The joy of generosity
One of the more rewarding components of my schedule is walking alongside clients to create and implement giving strategies. I have a gracious lady who has transitioned through widowhood and is thriving in her “rewirement” years. I would not classify her as financially ultra-wealthy. More than some, less than others. She does have a wealthy outlook on life. She sees the beauty around her, she has a mindset of abundance and an attitude of gratitude! She enjoys giving. She treasures her family. She also relishes travel. She has found a way to combine these by doing some personally rewarding volunteer work around the world a couple of times a year. There are also memorable family trips domestic and abroad.
Like the glorious sunsets we have had lately, giving brings her deep joy and meaning. So, we constantly look at her financial life from this viewpoint. We make sure she has enough to provide for her needs, create margin for the unexpected and put the proper tools in place to guide her along the way. We assess her situation for cash flow and look at her giving strategies annually. In years like 2014, with market upswings, we took the opportunity to be creative. We took appreciated stock and gave it directly to a nonprofit. This provided her with tax benefits avoiding capital gains that would have been incurred had we cashed in the stock in order to free up cash. It was simple, we didn’t need to track down old cost-basis information. She was also able to leverage her giving. Instead of just writing a check, she was able to increase the amount given by the amount the stock had appreciated.
Federal law allows you to deduct your gift based upon your adjusted gross income (AGI). If your combined charitable contributions for the year do not exceed 20 percent of AGI they may all be deducted. Depending on the type of property given and the type of charitable organization receiving the gift, you may be limited to 50 percent, 30 percent or 20 percent of AGI. In no event can your deduction exceed 50 percent of your adjusted gross income for the year. You can however carry forward a deduction for up to five years. Rules are complicated, so check with your advisory team.
We are working on a new tactic for 2015. We have reviewed what she gave in 2014. To whom has she given? Why are these causes important to her? Is there anything she would like to change? Was she giving on a systematic (monthly) basis? What kind of margin does she want to be able to give spontaneously? After excavating into the “who, what, where, when and why,” we are now building the “how.”
After assessing market gains for 2014, we are going to donate a portion her appreciated equities to a Donor Advised Fund — an IRS recognized 501(C)(3). These are the hottest new tools going in philanthropy. Once thought of as a tool only for the ultra-wealthy, these are flexible, friendly giving vehicles for many with generous mindsets. My client (the donor) will donate appreciated stock equal to her entire anticipated giving plan in early January to the fund, which will then have legal control over it. She will retain advisory privileges with respect to the distribution of the funds and, with my assistance, the investments held inside the account. She will then be able to give on a monthly basis, or have the DAF cut one-time checks. She will be able to give anonymously or with her name attached. She will be able to add additional assets to the account at any time, receiving a tax benefit in the year donated. She will get a monthly accounting of how much and to whom she has given. This will be a nice clean record for her and her accountant.
There are more than 217,000 donor advised fund accounts, according to the National Philanthropic Trust 2014 annual report, 34 percent increase over the last seven years. Grants from DAF to qualified charities accounts for about 5 percent of giving in the U.S. at about $9.66 billion. Locally, you can set up a donor advised fund through the Aspen Valley Community Foundation. Each DAF has different structures, investment policies, and costs associated with them, so you want to do your due-diligence to determine which best fits your needs.
May the season fill you with the spirit of gratitude and generosity, and may you look at 2015 as an opportunity to implement creative ways to share your blessings!
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 http://www.wealthbydesign4u.com. 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.
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