Why You Should Consider Direct Giving

Susan Dziubinski: Hi, I’m Susan Dziubinski with Morningstar. This time of year, many investors make charitable contributions, in part to enjoy their tax benefits. But Morningstar’s Christine Benz suggests that we think about making another type of gift during this season of need, the direct gift. Christine is here with us today to talk about this strategy.

Nice to see you, Christine.

Christine Benz: Susan, it's great to be here.

Dziubinski: Let's talk about this strategy, which is essentially giving a direct gift to someone who is in need. Can you give us an example of that?

Benz: I think many of us do know someone who is in need right now, whether they are in need of basic living expenses to cover rent or to cover food costs, or maybe they are struggling with credit card bills or some expenditure that they'd really like to make to enhance their quality of life. So, the idea is just to spend a little bit of time listening to your friends and family members, people who do work for you in your life, in your house. Find out what they have going on. And I'm guessing that if you listen closely, you're apt to identify at least a couple of areas where you may be able to help, assuming that you're lucky enough to be a financially well person yourself.

Dziubinski: Now, you're not necessarily suggesting that you pursue the direct gift route instead of giving to charity, right?

Benz: Absolutely not. I think that you should do both if you possibly can, and the reason is that charities can just be tremendously efficient in terms of getting funds, getting goods out to people and entities who need it. So, to use a simple example, The Greater Chicago Food Depository is going to be much more efficient in purchasing food in bulk and getting it to families and people who need it versus me going to my local grocery store and stacking up my cart and paying retail prices for that food. So, definitely, think about this as kind of an add-on if you're a charitable giver through traditional means. This is maybe something to think about doing in addition to that sort of giving.

Dziubinski: The idea of reaching out directly to someone who you know, who may have a financial need right now, does seem a little awkward maybe for some people. How would you broach that conversation? Where do you start?

Benz: I think it does get back to listening, Susan, to really spending time listening to what people close to you have going on in their lives. And I'll say I've done this a little bit in my own life, my husband and I have, and I think the key is just to find a shared point of connection that can often be a really great way to offer some type of assistance like this. So, for example, I'm an animal lover. I have people in my life who are animal lovers. And an example would be if you have a friend who is struggling with a big surgery that she'd like to get for her dog to enhance the pet's quality of life. That might be a spot where you say, would it help if I helped with that surgery? Or maybe you have a child who participates in an expensive activity. You know other parents who may be struggling with paying for that activity, but they'd really like to keep their kids engaged. That might be another spot if it's someone you know well, certainly, to be able to say, "Can we help cover this round of activities this time? I know what you're going through." So, I think just spending time with people, listening to them, getting to know what their needs are, I would say that that would probably provide a natural entry point for a lot of people.

Dziubinski: A natural question someone might have who would like to pursue this is how do I make this financial gift to someone without feeling like that I'm going to become a source of ongoing cash for this person?

Benz: I think that might be a pushback that some people might have to this strategy. I do think that coming in with a specific and prescribed gift is really a way to avoid that, to say I will help you with this specific thing. Another point I would make, Susan, is that no one should go into a strategy like this without knowing how to say no. So, if it turns out that there are future asks which go above and beyond what you're willing to give, you really should be able to say, "No, I'm sorry, that was all the help I could provide right now." So, know your limits going into this sort of situation before you even offer because it is an important point.

Dziubinski: And just to be clear, there are no tax benefits to the giver in a situation like this.

Benz: That's right. So, unless it's a qualified charity where you can make a tax-deductible contribution, you wouldn't be able to earn any sort of tax break. The big benefit though, Susan, the one we haven't really discussed is that you can make an impact and help someone who is close to you and you can observe the impact that you're making. And I think that that can be tremendously gratifying as a giver.

Dziubinski: Christine, thank you so much for exploring this really fresh idea to giving, and that seems especially useful this year. Thank you for your time.

Benz: Thank you, Susan.

Dziubinski: I’m Susan Dziubinski with Morningstar. Thank you for tuning in.