Are you an Unintentional Philanthropist?
Ryan Summerlin July 28, 2014
We are a generous country. We give for a multitude of reasons to myriad causes. According to the recent Giving USA annual report, total charitable giving increased by 4.4 percent to $335.17 billion in 2013. The single largest influence on this increase was the additional $9.69 billion in gifts made by individuals over 2012. Contributions have increased by 12.3 percent since the recession ended in 2009.
In 2013, U.S. adults donated $1,016 per capita, while on average, U.S. household giving reached $2,974. Total giving has increased by $34.6 billion in inflation-adjusted dollars in the last decade. We can do even more.
Your philanthropic decisions should be birthed with heartfelt connection to a cause or concern. Explore what motivates you. Do you want to make an impact? Do you have a passion for a cause? Is giving part of your religious or spiritual values? Does it help to keep your life simple? Are you a giver at heart and it just brings you joy?
Charitable planning allows you to direct your dollars to causes that speak to you and your family rather than allowing the government to direct your dollars to benefit society in the way they see fit. You may not be charitably inclined, but understanding that you will be either a voluntary philanthropist through charitable planning, or an involuntary philanthropist through your tax revenue, you may want to ponder your options.
You may not be charitably inclined, but understanding that you will be either a voluntary philanthropist through charitable planning, or an involuntary philanthropist through your tax revenue, you may want to ponder your options.
For example, you sell an appreciated asset and are exposed to potential capital gains taxes. The amount of time an asset has been held impacts the tax treatment of the gain. A tax of 28 percent can been felt on the sale of collectibles. You pay the tax, and the government distributes those dollars. If you were to donate that asset, you do not experience any capital gains taxes and you receive tax deduction.
With charitable planning, everyone wins. You, your family, and your extended community will benefit by intentionally using your social capital wisely. Even the government wins. By supporting viable charitable causes, we reduce the burden of governments to get involved in social programs that NGO organizations are better equipped to serve.
There are three primary methodologies of charitable giving. An outright gift may be given directly to the 501C3. Write a check or click a button to make a dollar for dollar transfer. Many organizations also allow for direct stock transfers.
Another method of giving is an endowment style. You can set aside funds to give over time. A growingly popular tool is the “Donor Advised Fund.” Here in the valley, we have the Aspen Community Foundation and the Western Colorado Community Foundation. These can be used for a wide range of gifts, including business interests, real estate, stocks and bonds. I have even heard of people donating cattle herds or agricultural crops to a DAF. You will want to get pre-approval from the DAF as to what types of gifts they can accept. The gift is normally sold and proceeds held in a personalized separate fund. You will receive a charitable deduction in the year given, and avoid capital gains tax on appreciated assets. Over time, you make grant recommendations to one or several qualified charities of your choosing.
The final method would be an income-producing tool. A prevalent one is the Charitable Remainder Trust. The CRT is a flexible planning device that provides income as well as tax benefits. Created by an attorney, it will have its own tax ID number. You will then make a contribution to the charitable trust, which will usually liquidate the asset. The donor will receive a tax deduction based on the present value of the future gift to be given to the charity. You will also start receiving an income stream. When you pass away, the charity or charities receives the remainder of trust assets.
What about your family? There are additional creative ways to equalize your estate very tax efficiently. Your team of advisors will walk alongside you to determine which strategies are best suited for you and your loved ones. You have choices. You have a financial voice that can impact generations in a positive way. With wise counsel, give with guts and gratitude.
Danielle Howard is a CERTIFIED FINANCIAL PLANNER ™ practitioner. Wealth By Design, LLC, her financial life planning office is located in Basalt where they take a personal interest in your financial well-being. Visit her at www.wealthbydesign4u.com or call 927-3909. Advisory Services offered through Cambridge Investment Research Advisors, Inc., A Registered Investment Advisor. Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Cambridge and WBD are not affiliated.