For many people, charitable giving is motivated by humanitarian concern as a way to leave a legacy to a favorite charity or a particular institution. In addition, charitable gifts offer donors the option of reducing income taxes in the year the donation is made or deferring the tax benefits until later.

Annual cash gifts represent a traditional method of giving to not-for-profit organizations, but asset-based gifts are worth considering because of their advantages to the donor as well as the charity.

Immediate Donations (stocks, bonds, cash)

Gifts of stocks, bonds, and cash are generally called immediate donations. Also worth considering is a donation designated in your will, and your heirs will be able to take advantage of estate-tax savings.

If you're considering donating some stock to a charity, there are a number of benefits. Let's assume you invested $5,000 five years ago in a stock or bond that is now worth $10,000. If you sell it, you'll have to pay a commission, plus tax on the $5,000 gain. At the 15% capital-gains rate, that will be a tax bite of $750 -- reducing the effective value of your security to $9,250 available to give to the charity.

If instead you transfer the security to the organization directly, the charity gets the full $10,000 value. You get to deduct the full $10,000 on your tax return. You have no capital gain, so there's no tax to pay. Plus, you haven't sold it, so there's no commission.

Revocable Gifts (life insurance, retirement benefits)

It's important to point out as long as you're still alive, gifts of life-insurance, retirement benefits or similar donations can be revoked if the beneficiary designation is changed. Since these revocable gifts are a promise to be fulfilled at a later date, they will appeal mostly to donors who want to plan a major gift immediately but also want the option of retrieving the assets if an emergency occurs. The disadvantage for these kinds of gifts is that they don't qualify for a charitable income-tax deduction.

Irrevocable Donations (charitable trusts, pooled income funds)

Other charitable contributions, such as gifts to charitable trusts or pooled income funds, are called irrevocable gifts because once initiated, the donations of assets cannot be retrieved. These gifts do qualify for charitable income-tax deductions in the year the donation is made.

Other deferred gifts that provide tax benefits to the donor include charitable remainder and other trust vehicles.

If you're considering a donation to a not-for-profit organization, it's smart to discuss the matter with your financial advisor, tax and legal advisors