In the case of a wealth event, including receiving an inheritance or selling a company, individuals and families may be overwhelmed by options. A sudden influx of money may be the first time that a person is in a position to give large amounts to the cause or causes close to their heart. However,  this opportunity poses challenges. Where should the money go? What vehicle best matches the needs and goals of a donor who suddenly has much more to give? What are the tax implications of giving in different ways? How can the donor ensure impact?

Fortunately, many people have faced these questions before. Here is a guide to moving money for donors who have recently experienced a wealth event. 

Ways to Give:

Giving vehicles are legal structures that facilitate the flow of money for charitable contributions. Each vehicle has pros and cons, and the donor's personal preferences and goals will determine the most appropriate. Below is a comparison chart from Stanford PACS Center for Philanthropy and Civil Society that can help donors understand the differences between giving vehicles.

Donors should decide which factors are most important for their giving in order to determine the best fit for their charitable goals.

Staffed Structures

Staff can help make a donor’s giving more effective, but paying staff and other related costs can cut into the funds donated to nonprofit organizations. Limited Liability Corporations (LLCs) offer increased flexibility, but the funds are not entirely tax-deductible. The giving vehicles all allow for the flow of tax-deductible contributions. Private foundations are tax-deductible and have a minimum annual 5% payout requirement.

Unstaffed structures

Giving without a staff reduces overhead, and it is possible to make an impact without staff through research, contracted resources, or options like issue funds that allow you to take advantage of existing staffed structures. Donations made through Donor-advised Funds (DAFs) or giving directly to organizations are both tax-deductible. DAF charitable deductions are available when money is transferred into the account. Unlike private foundations, DAFs do not have payout requirements, although donors who want to make an impact should focus on moving money out of their DAF accounts

How to Give:

Once a donor has decided on a giving vehicle, it is time for the real work to begin: moving money to impactful organizations. Where and how donors give matters. Bad practices, like excessively restrictive funding, can hamper the great work that donors intend to support. 

Before donors start moving money, they should familiarize themselves with giving best practices. One of the key best practices is creating a giving plan that serves the needs of nonprofits. Giving Compass’ Giving Planner is a great resource for donors who want to make a plan and track their giving. 

Where to Give:

Before choosing specific organizations to support, choosing which cause or causes the donor wants to impact is important. Selecting a focus is a key step toward impact. The best way to make a difference as a donor is to narrow in on one to three issue areas and direct money to those places. With so many worthy causes in the world, this is a challenging step, but an essential one. Spreading money across too many issue areas dilutes the impact of the funds.

Once the donor has chosen their area of impact, it is time to choose specific organizations to give to. Vetting organizations is a key step because donors need to trust the organizations that they support. Giving Compass’s Social Justice Nonprofit Directory is a shortcut for donors seeking high-impact organizations advancing equity. If these vetting criteria resonate with donors, they can search the directory to find nonprofits that they can support with confidence. 

For donors who need more information about giving, nonprofits, and issues before committing to a plan and moving money for impact, Giving Compass’ Guide to Good (Beta) is designed to provide the relevant resources. We invite you to try this tool before its official launch and let us know what you think.

A wealth event brings opportunities and challenges. With the right tools, donors can rise to meet the occasion and give with impact for equity.