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Tuesday, October 20, 2020

Philanthropic Strategies During the Pandemic & Pre-Election

Today, Charity Navigator has been graciously provided with an exclusive, first-hand account of charitable planning and giving by a married couple that utilize Charity Navigator’s tools and resources to inform their giving.  As donors who look at their support as an investment in the future of causes close to their hearts, they have remained committed to philanthropy during the COVID-19 pandemic, highlighting how they structured their investment strategy before and, now, during months of an economic recession. 

Steps in advance of COVID-19

We have taken a number of steps in advance of major events that can ensure that we could continue to donate to nonprofit organizations.

Tying our investment strategy to our charitable giving game plan.  We are a retired couple without kids, so charitable giving is a major part of our legacy.  Donating shares of stock to nonprofits is attractive for us on an after-tax basis.  We try to donate at least 30% of our Adjusted Gross Income each year via transfer of equity.  We also donate to emergency relief efforts with cash.

  • Balanced portfolio.  We keep a balance of equities, bonds and cash.  We increased the portion of this portfolio to cash before this year to ensure we had sufficient liquidity in the event of a major event that might impact the value of our portfolio. We also made sure that we had a balance that we were comfortable between sectors of the market that tend to grow faster than the market (such as technology) and those that tend to be safe havens in case there was a market downturn.

  • Following events.  We regularly track a half dozen events that may either help or hurt the value of our portfolio.  We signed up for a vacation in the United Arab Emirates (UAE) in late January 2020.  This alerted us to the threat of COVID-19 as it was beginning to spread out of China.  As UAE is a major transportation link among Asia, Europe, and the US, we were concerned that we might become infected.  Although we decided it was safe enough to go, we became concerned for our ability to donate in 2020.  We relooked at our portfolio and decided it was strong enough to withstand much of a potential impact of a downturn economically.

  • Waiting out the impact of COVID-19 on the market.  We decided we could wait out the initial impact of COVID-19 on the markets.  The rebound occurred by midyear; the most advantageous way for us to donate was to transfer shares of inherited technology stocks.  

  • Timing for giving.  We generally wait until the fourth quarter of the year to make most of our contributions.  We were burned in 2018 when the market dropped significantly late in the year.  That meant that the value of what we donated to nonprofits was less than we had intended.  We wanted to ensure that we did not have a similar impact this year.

Donating in advance of the 2020 election

Another event was on the horizon that could impact our portfolio, as well as how best to ensure we could donate wisely - the 2020 election.

  • Warning from an Investment Advisor.  We really like Bob Carlson's weekly newsletter because it alerts us to issues we should be aware of.  He raised a caution flag in early September about the potential impact of two aspects of the 2020 election on the market.  He suggested that his clients accelerate any changes they want to make in their portfolio, as well as for charitable giving.  The market tends to be nervous about uncertainty and that often leads to a negative correction.  The probability of an increase in market volatility was increasing.

  • The Election.  The newsletter indicated that, if the results of the election were disputed as was the case in 2000, it could significantly impact the value of our portfolio during the time frame that we customarily make our contributions.

  • Impact of Policy Changes.  The second reason for caution was that if there were a change in the Presidency from Republicans to Democrats, there would inevitably be changes in policy.  And that would take well into 2021 for it to sort out and be implemented.  This also had the potential to impact the value of our portfolio.

  • Accelerating our Donations.  We checked with some friends and they had similar concerns about the impact on their charitable contributions.   We made the bulk of our giving in September.

The team at Charity Navigator hopes that this insightful article provided by a fellow donor has inspired you to reflect on your own giving strategies. Comment below to share the steps you’ve taken to ensure the causes that align with your passions continue to thrive during the pandemic and before and after the election.

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