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A Strategic Approach to Charitable Giving


How to make less go farther.


Many people are finding the holiday tradition of making charitable donations difficult again this year, particularly if they're unemployed or worried about the economy.

Charities, many of which normally get the bulk of their donations at the end of the year, don't expect to see a big resurgence after last year's 2% drop. That means many people are probably trying to figure out how much they can give, and to which organizations.

If you can't give as much as you did in the past, you might consider concentrating your donations among a smaller number of charities. You'll have a bigger impact than if you made many modest gifts.

"For most people, whether they're wealthy or not, often charitable giving is reactive," said Lisa Philp, head of philanthropic services for JPMorgan (JPM) Private Bank. They make donations in response to pleas received in the mail or to what friends and family are doing, she said, rather than planning out this aspect of personal finance as they would investing or savings strategies.

Map Out Your Giving

Having a strategic approach can produce results that you'll feel good about. Philp works with very wealthy clients, but, she said, no matter whether you're donating $100 or $100,000, developing a plan can make giving more effective.

The first step in mapping out a strategy is deciding what's important to you. Helping to care for the surge of abandoned animals in shelters right now may tug at one person's heart strings, while supporting a food bank may appeal to someone else.

"Any one of those avenues is certainly worth pursuing, and you should just think through which of those avenues makes the most sense to me, and go from there," said Melissa A. Berman, CEO of Rockefeller Philanthropy Advisors.

After you've settled on your causes, check out the groups to make sure they are well run. Web sites like GuideStar and Charity Navigator offer evaluations of charitable operations and detail how much of their donations is used for administrative costs.

These sites use information from charities' tax returns to evaluate them, but both are limited, and many community-level groups aren't reviewed. You should also check the Internal Revenue Web site,, to find out if groups are recognized as qualified organizations. Only donations to qualified organizations are eligible for tax deductions -- and not every group granted tax-exempt status is qualified, the IRS warns.

For instance, non-profits that devote a good amount of their time or money to political causes are generally not considered qualified for tax deduction purposes.

Tax attorney Barbara Weltman noted that through the end of 2009, people over age 70 1/2 can transfer up to $100,000 directly from their Individual Retirement Accounts to charities without paying tax on the withdrawal or reporting it as income. Such a donation would not be tax deductible. See also The Business of Giving: Tax Benefits.

Making a big donation like that is one way to gain some leverage with an organization, if you want to influence its policies. But it's important to get to know how a group functions before trying to steer it. "Especially if you're new to the field, you want to learn from people who've tried different strategies over the years," Philp said.

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