NEW YORK (MainStreet) The stock market has been kind to investors in 2013, with gains so far of more than 20% on the S&P 500 in excess of 30% on the NASDAQ. As the end of the year approaches, many holders of profitable portfolios will be looking to pass on some of those gains to a charitable cause. Of course, benevolence is the primary reason but the tax benefits are a consideration, as well.
Cash contributions are the most common, but donating appreciated securities held for longer than a year allows a full deduction of the market value of an investment, and investors can avoid paying taxes on the gain.
The challenge may be finding a charity worthy of a donation.
Ken Stern is the author of With Charity for All (Doubleday, 2013) and says the biggest barrier to effective giving is the absence of readily available information about charitable effectiveness.
"The best known charity evaluator such as Charity Navigator and the Wise Giving Alliance typically do not provide information relevant to finding out which charitable programs really work," Stern tells MainStreet. "I tend to rely on the most in-depth charity evaluators such as Give Well and on the reports made available on their web sites by the charities themselves. The best charities provide on their web sites detailed accounting of their goals and independent evaluations of their success."
Give Well is a nonprofit charity evaluator that conducts in-depth research to "determine how much good a given program accomplishes (in terms of lives saved, lives improved, etc.) per dollar spent," according to its website.
"There are more than 1.1 million charities in this country and, perhaps not surprisingly in such a large group, there is a subset of really bad charities," Stern adds. "But it is very hard to tell the difference among charities. For instance, there are more than 59,000 charities with the word "veteran" in their title and it requires real expertise to tell the best from the worst. This creates an opportunity for those who are eager to deceive unwary donors. The biggest charitable fraud case -- the U.S. Navy Veterans case -- was in the veterans field. There are plenty of pitfalls for the unwary donor."