Charitable Giving in the Time of COVID-19
We have all been stunned and saddened by the sheer number of our fellow Americans suddenly in need. In the Great Recession of 2008-2009, the number of monthly job losses peaked at 818,000. The recession lasted roughly 18 months with a total of 8.7 million jobs lost. In the month of April, 2020 alone, 20.5 million Americans lost their jobs. That is on top of 881,000 in March with more likely to come in May and beyond. Consumer demand has dropped sharply, creating an environment where businesses needed to cut costs. Also, companies likely furloughed additional employees, knowing that enriched unemployment benefits under a new law would tide them over until businesses re-opened.
Despite government efforts to put money in people’s pockets, there is genuine suffering out there. Seeing pictures of long lines at food banks is reminiscent of the Great Depression.
Many of us who have been fortunate in life are in a position to help, and here are some suggestions:
Prioritize local businesses when you shop and dine. The big chains will likely make it as long as they haven’t been mismanaged, but independent businesspeople frequently don’t have much to fall back on.
Consider maintenance that you have been putting off. Does that roof on your house look tired? When was the last time you had your car brakes checked? This helps put people back to work and you might even get a discount on the price to boot.
Accelerate charitable giving you were going to do anyway. Why wait until December?
If you have some free time in the downturn, clean out those closets and basements. Your unneeded items can be put to good use at thrift shops like Salvation Army, Goodwill, and St. Vincent de Paul.
St. Vincent de Paul may not be known to many of you, but they are important to me. I know the people who run the SVdP “conference” at our church. These volunteers take the time to get to know people asking for assistance rather than just handing out checks. Even with no Masses since mid-March, the SVdP truck was overflowing with donations after they put an announcement out via email. Several donated pieces of furniture, lamps, and kitchen items went to a young woman who sought help after fleeing an abusive relationship with nothing but her baby and her car. I’m not suggesting you fund my favorite charities, of course, but consider giving to the ones you are passionate about.
My friends tell me the need is up quite a bit, and is likely to worsen when moratoriums on foreclosures, evictions, and utility shutoffs expire. Imagine multiplying this across the country. Yet, many organizations depend on in-person fundraisers like dinners and walk-a-thons that are not permitted in COVID times. Frequently they are staffed by volunteers who are under stay-at-home orders and unable to help. Some extra financial resources would definitely come in handy.
Fidelity Charitable pitched an interesting new idea to me. They always suggest creating or funding a Donor-Advised Fund (DAF), but recently gave it a new twist. A DAF can be funded with shares of highly-appreciated stock—and yes there is still some of this for long-time investors—to charity for an upfront tax deduction and the right to make charitable distributions from the DAF in future years. The twist is to use the deduction to offset taxes from doing a partial Roth conversion. You get a tax deduction, avoid capital gains taxes (legally), fund your favorite charities, and convert an IRA into a tax-free investment vehicle. Win-win-win-win. I’ve never seen four of them before!
Here is another way to help. Even though the government waived Required Minimum Distributions (RMDs) for 2020, qualified charitable distributions (QCDs) were left intact. Investors 70-1/2 or older this year may still contribute up to $100,000 from their IRAs. It may feel like there is less financial benefit than in years when RMDs are mandated, though, because you won’t be avoiding a taxable distribution this year. Charities will still need help next year, so perhaps consider this as a January, 2021 opportunity.
Our job is to help you earn a return on your life’s savings so you can afford to maintain your standard of living. It is not our job to preach what you should do with your money as long as you are living within your means. But the need is there, and we felt obligated to share ways you can help if you are so inclined.
While there are some hopeful reports out of the medical field and COVID-19 statistics appear to be improving in the northern hemisphere, we need to remain vigilant as we begin to venture out and return to “normal.” There may still be some challenges ahead, so let’s not get overconfident. Despite that cautionary wording, this episode in our history will pass. May you and your loved ones stay well and healthy, and please let us know if you have charitable desires that we can help you with.
Scott D. Horsburgh, CFA