Charitable Giving and Philanthropic Planning in Nigeria (Part One)

Charitable Giving and Philanthropic Planning in Nigeria (Part One)

Charitable giving and philanthropic planning are important in addressing social issues and fostering positive change in communities worldwide. In Nigeria, a country with many social challenges ranging from poverty and healthcare disparities to educational gaps and environmental concerns, charitable giving and philanthropy have emerged as critical mechanisms for driving positive social impact. This two-part series explores the realm of philanthropic planning, shedding light on its significance and the strategies involved.

Understanding Philanthropy
Philanthropy refers to charitable acts or other good works such as volunteering your time or efforts that help others or contribute to society’s overall well-being. For some, philanthropy entails making large financial contributions to support or build university buildings, research centers, or fund scholarships. Others define philanthropy as a yearly donation to a church, a charitable organization, or public school.

What Is Philanthropic Planning?
Philanthropic planning is the process of developing a comprehensive charitable giving strategy that aligns with an individual’s or organization’s values, goals, and financial resources.
This method entails creating a plan that identifies the most effective and efficient ways to make charitable contributions while taking into account tax implications and the potential impact on the philanthropic causes being supported.

How Philanthropic Planning Works
Philanthropic planning entails developing a deliberate and strategic approach to donating. Individuals and organizations can use the following steps to guide them through the philanthropic planning process: 

1. Recognize previous charitable donation by examining your donations as an individual or as a company. Consider any areas that may have been overlooked previously. In addition to reviewing previous donations, identify the causes you have supported and assess the impact of your contributions. 
2. Define the impact you want to have and set specific goals for your charitable giving. 
3. Check that the objectives align with your interests and values. This ensures that any donations are meaningful and reflect who you are as a person or company. 
4. Select the charitable organizations that you will support. Donating to multiple organizations or selecting a single organization is part of this process. 
5. Incorporate some financial planning into the equation to allocate resources optimally to projects while not jeopardizing personal finances too much, which usually entails opening separate accounts. 
6. Work with a wealth management services provider or financial advisor to develop a charitable giving budget. Such professionals can assist you in determining the tax implications of your contributions and determining the most effective ways to maximize the impact of your donations.

Strategies for Philanthropic Planning

1. Tax-Advantaged Philanthropy: The practice of structuring charitable donations to maximize tax benefits is known as tax-efficient philanthropy. Charitable contributions can be deducted in a single tax year or through tax-advantaged vehicles such as charitable remainder trusts or gift annuities. 
2. Donations to Charities: Assets are passed down upon death or through a trust established prior to death in this case. These assets can be donated to charity without having an impact on the donor’s estate taxes or other financial obligations. This is a way to make a charitable contribution that will leave a lasting legacy. 
3. Direct Gifts to Charity: Making a one-time or ongoing donation to a charitable organization is what direct gifts entail. This is one of the most basic and widely used methods of charitable giving. It enables individuals to contribute to causes they care about without having to make complicated legal arrangements.
   This method requires little paperwork, making it simple and efficient for those who want to donate directly from their pockets or personal accounts. It does not involve any third-party intermediaries or entities such as foundations or trusts.
4. Securities Donation: Donating a publicly traded security that has appreciated in value can result in the elimination of both the capital gains tax and the donation tax credit. When compared to selling the security and making a cash donation, this provides an opportunity for tax savings. Giving securities to a charitable organization entails donating stocks, bonds, or other securities. 
5. Private foundation: A private foundation is a charitable organization established by an individual or family to support charitable causes. Donors who make contributions to the foundation can receive an immediate tax deduction.
   The assets of the foundation can grow tax-free. Furthermore, because private foundations are not subject to the same tax rules as public charities, they have greater flexibility in distributing their assets.
6. Donor-Advised Funds (DAFs): These are charitable giving accounts that are overseen by a sponsoring organization. Individuals can make tax-deductible contributions to the fund and then recommend grants to charitable organizations without committing to the time and resources required of a private foundation.
   Donor-advised funds offer the greatest potential benefits because they allow donors to be flexible while still maintaining control over grant distributions. Clients can direct funds in a variety of ways.

Conclusion
Philanthropy planning is the process of transforming your charitable intentions into a strategic and meaningful endeavor. Whether your goal is to alleviate poverty, advance education, promote healthcare, or support other noble causes, careful planning can assist you in making a long-term difference. You can leave a legacy of positive change that resonates with your values and benefits society for generations to come by aligning your resources with your values and working with experts to optimize your efforts. So, plan your philanthropy ahead of time and witness the transformative power of your generosity.

Consider consulting with a wealth management expert for advice on your philanthropic efforts.

Please stay tuned for the second part of this series, which will explore the landscape of charitable giving and philanthropic planning in Nigeria, providing further insights into the significance of these endeavors in the country’s development.

References:

1. “What Is Philanthropy? Examples, History, Benefits and Types”. Investopedia, accessed  15th October 2023.
2. “Philanthropy: Four Steps To Giving Strategically”. Forbes, accessed 16th October 2023.
3. “Philanthropic Planning”. Finance Strategists, accessed 17th October 2023.
4. “Philanthropic Planning: How a Focus on Philanthropy Can Help Grow an Advisory Practice – Key Takeaways”. Foundation Services, accessed 18th October 2023.
5. “Charitable Planning Guide”. Fidelity Investments Charitable Gift Fund, accessed 18th October 2023.