As we approach the end of 2020, most of us will spend time reflecting on what a surprising and, yes, unprecedented, year it’s been. We’ve witnessed and experienced unimaginable hardships in our communities and across the nation and world.
Of the many things I’ve learned this year, this lesson sticks out to me the most: When times are tough, people rise to the occasion. I’ve seen this in our medical professionals and essential workers. I’ve seen it in the many incredible nonprofits serving communities throughout the pandemic. And as President of Vanguard Charitable, I’ve seen it among our donors, who have broken granting records this year, and who tell me how important it is to them to help in a meaningful way.
With all that’s happened, so many of us want to help in any way we can, but it’s difficult to know where to start.
Focus on what you know
“What should I do?” We’re hearing this question a lot right now. While people want to make a difference and give more, they’re facing a highly unpredictable environment. They wonder what the world will look like in 2021—including how the country’s tax policies will change (if at all). This uncertainty can make it difficult when it comes to year-end charitable decisions. My advice? Focus less on what you don’t know and more on what you do know.
- You know you can give back in many ways. There are many ways to conceive of giving. We often hear our donors express the value of their “time, talent, and treasure.” Volunteering, serving on a board, or offering other expertise in support of charities are wonderful ways to make a difference at a time like this. For those with an in-demand skill—think data analytics or digital advertising—consider reaching out to your favorite nonprofit to see how you may be able to “donate” your skills to further their mission.
- You know the “current state” when it comes to taxes. For those looking to donate financially, you know what to expect with both income taxes (wage, capital gains, and dividend taxes) and estate taxes this year. Regardless of what may or may not be coming down the line, you can determine right now the actions you can take to receive more favorable tax treatment in 2020.
- You know the markets have been strong, and you likely have appreciated assets. Despite economic uncertainty, the markets have shown great resiliency and strength. In such an environment, some people may not realize what you give can be as important as how much you give.Consider donating appreciated securities over cash donations to receive the charitable tax deduction and to forgo paying capital gains (if you’ve held your appreciated assets for more than a year). Review your portfolio with your Vanguard advisor (if you’re a Vanguard Personal Advisor client), and maximize your charitable gifts in the most tax-effective manner. And if your most appreciated assets are illiquid, you can even donate those assets, such as private equity, hedge fund interests, C-corp stock, real estate, LLCs, limited partnerships, and more. While not all charities can accept these assets, a donor-advised fund provider like Vanguard Charitable can.
- You know the need has never been greater. If you’re interested in supporting COVID relief, Vanguard Charitable has a new mapping tool to change the way you give. During the early weeks of the pandemic, our donors asked for help finding the hard-working charities providing crucial COVID relief—in their local communities and across the country. So we set to work on creating a groundbreaking new tool to address this request. The Nonprofit Aid VisualizerTM—NAVi—enables you to search for a charity on an interactive platform, using information like COVID vulnerability and COVID incidence levels, making it easy to find charities to support.
NAVi embodies one of the core beliefs at Vanguard Charitable: A more informed donor is a more effective donor.
Use a giving tool
Once you figure out how much you’re giving and which assets you’re donating, you might want to think about how you should give—specifically whether you should use a giving tool. There are a few different types of giving tools—private foundations, donor-advised funds, charitable trusts—and they differ in terms of features and cost. While comparing and contrasting your options, keep in mind you can often use many giving tools together.
There are ways to make the giving budget you have stretch further. A giving tool is one great way to do this. The purpose of a giving tool is simple: to transfer assets to charitable causes in a planful way that makes financial sense for you, and grows the amount you’re able to give over time.
Important: If you’re planning to use a giving tool, make sure you pay close attention to the fees. It’s important to remember that the lower the fees, the more money will be available to donate to the charities you admire. At Vanguard Charitable, our donor-advised fund comes with the lowest all-in fee in the industry—86% lower than the industry average.* That translates into extra dollars available for the causes you care most about.
As 2020 ends, I’m reminded of how interconnected we all are. No matter where in this country or on this planet we live, the pandemic has affected us all in one way or another. For me, this underscores the responsibility we have to one another. And when we seek to give back, taking a strategic approach can make our giving go even further.
*This number represents Vanguard Charitable’s investment fee average compared to the industry average fee, which is calculated based on the average expense ratios charged by other donor-advised fund sponsors, according to the most recent publicly available fee schedules.
We recommend you consult a qualified tax advisor about your individual situation.
Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.