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Thursday, July 8, 2010

Analyzing charities: How you can become a smarter giver



By Kevin Reardon
The discouraging financial news is nearly impossible to escape. It’s on TV, online, on the radio and in the newspapers every single day. Nervous investors watching the stock market roller coaster ride. Jobless rates climbing. The housing market falling. There’s plenty of financial frustration to go around.

However, despite the recession, you might be surprised to learn that Americans haven’t shut down much of their charitable giving. In fact, according to the Giving USA Foundation, U.S. charitable giving stood at $307.65 billion in 2008, down only 2 percent from the previous year.

This year may not be an exception, given the humanitarian outpouring following the Haitian earthquake. But if you’re going to give your hard-earned dollars to charity, be sure to be smart in doing so. It makes sense to develop a long-term giving strategy that dovetails with your current finances, your estate-planning strategy and your values.

A visit with a qualified financial and tax adviser is a good first step in the giving process no matter what your age or assets. It’s important to view this process the way you would examine any investment – with solid research and an open ear to advice.

Here are ways to research and give to nonprofits and charities:

Go online

More than ever, the Internet is a great starting point for investigating various charities. Search engines such as www.Guidestar.org, www.Charitynavigator.org, www.Charitywatch.org and www.Give.org give detailed overviews of various charities. In addition, they help you identify nonprofits that work within specific causes and subject areas. A foundation called Philanthropedia not only rates various nonprofits but allows visitors to make direct donations through the site.

If your charity is not on the Internet, request a copy of their Form 990, the form the Internal Revenue Service requests from all nonprofits. The IRS did an overhaul of the form in 2007 to request more information on governance. While the forms are detailed and sometimes tough for neophytes to understand, it’s not a bad idea to keep the information on file as you discuss the material with your advisers.

Figure out if you’ll need income from your gift

There are ways to draw income from donations. Your financial adviser can work with an attorney and CPA help you in understanding the following options:

* Charitable gift annuities allow a donor and a charity to enter into an annuity agreement that will allow payments back to the donor that may be partially or all tax free;

* Charitable remainder trusts allow someone to donate cash or appreciated property to a trust that can sell the appreciated property and distribute proceeds to the donor on a tax-advantaged basis;

* Life estate agreements let someone with a home or farm to keep living there while they receive a tax deduction for the gift. When they die, there may be savings in probate costs and estate taxes.

* Pooled income funds are now offered by established mutual fund companies. These funds allow you to deposit money now for distribution to charity in the future while allowing you to receive tax-advantaged income.

Consider making a major direct donation if the charity or foundation will accept it

If you know of a foundation or charity that you want to support, research it first and then see what its policies are toward accepting donations of cash, stock or property. Not all foundations accept such gifts from the general public.

Doing your homework will help you pinpoint charitable organizations that will fit your investment strategy while lining up with your value system at the same time.

-- Reardon is owner & president of Brookfield-based Shakespeare Wealth Management Inc. He can be reached at 262-814-1600 or Kevin@ShakespeareWealthManagement.com.

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