Ask Money


Chris Farrell Dec 14, 2009

Question: I am in the field of fundraising and I am in the position of asking individuals for annual gifts to a School. This current economy however has donors a little more wary of making gifts. This makes me a bit more conservative in my requests. Should I be? Are personal advisors and others still encouraging individuals to make annual charitable gifts for tax purposes and can this reminder especially as we enter tax-year-end be a good motivator to get donors to support the School. Maybe asked another way, are there tax incentives that make charitable spending more attractive in a down economy?

I do want to emphasize that I am speaking of donors who are still employed with little or no change in salary. We are very conscientious about approaching our donors who are facing difficult times. Kurt, Bel Air, MD

Answer: This is an intriguing question. I’m not sure how much insight I have to offer, but here are some thoughts. And I did recently participated in a meeting of certified financial planners and this topic came up for discussion. Clearly, it goes without saying that It’s a tough environment. But the financial planners I know are working with clients to encourage them to keep up with their charitable giving. (As you say, we’re not including folks that are hurting financially or have lost their jobs. Most can’t give the way they did before.)

I can’t think of any twists to the tax code that boost the tax benefit of charitable giving in down times. The tax advantages of charitable giving really kick when the economy is on a roll and households are feeling flush, perhaps with bonus money rolling in. They’d like to do good and shelter some income from Uncle Sam. For instance, when the stock market is strong the well-heeled often turn toward donating appreciated stock to charities. The charity gets a bigger gift and the donor gets a nice tax break. Yet even with the stock market up sharply since March most portfolios remain well in the red column. Big bonuses and lush pay raises are rare these days, except on Wall Street. (And that’s another story.)

Still, many financial planners believe that giving remains important. In many cases, I’ve been told, people can afford to give away the same amount, but they’re fearful. They’ve lost wealth with the drop in home values and the stock market. It’s understandable.

So, to your question: Yes, I’d keep on asking but I would lean on the conservative side. I think your instincts are right. And the charitable gift tax benefit is still a valuable financial incentive.

There’s another trend I have noticed. Some people I’ve run across are giving away the same amount of money but they’ve changed the focus of their giving to reflect our troubled times. For instance, maybe they were donating money to a museum and now they’re donating to a homeless shelter. In that case, I would recommend that you support the shift in emphasis. What matters is the giving and that people share their wealth. And at some point I’ll bet that perspective will help the school, too.

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