Are you a successful woman who wants to give back? 3 steps to develop a personalized philanthropic plan
By Aimee Bauman, CFP®, CHFC®, CLU®, Director of Financial Planning for CAISSA
As women continue to make strides in taking on executive leadership roles within organizations and launching businesses of their own, they correspondingly are increasingly the key decision makers on financial matters in their households.
In an article titled, “How Women Are Changing the Philanthropy Game,” the New York Times
states that, “Women have more money than ever before and they’re continuing to accumulate it, and quickly. By 2023, women’s global wealth will rise to at least $81 trillion, according to a Boston Consulting Group analysis. In 2010, that number was $34 trillion.”
Empowered by the wealth they are amassing, women today are using philanthropy to shape our communities, live their values, and establish a lasting legacy like never before. In short, women have become a formidable philanthropic force for good.
But to be an effective force for good, you need a plan. Philanthropy today is more than just writing a check to your favorite local charity. It can be as nuanced and multi-faceted as you want it to be. There are many tips for giving back. And for most women, giving back is about more than knowing charitable giving is tax-deductible. It’s about making a meaningful, lasting impact. It’s very personal … and a philanthropic plan should reflect that.
To get started in creating your personalized philanthropic plan, below are three steps to explore with your family and advisors:
Step one: Address the “why” behind your desire to give back. Answer the question, “What’s driving me to do this?” Do you want to make an impact on your community? Do you want to set an example for the next generation in your family? Have you been personally impacted by a societal issue or life event that you want to help solve (e.g. an incurable disease, drug addition, gun violence). Take stock of what you are passionate about and weigh that against your ability to make an impact on those issues. There are of course a great many causes that need support, so it’s important to be focused.
A philanthropic plan is often about establishing a legacy, and that can extend well past your lifetime. So, involve others in your family in developing the “why” behind your philanthropic plan, particularly the younger generations. Doing so can not only generate enthusiasm and bring the family together around a shared vision, but it can help ensure that vision is acted upon for decades to come.
Step two: Identify the methods by which you will give. Once you have established a philanthropic vision for yourself and family, start exploring the right structure and mechanisms to make charitable gifts. Yes, you can continue to simply write checks, but there are more advantageous and impactful strategies to consider. For example, you could consider making qualified charitable distributions (QCDs), which are distributions from an IRA that are paid directly to qualified charities. If you are at least 70.5 years old and have significant IRA assets, QCDs can be a fantastic way to make a gift directly to a qualified charity. In doing so, you use pre-tax dollars and potentially reduce your overall tax bill and may help to manage your Medicare premiums. Consult with your advisors to begin leveraging QCDs.
Another popular option is a donor-advised fund, which is essentially a charitable investment account that’s sole purpose is to support the charitable organizations you care about. It can also do wonders to activate a broader family philanthropic vision. By setting up and making gifts from a donor-advised fund, those assets are removed from your estate and therefore are not exposed to potential estate tax. In addition, all future appreciation of those assets is tax exempt. Be aware that it is most advantageous to create and contribute to a donor-advised fund in a year when you are expecting significant inflows of taxable income. Also, you can gift more than
just cash to a donor-advised fund. For example, low-basis employer stock can be a great asset to contribute.
There are other more complex charitable giving tools and techniques to consider, such as setting up a full-fledged family foundation or charitable lead trusts. Again, be sure to consult with your advisors to determine what makes the most sense for you and your family.
Step three: Evaluate the impact of your charitable giving. Once you’ve decided on and set up the mechanisms by which you will give, ensure the entities you plan to support are willing and able to measure and report back on the impact of your generosity. Can they demonstrate exactly how your charitable gifts have been used and to what effect? It’s important to establish success metrics from the start to ensure you, your family, and the organization you want to support are aligned on expectations of your gift. If you are not comfortable with a charity’s ability to track the impact of your gift, look elsewhere for other organizations to support.
In summary, philanthropic giving is a very personal journey. It represents a powerful embodiment of your values. Make it your own by developing a philanthropic plan unique to you and your family’s desired legacy.