Many companies these days—if not most—offer programs that help their employees find volunteer opportunities that fit best with their personal charitable interests and the specific skills they have to contribute. But few provide similar guidance when it comes to supporting a charity financially. Unfortunately, that means most of your workers are missing out on ways to provide greater amounts of support to their favored nonprofits in ways that fit best with their own personal financial situations, according to experts at Fidelity Charitable, a leading administrator of donor-advised funds.
“There’s many other methods to give that are beyond cash and are more advantageous for both the donor and the nonprofit,” said Matt Nash, senior vice president of donor engagement at Fidelity Charitable.
According to a recent study put out by Fidelity, very few donors are well-acquainted with the full range of giving vehicles at their disposal—many of which offer significant advantages that translate into larger donations in the long run for their chosen charities. For example:
- Leaving money to charity after death allows for an individual to rest easy because they will have access to their money and resources while alive and possibly in need of it. Many seniors fear running out of money before they pass, and that can put a damper on donations, but bequests alleviate that fear.
- Donating financial securities like stocks and bonds, or even real estate, allows individuals to avoid paying federal capital gains tax—which can reach up to 20 percent for long-term gains—allowing them to make larger contributions than they would otherwise.
- Life insurance policies that pay out to a charity offer a way to support a charity after one’s death, and are especially attractive for those without family to inherit their estates.
- Setting up charitable annuities provides donors the peace of mind that comes with a reliable, stable income source while allowing the charity to derive the profit that would otherwise go to an insurance company or financial institution.
- Distributions from IRAs allow individuals to make charitable contributions while minimizing tax obligations on the distributions.
- Donor-advised funds offer streamlined means for donating securities and other assets that some might perceive as too complicated to donate, especially among several recipient organizations.
Unfortunately, very few individuals make use of these alternatives to cash donations. Even high-net-worth individuals—who are presumably well-versed in financial matters and money management—eschewing them in favor of cash. According to Nash, the problem partly lies with inertia.
“Many donors just don’t think about it. They’ve always given cash, and the nonprofits they support all ask for cash, so there’s no need to look at other ways,” he said.
Corporate contributions directors have a role to play here, by providing information and educating their employees about the full range of options for supporting their favorite charities. Much of this information could easily be included as part of any broader financial literacy, retirement counseling or investment management programs offered as employee benefits.
Another possibility is to structure employee giving campaigns to allow for some noncash contributions—the easiest being donations of company stock (if offered), which should be relatively painless for companies to manage and even match if they have matching gift programs.
Companies can also offer to match employee contributions to donor-advised funds, and even help their workers set up their DAFs as part of their financial and retirement planning services.
The ultimate goal should be to help employees maximize their support for worthy charitable causes in ways that benefit them as well, from a tax and cash flow perspective, and serve their financial interests now and in the future. And with that goal in mind, Fidelity says, cash may be the least efficient way to give.
For more information, visit www.fidelitycharitable.org.