Budgeting for Donations in the New Year

Since there are so many good causes and charities, the very act of choosing which one to donate one’s hard-earned money to is challenging. That being said, once one has decided to give, creating a realistic budget based on a person’s income is essential.
budget your yearly donations

Since there are so many good causes and charities, the very act of choosing which one to donate one’s hard-earned money to is challenging. That being said, once one has decided to give, creating a realistic budget based on a person’s income is essential.

It would be up to the individual to decide whether they want to donate a large amount to one non-profit or whether to spread that largesse among several of them.

From a Jewish perspective, one of the considerations that people take into account is the practice of ma’aser ksfaim/ma’aser – also known as tithing. This is a convention that dates back to Temple times, when regular people, not of the priestly class, were expected to set aside a percentage of their agricultural yield. Now that there is no Temple, there are some rabbinic sources that make reference to a tithe of money as well as of produce, although it is not entirely clear whether this is a voluntary contribution rather than an obligation. Nevertheless, many observant Jews even today, donate a tenth of their annual income to charity. So, if you are preparing a budget, this is a key element to think about.

A great way to budget for donations in the New Year would be to contact the planned giving department of your chosen nonprofit. Mine is the International Fellowship of Christians and Jews (IFCJ), headed by Rabbi Yechiel Eckstein, who has trail blazed the field of Jewish-Christian relations. Even if you are in the peak of health and if you have reached a certain stage where your net worth allows you and any dependents to live a comfortable life (or even an extravagant one), it would be appropriate to think about how you can give now and keep on giving by way of a legacy. As it says in Isaiah 58:7, it is critically important to “share your food with the hungry and to provide the poor wanderer with shelter — when you see the naked, to clothe him.” And with planned giving accounting for as much as 30% of an organization’s annual campaign, could there be a more important legacy than that?

There are many planned giving options – for example bequeathing a gift through a will. It is the simplest type of planned gift and has many benefits for the donor, including providing an estate tax charitable deduction and reducing the burden of taxes one’s family. Other planned giving options include gifts of real estate or life insurance, or a charitable remainder trust, transferring one’s cash or property to fund a trust that makes payments for the donor’s lifetime or several years and then passes what remains to the nonprofit.

With a charitable gift annuity (CGA), the donor makes a gift of cash or stock and the organization agrees to make fixed payments of up to 9.5%. Many retirement arrangements such as IRAs, Keoghs and 401(K) plans have contribution limits. A deferred CGA enables donors to give cash or securities now and receive annuity payments at a later, specified time, such as at retirement, yielding significantly higher payments at payout time and a larger income tax deduction in the year the annuity is established.

Donors can also establish a donor advised fund – often compared to private foundations – which can pass on a legacy of giving from generation to generation. A donor advised fund assures Jewish National Fund donors receive the most favorable, immediate tax deductions allowed under IRS tax laws while giving donors the flexibility to make charitable grant recommendations at their discretion.

Another function to consider is a charitable remainder trust, which is an irrevocable trust designed to reduce the taxable income of individuals by first disbursing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity. This is a “split interest” giving vehicle that allows a trustor to make contributions, be eligible for a partial tax deduction and donate remaining assets. This strategy enables people to pursue philanthropic goals while still generating income. In addition to tax management charitable remainder, trusts can offer benefits for retirement and estate planning.

Whatever type of donation you have budgeted for and plan to give, you should ensure that the nonprofit to which you will donate follows a number of rules. Is there one point of contact for you, considering that you are a major donor? Does the nonprofit offer face-to-face meetings with you? Will it provide you with bespoke proposals and updates? Will you receive personalized emails? What is the nonprofits procedure for recognition and thanking? Will you be invited to future cultivation events? Will it provide you with trips to see how your donations are being spent? If your nonprofit of choice ticks all these boxes, then you should go right ahead and begin what will hopefully be a rewarding and fulfilling relationship.

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