Paying It Forward — 5 Steps To Add Charitable Giving To Your Financial Plan

For many people, charitable giving is an important part of their overall plan to make the most out of having wealth to manage. As you meet with your financial planner, donations, and charity support should be part of your discussions and plans. 

Here are 5 steps to plan how you will give away your money.

1. Set Priorities. First off, sit down as a family or individually and decide what values are the most important for you. Start with a vague priorities list, such as supporting children, health research, or education. Then, narrow down those categories into smaller categories that will provide more concrete choices. This could mean that if you start by wanting to support animal charities, you could narrow it down to certain breed types, specific health issues, or types of animal services.

2. Research Charities. You don't want to give your money to just anyone, so research any agency that you are considering. Make sure they are a 501(c)(3) organization. Look at their financial statements to see how much of donations goes directly to the work and how much is used for other purposes. Consider whether you want to give to a local source or a national or international charity. Visit facilities if possible.

3. Set a Schedule. When do you want to make your donations? Many upper-income clients like to make donations at the end of the year to coordinate tax benefits or harvest tax losses in their wealth management planning portfolio. But you may be able to do more good by giving at regular intervals throughout the year or supporting a specific event. Set up charitable activities automatically if possible. 

4. Create an Account. You and your financial planner can consider ways to separate your charitable giving money so that it's a set amount or is funded by specific accounts. You may even want to set up a donation account and use that to fund your giving efforts. This keeps these generous activities from negatively impacting your regular expenses or lowering your investment income for later.

5. Recheck the Plan. Once per year, look over your charitable giving arrangements and see if you want to make any changes. If things are a little tight, you may want to lower the amounts of donations. If things are going well, you may decide to expand them. You may also decide if the receiving charities still match your priorities and goals.

Having the ability to support good causes that matter to you is one of the joys of managing wealth. By arranging things with your financial planner, you can ensure that the money lasts and that you can have confidence that your giving will do the most good for years to come.