Make a Charitable Pledge

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Charity Amt. Raised
Co-op America $169,425
NFTE $91,341
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Room to Read $25,266
Half the Sky $21,350
TOTAL $337,429
As of January 9, 2007
Foolanthropy 2006
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By Dan Caplinger
January 3, 2007

As the new year begins, you may be breathing a sigh of relief. You've gotten through the holidays, hopefully having gotten everyone on your list a present they like. If you're charitably inclined, you've probably made another annual round of December gifts to your favorite charities. January is a nice time to relax and take a break from the stress and constant activity of the holiday season.

However, it's not too early to begin thinking about strategies for 2007. In particular, if the 2006 Foolanthropy campaign or another charitable fundraising activity has gotten you involved in charitable giving for the first time, you may want to keep the momentum you gained when you got started. Even if the expenses of the holidays have your pocketbook tapped out, one way to make your intentions clear is to make a charitable pledge.

Pledging basics
Many charities have pledge drives at which they solicit promises for later contributions from prospective donors. In running pledge drives, charities realize that for many people, it's easier to make charitable contributions in two stages, first by committing to make a donation even if they don't have money available, and then by fulfilling their promise and completing their gift.

Charities have become savvy at making things as easy as possible for potential donors. Once reliant on cash and checks, many charities now accept credit card payments, set up automatic withdrawals from donors' bank accounts, and even allow periodic payments each month or quarter. Some charities have gone even further, creating relationships with local employers to allow employees to have charitable gifts directly deducted from their paychecks. With most organizations always in need of gifts, going the extra mile can mean the difference between getting a gift or not.

Taking charge of your giving
If you're like many people, year-end charitable giving is often somewhat disorganized. You may have charities that always get donations from you. On the other hand, you may also respond to the many organizations that solicit contributions in November and December by sending small amounts to several of them. By the time April rolls around and you're trying to keep track of all the donations you made in order to claim them on your tax return, you might realize just how harried a process your giving involved.

By thinking about your charitable giving strategy early in the year, you give yourself a chance to make better plans about how much you want to give and which organizations you want to support. Rather than sending out a number of $10 or $20 checks to many different organizations, you may choose to focus your charitable efforts on one or two worthy causes that are the most important to you. Given more time to consider all your charitable options, you may think about doing something more complicated than making a simple cash gift. Going through the mechanics of making a gift of shares of stock or setting up a charitable gift annuity or trust isn't something you want to be doing at the last minute, but with some advance time to study various choices in greater detail, you may have a more rewarding experience.

How much should you pledge?
Another benefit of early planning and pledging is that it's easier to incorporate giving into your regular budget. You can therefore think more rationally about how much you want to give to charity over the course of the year. This can help you feel better about the choices you make and prevent you from making emotionally-based decisions that can leave your finances in a temporary bind.

How much you pledge is a personal choice based on your resources and financial needs. While you can find rules of thumb from many sources, the exact amount you pledge is less important than your commitment to following through with your pledge. Once a charity receives your pledge, it will take action in anticipation of receiving money from you in the future, creating an awkward situation if you end up reneging on your pledge.

Breaking a pledge
In fact, in some cases, charities have filed suit and gone to court over broken pledges from prospective donors. Many of these cases involve donors who died before they finished making their gifts. Whether or not a charity can collect on a broken pledge is actually a complicated legal question. Although a pledge closely resembles a standard contract that could generally be enforced, most contracts involve an exchange of promises between parties. With pledges, although the donor promises to give money, the charity often doesn't make a promise in return. This sometimes makes the pledge unenforceable. On the other hand, some states have laws that explicitly allow charities to collect on charitable pledges regardless of whether the charity made a promise in return.

Regardless of the legal issues, though, you shouldn't make a pledge that you don't intend to keep. Apart from the detrimental effects your broken promise can have on the charity, it nullifies the whole purpose of making the pledge in the first place. By taking a charitable pledge seriously, you'll make things easier for everyone involved.

January is often a good time to plan out your year. Adding a charitable pledge to the list of things you intend to accomplish during 2007 is a good way to keep the spirit of giving alive well beyond the end of the holiday season.

For more charitable Foolishness:

Time's running out on the 2006 Foolanthropy charity drive. Five charities are competing for donations, with the one raising the most money by Jan. 7 earning an additional $10,000 from the Fool. Please consider giving to these worthy causes, and thanks for your support.

Fool contributor Dan Caplinger is already getting his giving strategy together for 2007. The Fool has a disclosure policy.