In the span of weeks, the COVID-19 pandemic and an earlier than expected start to California’s fire season have impacted every aspect of our communities, including the nonprofit sector. Whether it is health-related, a safety net organization serving the vulnerable, or focused on the arts and education, many nonprofits are struggling.
For the seasoned philanthropist and newbie donor alike, now is a great time to do some research and make your dollars make a big difference during these tumultuous times.
What should you consider if determining how best to help?
Do you support short-term relief or long-term recovery?
With so many worthy causes, it is tempting to focus on organizations that provide immediate assistance. Charities that advocate policy change can be key to rebuilding, so some donors create buckets to support both relief and recovery.
Do you focus on local or global philanthropy?
You may have typically focused your giving on local organizations, but keep in mind that the pandemic has affected regions disproportionately. Making a donation to areas with fewer resources may be equally rewarding and give your dollars more impact.
How much control do you want in how your gift is used?
In general, there are two types of charitable gifts: restricted and unrestricted. Unrestricted gifts give the organization more flexibility in deciding where your money is most needed, and restricted gifts support a specific project or program. Many nonprofits prefer unrestricted gifts because of the flexibility it gives them, but it is a good idea to research any charitable organization you plan to support before deciding what type of gift to give.
Do you want a guide to help you make philanthropic decisions?
Given that there are over 2 million nonprofits in the U.S., an intermediary such as a community foundation might benefit you. In addition to their expertise, these resources have a vetted pool of charitable organizations you can support.
Other options are joining a giving circle and making charitable giving decisions with a group. There are also rating websites such as GuideStar, Charity Navigator, and Charity Watch that can help you get a feel for an organization’s impact.
Do you want to give outside the box?
Various organizations and foundations are sponsoring COVID-19 Community Response Funds. Nonprofits, local government, businesses, and philanthropic individuals are all contributing to ensure that urgent pandemic-related grants can be made quickly. Community Response Funds are meant to channel resources and coordinate efforts related to COVID-19, and most response efforts are focused in two areas: public health and economic instability. The funds are not intended to be the only way donors should give, though they offer an additional option.
One word of caution. Charity scams are especially active during emotional events such as the pandemic we are currently experiencing. The Federal Trade Commission suggests that you:
- Research charitable organizations using the words “complaint” or “scam” to uncover any previous instances of alleged fraud.
- Avoid a charity that asks for money transfers, bitcoin, or gift cards.
- Take care when considering crowdfunding, as it is hard to tell the real from the fake. In addition, a gift given through a platform like GoFundMe.com, for example, may not count as a tax-deductible gift, so take time to do your due diligence.
What about a donor advised fund?
If you already have a donor advised fund (DAF), you may want to consider deploying funds sooner rather than later. For anyone unfamiliar with the concept, a donor-advised fund is a charitable investment account. The donor contributes cash or stock for an immediate tax deduction. The investment grows tax-free, and you can give the funds now or over time to your chosen charity. Contact your financial adviser to determine if a DAF makes sense for you. The recent coronavirus legislation — the CARES Act — is also providing a $300 tax deduction for some tax filers.
Some see the COVID-19 pandemic as philanthropy’s big moment. Because charities can be more innovative and flexible than the government, philanthropy is ideally suited to filling in the gaps. The virus has also tempered the dilemma of too many choices.
With millions of good causes, there has become clarity, which has led many to give now, give more, and give more flexibly – donor behavior nonprofits have advocated for years. The difference now is that the pandemic is a global crisis at a local level. The prevailing donor sentiment is: “I need to do something now – this is about me.”
CFP® CAP®, CCO & Managing Partner, Senior Wealth Advisor