Skip to content

Smarter Giving: Four Things to Know When Considering Charitable Contributions

Sep 22, 2020

What will your legacy be? Donating to a nonprofit organization through an estate or trust is one way to ensure the cause you care about will be supported for years to come, even after you’re gone. It can be an emotional choice, but it's important to consider the financial implications of charitable giving to be certain that your funds will be used effectively. We have compiled four things to keep in mind when looking into contributing to a nonprofit organization:

Choose Charities Wisely

All nonprofits are NOT equal in the eyes of the IRS. Charitable giving to nonprofit organizations can be tax-deductible, but only if the organization is a certain type of organization as defined by the IRS. If you are considering making a donation to a specific nonprofit organization, be sure to ask if it’s a qualified 501(c)(3) entity. The 501(c)(3) designation is the most common IRS qualified designation that will ensure that the money you give to an organization will be tax-deductible. By making a tax-deductible contribution, you not only receive a tax benefit but will have more money left over for making future charitable contributions.

A wide range of entities can qualify for 501(c)(3) status. In addition to traditional charitable organizations, such as the American Red Cross or the Susan G. Komen Breast Cancer Foundation, for example; educational institutions, religious groups, and scientific foundations can also be 501(c)(3) entities. The IRS website offers a search tool that can help you determine if the charity you're interested in has received a 501(c)(3) designation.

Know Your Options

If you've found a 501(c)(3) nonprofit whose mission speaks to you, you might experience the urge to pull out your pen and write a check. First, take the time to learn the different ways in which you can give to your chosen organization, and then determine which method is right for you.

  1. Outright Gifts – Direct donations, such as that check, are considered outright gifts. Also included in this category are donor-advised funds, which are vehicles that allow you to donate a sum of money or other assets to benefit specific nonprofits, or classes of nonprofits, of your choosing now and in the future.
  2. Split-Interest Gifts – Assets that produce income, such as stocks and bonds, are included in this group. The earnings from the assets are split between the charitable organization of your choice and either you or your heirs.
  3. Testamentary Gifts – Through a testamentary gift, your donation to charity will occur upon your passing via your will and/or a trust.

Ask the Hard Questions Now

Once you have a nonprofit in mind that you'd like to donate to, and you understand the ways in which you're able to contribute to charitable organizations, don't hesitate to begin putting your plan in place. You can get started by asking yourself some tough questions, such as:

  • When do I want my donation to occur?
  • What do I want to happen to my assets after I am gone?
  • Upon my death, will 100% of my assets go to my heirs, or do I want to include the charities of my choice to receive a portion of my assets and my heirs the remainder?
  • Should I create a foundation or a charitable trust?

Put Your Plan into Action

It’s crucial to engage with a team of professionals who can assist with creating a smart giving plan that utilizes your funds in the most efficient manner. Once you have determined what your charitable giving plan should encompass, contact your CRI advisor for further guidance as you progress through the next steps.

Relevant insights

Join Our Conversation

Subscribe to our e-communications to receive the latest accounting and advisory news and updates impacting you and your business.

By proceeding, you are agreeing to the terms and conditions in the Carr, Riggs and Ingram LLC Privacy Policy.

This field is for validation purposes and should be left unchanged.