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How To Engage In Meaningful Philanthropy
September 27, 2016
Most people aspire to be a philanthropist, who gives away significant amounts of money that creates positive impact in the lives of others and the community. While this is part of being a philanthropist, there is so much more to consider than just the amount to give away. Bill Gates describes, “Effective philanthropy requires a lot of time and creativity - the same kind of focus and skills that building a business requires.” Creating change and building a positive legacy through philanthropic efforts involves the same care and thought as any major investment would. Good philanthropists carefully consider the causes that they support, the timeline for their support, and the vehicle in which they give their support.
The first step in any philanthropic effort is to decide the cause. Whatever cause you decide to support, it should be something that you feel passionately about- meaning the cause brings you great joy (perhaps the ballet or the opera) or it causes you to feel deep anger (abuse of children or cancer). If the cause does not stir deep positive or negative emotions for you, then it may be a great cause, but it is not the cause for you. Once you know the cause, you can begin to determine a nonprofit within that cause to support. You will want to identify a charitable organization that shares your philosophies and values, operates within the geographic scope you want (local, national, or international), and has experience creating the impact and outcomes that you desire. This is best done by visiting the organization’s website, reading their marketing materials, observing their activities, and asking questions of their staff and volunteer leadership.
Money is not the only thing that will make your gift meaningful, timing also plays an important role. Andrew Carnegie advocated giving your wealth away before you died as has Warren Buffet. Their idea being that you can see the impact of your philanthropy during your lifetime and adjust your giving according to your changing interests and values. Some philanthropists prefer to make the majority of their gifts posthumously. Donors like Johnny Carson gave during their lifetime, but through carefully crafted foundations, many of their most significant gifts have transpired after their deaths. Even after death, you can control your philanthropy with detailed instructions or a plan to “sunset” your foundation or cease your giving at a specifically defined date. These decisions require careful consideration as US laws are very restrictive regarding following the philanthropist’s wishes. For example, funding created by Ben Franklin remains unable to be distributed as liberally as he would like, because he specified funding for blacksmith apprenticeships - something rarely needed in modern society.
How you give is one of the most important considerations. Multiple vehicles like charitable remainder trusts, annuities, real estate, donor-advised funds, etc. can be used to execute philanthropic goals, which is why having a trusted estate planning attorney or tax advisor is wise. Each vehicle as implications for taxable income and its timing. Additionally, some gifts are not money at all but items that the nonprofit can convert into cash such as real estate and stock holdings. Foundations are not the only way of distributing ongoing philanthropic gifts to a variety of charities. Donor-advised funds can also offer opportunities to direct your gifts with less overhead than managing a foundation and a lesser degree of control. In addition to financial advisors, philanthropic advisors (like Fullanthropy) can help you identify reputable nonprofits, ensure the effectiveness of your philanthropy, and advise you regarding foundations or donor-advised funds.
Giving back is a noble aspiration, but it must be done effectively to create the legacy that most philanthropists desire. To be a truly effective philanthropist, you must approach your giving with the same care and thoughtfulness that you approach your livelihood.