Tan logoSchedule FREE Consultation

Weathering Market Volatility: Strategic Investment Insights

By: David Kuzma
August 29, 2023
blog image banner
August 29, 2023

Charitable Giving: A Comprehensive Guide to Impactful Philanthropy

Charitable giving is an act that goes beyond just the contribution of funds.It's about making a difference, creating positive change, and contributing to causes you cherish most. In a world filled with numerous charitable organizations and causes, it becomes crucial to understand how to navigate this philanthropic landscape to ensure your efforts have the maximum impact.

Finding a Qualified Charity

The first step in any philanthropic journey is identifying the right charity. This process involves more than just picking a name out of a hat. It's about aligning your values with those of the organization and ensuring that they are effectively using their resources to make a tangible difference.

Start by researching charitable organizations that focus on causes close to your heart. Look for national or local chapters and ensure they are properly registered and have the transparency record you’d expect from a legitimate organization.

The next step is to look into the efficiency of their operations. Many qualifying charities will publish financial information online for donors to review, including their revenue, expenses, program costs and the salaries of their employees. This information will help you gain a better understanding of how much they are investing in their cause and if it is reaching the intended beneficiaries.

Finally, reach out to the organization's staff members or volunteers for detailed information about their activities. Ask questions that allow you to discover how funds are being allocated and used to make a difference. This will help you decide if your contributions are likely to have an impact.


  1. Alignment of Values: When you find a charity that mirrors your values, your philanthropic journey becomes more meaningful, fulfilling, and personal. It feels good to know that your money is supporting causes close to your heart.
  2. Effective Use of Funds: Reputable charities have a proven track record of effectively utilizing their funds towards their mission. Your donations can lead to real change when managed correctly.
  3. Transparency: Credible charities are transparent about their operations, including how they use their funds. This transparency gives you confidence that your donation is going exactly where it is needed.


  1. Time-Consuming: Finding a qualified charity requires extensive research and due diligence. You need to examine their financial health, programs, and impact, which can be time-consuming.
  2. Potential for Fraud: Unfortunately, scams exist in the charity world. Some organizations may misrepresent their cause or misuse donated funds.
  3. Administrative Costs: Some charities have high administrative costs, which means a smaller portion of your donation goes directly to the cause.

Resources like Charity Navigator and the Better Business Bureau's Wise Giving Alliance can help evaluate potential charities. They provide comprehensive assessments based on financial health, accountability, transparency, and results.

Donor-Advised Funds (DAFs)

Donor-Advised Funds (DAFs) are becoming an increasingly popular vehicle for charitable giving. They offer an immediate tax benefit and allow you to recommend grants from the fund to your chosen nonprofits over time.

These funds make it easy to set aside a lump sum of money for charitable giving and they also provide the flexibility of distributing the funds in whatever manner you choose. This means you can support multiple organizations with just one donation, and you can even support more than one cause or project within each organization.

DAFs also offer other benefits such as portfolio management and the ability to grant anonymously.

Furthermore, donors only receive a tax deduction in the year of contributions to the DAF. Meaning if you donate to your DAF this year and you make a recommended grant distribution a couple years later. You only receive the tax deduction in the first year, NOT the year of the distribution.



  1. Tax Benefits: Contributions to DAFs are immediately tax-deductible. This can be particularly beneficial if you anticipate a higher tax burden in a given year.
  2. Investment Growth: Funds in a DAF can be invested, offering potential tax-free growth. This allows you to potentially increase the amount available for granting over time.
  3. Flexibility: DAFs offer flexibility. You can contribute to the fund as frequently as you wish and recommend grants at your convenience.



  1. Lack of Direct Control: While you can advise on grants, the final decision rests with the DAF's sponsoring organization.
  2. Fees: Like many financial vehicles, DAFs come with administrative fees. These fees cover the cost of managing the fund and can vary by sponsoring organization.
  3. Minimum Contribution Requirements: Many DAFs require a significant initial contribution, which may not be feasible for all donors.

Bunching and Tax Codes

"Bunching" is a strategy that involves combining multiple years of charitable contributions into one tax year. This can help you exceed the standard deduction limit, allowing you to itemize your deductions and potentially save on taxes.

You can either make all your larger charitable contributions that year or combine this strategy with the Donor Advise Fund and distribute the funds over multiple year.  Be sure to talk with your tax advisor for more information.



  1. Tax Savings: Bunching can lead to substantial tax savings. By making larger donations in a single year, you can itemize your deductions instead of taking the standard deduction.
  2. Larger Impact: Bunching allows you to make larger donations at once. A significant donation can have a profound impact, especially for smaller charities.
  3. Simplified Record Keeping: Making one large donation simplifies record keeping. Instead of tracking numerous small donations, you only need to keep a record of one large contribution.


  1. Complex Planning: Bunching requires careful planning and a thorough understanding of tax codes. It's essential to consult with a tax professional to ensure this strategy aligns with your financial situation.
  2. Inconsistent Support: Bunching donations may result in inconsistent support to your chosen charities. They may receive a large donation one year and then nothing the next, which can make budgeting difficult for these organizations.
  3. Cash Flow  Considerations: Bunching requires you to make a large donation in a single year, which could impact your cash flow.

Charitable Trusts

Charitable trusts, including Charitable Lead Trusts (CLTs) and Charitable Remainder Trusts (CRTs), can be powerful tools for those looking to make a significant impact through their philanthropy.


  1. Tax Benefits: Charitable trusts offer unique tax benefits. Depending on the type of trust, these may include income, gift, and estate tax deductions.
  2. Income Stream: CRTs pay income to non-charitable beneficiaries for a set period, which can provide a steady income stream.
  3. Control: With a charitable trust, you can specify the terms of the trust, including the recipient charity and duration of the trust.


  1. Irrevocability: Once established, charitable trusts are typically irrevocable. This means you can't change your mind and reclaim the assets.
  2. Complexity: Setting up and managing a charitable trust can be complex. It often requires legal expertise and professional management.
  3. Costs: There are costs associated with setting up and administering a trust, which can eat into the funds available for granting.

Setting Up a Foundation

Establishing a foundation can be a viable option for those interested in long-term philanthropy. While it comes with its own set of challenges, a foundation can create a lasting family legacy of giving.


  1. Control: A foundation gives you control over how the funds are used. You can guide the foundation's mission and grantmaking.
  2. Legacy: A foundation can create a lasting family legacy. It allows future generations to continue your philanthropic work.
  3. Visibility: Establishing a foundation can bring visibility to the causes you care about. It can raise public awareness and attract additional support.


  1. Costs: Foundations come with significant administrative costs. These include legal fees, accounting fees, and filing fees.
  2. Public Scrutiny: As a public entity, a foundation is subject to public scrutiny. Its records are public, and it must adhere to strict transparency requirements.
  3. Regulatory Compliance: Foundations must comply with state and federal regulations. This can be complex and time-consuming.

In conclusion, charitable giving is a deeply personal and rewarding endeavor. It's not just about writing checks but about strategic planning, understanding tax implications, and using available tools to maximize your impact. Whether you choose to donate to a DAF, set up a charitable trust, or establish your own foundation, thoughtful planning can help turn your generosity into meaningful change. Always consult with a financial advisor or tax professional when considering these strategies to ensure they align with your overall financial plan and philanthropic aspirations.

DISCLOSURE: Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investing regular amounts steadily over time (dollar-cost averaging) may lower your average per-share cost. Periodic investment programs cannot guarantee profit or protect against loss in a declining market. Dollar-costaveraging is a long-term strategy.