Decisions, Decisions, Decisions: How to Choose a Charity

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(ARA) - Your mailbox is filled with appeal letters from a variety of charitable causes. The telephone rings -- no doubt during supper -- seeking your support for a local charity’s event. The community library, your alma mater and even your children’s school are having fund-drives. If that wasn't enough, your spouse keeps nagging you about setting up an estate plan. So how do you choose which cause to support or which organization to bequeath your hard-earned assets?

Whether you want to eliminate taxes, invest a work bonus, plan your financial future or simply help out a cause close to your heart, giving should be a positive, meaningful experience, explains Garth Warren, president of the Northwestern Foundation, the charitable giving arm of Northwestern College & Radio in Saint Paul, Minn.

For example, establish a college scholarship for education students in memory of a loved one that spent an entire career in teaching. Give cash funds to purchase playground equipment at the local park where you spent your youth. Donate a life insurance policy to a health cause that has impacted your family. "No matter the size of the gift, designating a charitable gift should mean something to both you and the beneficiary,"Warren says.

One key to choosing a charity is the donor's motivation. "Why do you want to give to a specific cause?"Warren asks. "Has it personally touched you? Do you identify with its mission or purpose? Does contributing give you a sense of ownership and partnership? Giving to an organization you believe in or share a common vision with means so much more than giving just for tax purposes."

The gift should also please the donor, Warren stresses. "You should be convinced your gift would make a positive difference for the organization. You should have no regrets, no afterthoughts, just confidence in your decision."

Many times Warren has seen donors glow with satisfaction, joy and even tears knowing their gift to a scholarship fund, for example, will help students attend college who otherwise couldn’t have afforded it. "There’s a sense of fulfillment, which puts added value on their gift,"he’s observed.

Another key in choosing a charity is planning. "Giving requires time and effort. There are a variety of factors and options,"Warren says. "You need to select the right asset for the right gift vehicle at the right time, all to appropriately address your overall giving and estate plans."

Ways to Give

There is a gift to fit every objective, Warren says. Some options include:
* Bequests -- Leave your legacy by making a gift in your will. A bequest is one of the simplest ways to remember those you care about most.
* Cash -- Cash is the simplest way to give. But remember, Warren says, you can deduct a cash gift for income tax purposes only in the year in which you contribute it.
* Charitable Gift Annuity -- A gift annuity is a contractual agreement in which you transfer assets to a designated organization in exchange for an annuity. By donating through a gift annuity, you contract for a fixed income payment for yourself or yourself and another individual, if you choose.
* Charitable Remainder Trust -- This gift can increase income, reduce taxes, unlock appreciated investments, rid you of investment worries and ultimately provide very important support. "When you create a charitable remainder trust, you irrevocably transfer money, securities or other assets to a trust that will then pay you an income for life or for a period of years,"Warren explains. "If you wish, the trust can also pay an income to another beneficiary of your choice."At the death of the surviving beneficiary, the remaining principal in the trust goes to the designated organization.
* Life Insurance -- Donate a life insurance policy or simply name an organization as the beneficiary. For the gift of a paid-up policy, you receive an income tax deduction equal to the lesser of the cash value of the policy or the total premiums paid.
* Real Estate -- If you own property that is paid off and has appreciated in value, an outright gift may be a simple solution. "You can deduct the fair market value of your gift, avoid all capital gains taxes and remove that asset from your taxable estate. You can transfer the deed of your home or farm and keep the right to use the property for your lifetime and that of your spouse,"Warren says.
* Securities -- The best stocks to donate are those that have increased greatly in value, particularly those producing a low yield. If you wish to keep the stock in your portfolio, by giving the stock and using cash to buy the same stock through your broker, you receive the same income tax deduction but have a new, higher basis in the stock.

"The first step in any charitable endeavor is to talk to a financial advisor who can assess where you are financially and design a plan to help you meet your financial goals," Warren advises.

According to the Better Business Bureau, more than 80 percent of the money raised by charities in this country comes from individuals. "Your hard-earned dollars make a significant impact,"Warren stresses. "When you want to help a charity, do your homework and seek advice, but also give from the heart."

Courtesy of ARA Content