Wealth Notes: Planning To Give Wisely
Recently, I was at an event for a local nonprofit organization where the fund development team talked about legacy giving. The Executive Director told a story of a local woman and the impact she had on 26 charitable organizations in the Pikes Peak Region. The woman worked as a civil servant and apparently never had a highly paid position during her career. At her death, this woman left more than $14,000,000 to a trust to fund those 26 organizations in a way that provides income every year.
Many of our clients make charitable donations each year. We have clients that give to their colleges and universities, to faith-based organizations and to community service groups. Some give based on a life experience – cancer, heart attack or asthma. Others give based on an inspiring event or a natural disaster. Each person gives in their own way to groups that capture their hearts and where they feel like their money will make a difference in making lives better.
We ask about charitable giving as part of our financial planning process. We like to hear our clients’ stories as we talk about the meaningful and impactful causes that keep them engaged in the community around them. It helps us to understand the purpose of money when we know how it will be spent – to live a fulfilling life, to educate and support children or family, to build business and yes, to donate to causes.
We also can devise and support strategies to improve the ability to give and to identify assets with which to give. To many, giving means writing a check once or twice a year or when asked. Our conversations can lead to changing strategies and more impactful giving.
Making the best decisions for your charitable giving starts with taking the time to decide why you want to give and to which groups or causes. Great giving starts with intention.
Religious clients start with the guidelines of their faith and the institution to which they belong. This can look like 10% of income as a tithe to a church. It can look like a monthly contribution or making an annual gift at an important time of year on the religious calendar.
Other clients give to educational institutions. Colleges and private schools account for large amounts of current and legacy gifts. These institutions do a great job of reminding us each year to give – postcards, calls and inserts in newsletters remind us about how important these schools were in helping us become the people we are today. We became the people we are today through the education we received during high school and college.
Community groups make up the other big piece of giving for many of our clients. These arts, health and social organizations are tangible to us. We see the work of the local theater group. We know the people helping end child abuse or caring for people with disabilities.
Take some time before the end of the year to decide where you want to give and how you want to make a difference. Sometimes it’s as simple as responding to a mailing but you will feel better about your giving if you choose those organizations that solve problems that matter to you.
After deciding where to give, we can focus on the giving strategies.
Most giving is done with a simple donation by writing a check. It’s quick. It’s easy. The funds go to the organization right away. Usually, the organization sends back a tax receipt to make reporting easy.
A few other techniques can help giving. We review assets during the financial planning process. Some clients have highly appreciated assets outside of retirement accounts. These assets will owe capital gains when sold. Many charities now accept gifts of publicly traded stock and a portion of the highly appreciated asset could be better used as a gift than writing a check to increase the tax advantages of the gift.
Some clients want the tax deduction in the current year but are not sure which charities to benefit. They may want to spread the giving over multiple years and take the deduction this year. Here, clients can use a donor-advised fund for tax planning and to buy time on their charitable giving. This can work for stock, real estate or privately held assets.
Our financial planning process identifies the likelihood that our clients will have significant assets at the end of the plan. In these cases, we are asking about who should receive that legacy. Sometimes it is family; other times there is no answer as the idea had not been considered. We can work with legal professionals to adjust the estate plan to carve out a legacy fund to be used for charitable gifts. Like the woman in Colorado Springs who left $14,000,000 in her estate, others can leave gifts to benefit the community after their passing.
There are many other strategies involved in complex charitable planning. Your professional team can search for ways to maximize the benefits you receive in giving. Call us before the end of the year so we can help identify strategies to help you make a difference.
