Now Is the Last Chance to Donate

Clients being hit up with year-end charitable appeals may not realize there are many strategic ways to be generous.

By Ken Nopar

At this time of year, it is hard to escape the requests for charitable donations that we receive in the mail, in social and traditional media, and on our home and cell phones.  Charities we’ve contributed to previously as well as those we’ve never heard of reach out to us. Why? Because these appeals work, as many organizations receive as much as 30% of their annual donations during December.

Though these solicitations may not be welcome, they are helpful since they remind donors who have not yet given much, or at all, this year that now is the time to give, especially if they want or need a tax deduction this year. Fortunately, with the late surge in the markets this year and with year-end bonuses and other compensation, many donors are now able to be generous with their year-end contributions. Or donate additional amounts beyond what they have previously given.

High-net-worth donors continued to be generous. The 2023 Lilly School of Philanthropy/Bank of America study shows that 85% of affluent people donate. This is very fortunate because the number of overall households that give has dropped from 66% in 2000 to 50% today. The overall amount of giving dropped 10% in 2022, compared with 2021, after being adjusted for inflation.

Older donors continue to give, and there is concern that younger donors who do not get in the habit of donating early may not be as generous later in  life. This can apply to particular causes such as religion, since fewer people attend religious services.

A growing need

As a result of the overall drop in giving, charities are in great need. Many have not yet recovered from the pandemic and other crises while the demand for their services has increased.

Regardless of how donors give, and whether they donate cash or publicly-traded securities, the window for contributing this year is closing quickly. The need is everywhere, as we can see by looking at media or simply by driving through our communities. Sometimes there are so many causes and charities worthy of support that deciding where to give can be challenging.

Clients who already have established donor-advised funds (DAFs) or private foundations may want to contribute additional amounts to these vehicles now. Many DAF donors have made numerous and significant grants in recent years to sustain non-profit organizations. As a result, this may be the ideal time to contribute to and replenish their DAF so they are able to make more grants in upcoming months and years. Donors receive a tax deduction at the time of their contribution to the DAF and not when they make grants from the DAF to charities, and assets in DAF accounts grow tax-free.

Though there is significant need and donors should provide support now to their favorite causes and charities, they should also reflect and determine what is most important to them. Donors who develop a mission or vision for giving often feel a sense of pride and satisfaction from their generosity, especially when they give proactively instead of reactively. This does not mean that donors should not give in response to an appeal. But planning ahead usually means that donors will be more strategic in achieving their charitable goals.

Eyes wide open

Donors, particularly seniors, should exercise caution if they are solicited to give directly to an organization that they are not very familiar. Donors who have established DAF accounts are protected because DAF sponsors perform due diligence on charities before approving grants. Though most charities are trustworthy, donors who do not have DAF accounts should vet an unfamiliar organization themselves before making a significant donation.

In the new year, clients can have more extensive discussions with their advisors to review whether they should donate different types of assets, such as closely-held business interests (i.e. when selling their business), real estate or other assets that they no longer want or need.

If it is too late for this year (and it may not yet be!), advisors can also discuss whether it make sense for a client to open a DAF, create a charitable trust, or use a qualified charitable distribution to satisfy part or all of the required minimum distribution from their IRA next year. Clients should also be encouraged to donate earlier next year, instead of waiting until year-end, since charities have needs throughout the year.

But for now, if clients have the means and are philanthropic, this is the time for them to work with their advisors to make this year’s donations happen. Waiting until December 31 is not the best idea. Time is quickly running out. But for those who are considering supporting their favorite charities or opening a DAF, there is still time.

Ken Nopar is the vice president and senior philanthropic advisor for AEF, a leading independent donor-advised fund since 1993 with over $6 billion in assets under oversight and 14,000 DAFs. AEF works closely with its donors’ wealth, legal and tax advisors in all 50 states. Nopar can be reached at kennopar@aefonline.org.

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