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To Your Wealth December, 2003 By Michael P Haubrich,
CFP Giving
From the Heart |
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The sounds of merry bells ringing
as we shop for holiday gifts reminds us that this is also the season for
charity. It’s also the most popular
time to open our wallets as a sign of our concern for our fellow beings. It is a time that makes hearts ring with
the joy that comes from giving.
Although giving is not confined to the holiday season, it is more
pronounced during this time and there are some considerations to keep in mind
as you finalize your charitable donations for the year. Americans give more to charitable
causes than any other country in the world. In fact more than $241 billion
was given to various causes in 2002 by individuals, corporations and
foundations, representing about a one percent increase over 2001. According to Giving USA, an annual survey
of philanthropy published by the American Association of Fundraising Counsel,
individuals traditionally give the most, often more than 75 percent of all
giving in this country. It’s important to check out
the charities you support and practice responsible giving. Some general
things to keep in mind include always paying by check, keeping records of
your donations so you can document your giving on your tax returns, and
checking our the organization with your local Better Business Bureau or with the
state’s attorney general’s office.
It’s recommended to request a copy of an organization’s latest annual
report, a list of board members and recent financial statements. This information will allow you to assess
how efficiently the charity operates, what programs are actually implemented
and how much of your donation is spent on administrative expenses. According to the Council of
Better Business Bureaus’ Standards, at least half of the charity’s total
income is to be spent on programs, no more than 35 percent of the
contributions can be spent on fund raising efforts and no more than half of
the charity’s total income can be spent on administrative costs. There are many different
ways to donate to charities. In
addition to cash, gifts can also include things like stocks, life insurance,
real estate and volunteering time.
Additionally, gifting can be accomplished through public, private or
community foundations, as well as planned giving options such as annuities or
charitable bequests. Each type of
donation can have distinct financial or tax implications, so it’s best to
work with your financial advisor to develop a gifting strategy that best
suits your situation. Caution should be taken to
ensure that your charitable donations are appropriately accounted for on your
state and federal taxes. An
organization who is tax-exempt does not automatically mean that your
contribution is tax deductible. Tax exempt simply refers to the fact that the
organization does not pay taxes. On
the other hand, tax deductible refers to your ability to claim that donation
on your itemized tax return. IRS publication 78, Cumulative List of
Organizations, provides an annual listing of tax-exempt organizations to
which donations are tax deductible. Currently, giving from the
heart may be harder for those individuals who do not itemize their tax
returns. Unfortunately, there is no
provision to deduct charitable donations unless you itemize, but there is
proposed legislation to change that.
Also included in this legislation is the provision to transfer,
tax-free a portion of your IRA. That
means you would be able to gift funds that were never taxed. It is possible that this legislation will
be passed by the end of this year, thereby allowing donors additional options. You can check the progress of this
legislation at http://www.ombwatch.org/article/archive/42.
There are many excellent
resources available on-line to assist you in learning more about responsible
gifting options. Refer to www.givingforum.org for more
information on types of charitable giving and working with professionals,
including a certified financial planner, to ensure your gifts from the heart
don’t cause you heartburn later on. Michael P. Haubrich, CFP is President of Financial Service Group,
Inc., a Registered Investment Advisory Firm in |