have a larger portion than norm allocated to payroll due to the fact that they must have round the clock staff to care for the girls. Engage with the charities that you give to and ask the questions that are on your mind to make your own assessments.
8. Giving to a charity that sells your info.
9. Picking the wrong donor advised fund
Make sure the organization that hosts your donor advised fund matches with your values and intentions. Also check out policies and guidelines before establishing a fund. The article points out a couple examples of not allowing for succession planning for a fund and no ability to transfer your fund if you are unhappy with the services. Keep in mind, Servant allows you to create a succession plan for your donor advised fund as well the ability to transfer it at any time.
10. Not getting insured
If you serve on a nonprofit board it is important to get directors and officers insurance. Charity board members can be held personal liable for most of the charity’s decisions, whether it’s the mismanagement of investments or employment mishaps.
Article link: http://online.wsj.com/article/SB10001424052748704369304575632241438956652.html?mod=WSJ_PersonalFinance_PF2