Help clients direct their philanthropic gifts toward truly worthy causes

It’s the time of year when giving thanks and giving gifts is on the minds of many people

It’s the time of year when giving thanks and giving gifts is on the minds of many people—including your clients. And they might not be confining their gifts to families and friends, either, as they consider making donations to charitable organizations. But as their financial professional, you can do them a big service—by helping them make sure that their gifts are doing the maximum amount of good.

Specifically, you can advise your clients to do some homework to ensure they are giving to reputable charities. That means they’ll need to ask some questions: How does a group measure its effectiveness? Is it devoting as many of its contributions as possible to the actual work of the organization, or is it spending too much money on administrative costs? Many experts on charitable giving say that a well-managed charity should spend at least 75 percent of its income on programs.

Your clients may be able to find to these types of questions on a charitable group’s annual report and its website. But they can also confirm their choices by double checking the charitable group’s facts against valuable information from impartial, third-party sources, including the following:

IRS Tax Exempt Organization Search – This site helps visitors find information about a tax-exempt organization’s federal tax status and filings. Once on this site, your clients can find organizations eligible to receive tax-deductible charitable contributions, organizations whose tax-exempt status has been revoked, and data provided by tax-exempt organizations to the IRS. 

Charity Navigator – This site rates charities based on their financial health, accountability, and transparency to help donors make informed decisions about their contributions. Charity Navigator has evaluated over 9,000 tax-exempt charities. If your clients’ chosen organization is not included, they may want to find out why.

GuideStar – GuideStar provides a broad range of information on charitable organizations, including their mission statements, programs and financial data, such as gross receipts and assets. Visitors can also access an organization’s Form 990, which discloses where and how an organization’s donations are spent, including the earnings of top officers. All non-profits are required to have up-to-date 990s available to the public. If an organization does not have this information readily available, or is not forthcoming if your clients request it from them, clients may want to reconsider their donations.

Charity Watch – This organization rates charities on specific criteria. Advice, articles, and basic information are open to the public, but your clients can also sign up for members-only access, which gives further insight into specific charities. Charity Watch also exposes instances of abuse.

BBB Wise Giving Alliance – This site helps donors by evaluating organizations based on 20 specific standards, such as governance and oversight, effectiveness, finances, solicitations, and informational materials, for which charities earn a point each. BBB Wise Giving Alliance generally recommends that if an organization does not score a 20 out of 20, individuals’ donations may be better made elsewhere.

In addition to encouraging your clients to visit these sites, you may also want to offer the following tips for making charitable donations:

• Be careful with giving a credit card number over the phone or to an organization that only wants cash donations. Legitimate organizations typically have options for donating securely.
• Understand that charities have administrative costs, as mentioned above. If an organization claims that 100 percent of your donation will go straight to victims or resources, you may want to investigate further.
• Trust your instinct; you should feel good about making a contribution.
• Be concerned about donating via text. Make sure you know what organization is receiving your donation.
• When in doubt, consider making a non-cash donation such a food, clothing, or other goods.

Ensuring that a charitable group is reputable and being careful about making contributions are important elements of charitable giving, but they aren’t the only ones that should concern your clients—they’ll also want to be familiar with the tax aspects of these gifts. And while you certainly may want to refer them to their tax professionals for questions on this subject, you can also offer some valuable tips, a few of which can be found in the article Start your year-end planning conversations with clients today.

RBC Clearing & Custody offers several solutions to help clients achieve their philanthropic goals while accomplishing their other wealth management goals. A donor advised fund is one example of a product on our platform that can help clients support worthy causes they care about in a tax advantaged way.

Make a point to talk to your clients soon about charitable giving. If it’s something they want to do—you may be able to help them maximize the benefits of their generosity.