Self-knowledge and advance preparation are the keys to successful gift planning. Here are some of the things to think about before you decide on how to structure a large charitable gift.
Before you give anything, it’s important to understand how much you can afford to give. This may not seem like a problem to many high-net-worth business owners and executives. But even the wealthiest should carefully consider whether the amount of an intended gift will affect their quality of life or the estate they plan to leave behind. This consideration will help determine an appropriate giving structure. Because some forms of giving require sizable donations (trusts and foundations), determining what you can give can help eliminate options and streamline the planned giving process.
No matter how large your gift, you’ll need to spend some time thinking about the exact purpose of your donation. Chances are you already have a general idea of the causes and issues that matter to you – but what aspect of a cause would you like to donate to? A donation to a health-related cause, for example, could be directed toward research, ongoing care or new equipment.
Different giving structures require different levels of involvement, so it makes sense to think about what kind of involvement you want before deciding on a gift structure. For those looking to maximize their involvement with a cause, it’s best to select one of the giving structures that offer direct control over your donation dollars. In such a case, trusts, foundations and other specialized structures would be appropriate choices. Those who have neither the time nor the inclination for direct involvement will likely want to steer clear of such structures.
Some business owners believe charitable giving should be largely left anonymous. For others, attaching the family name to a cause is an important goal. Neither approach is any better than the other, but again, your choice will have a big difference on the form and structure of your gift – some giving structures offer more privacy than others. Those seeking recognition should be aware that a substantial gift may attract fundraising solicitations from other charities or even unrelated solicitations from telemarketers and other salespeople.
Another important consideration is whether you need to protect your gift from a potential challenge from your heirs. Probably the best way to prevent such a challenge is simply to communicate effectively with family members. By letting your family understand your intentions well before the event, you can eliminate conflict before it begins. If it’s clear family members will have a problem with charitable intentions, it’s a good idea to select giving structures that offer some degree of protection against such challenges – or better yet – to make such gifts while still alive.
There’s no denying that charitable giving can be one of the more complicated areas of wealth management, and that’s particularly the case when the intended gift is significant, as it often is with high-net-worth individuals. No matter how complicated it gets, however, charity starts with a very simple idea: giving is about doing good for others.
I realize this is common sense. But in this day of conspicuous consumption, complicated tax rules and burdensome regulations, I think it bears repeating. The purpose of your gift isn’t to generate a tax receipt or to show everyone how wealthy you are or to get your name on a side of a building. It’s to do good for others. Keep this in mind when it comes time to make your charitable gift.