Giving Wisely

Posted 3 years, 10 months ago


Do you ever feel like every time you turn around you are being asked to donate to a cause? We Americans are a generous people but sometimes we are hesitant because we want to ensure our money is being well spent.  The needs can seem overwhelming and giving wisely can be a daunting task.  It can sometimes feel like it is easier to live in our comfortable bubbles and forget about those in need.

However, first you may want to consider some of these facts:

Unfortunately, the majority of the world lives in trying conditions every day.  Life with this kind of poverty often means just trying to scrape by.  Planning for the future and life in these conditions can seem hopeless.  Many of us have seen poverty first hand throughout the world and can attest that many of these children had very little opportunity from the moment they were born.  As the wealthiest one percent of the world, we can be called to lend a hand and help out those less fortunate.

So how do we go about giving wisely?  Are we not all called to be good stewards of the money and resources entrusted to us?  Where do we begin?  Below are four techniques that you may find useful:

Volunteer where you give.  If your schedule allows, try volunteering your time in addition to your money.  This can be a way to truly see how your dollars are being spent and partake in the joy that comes with giving.  As an example, I have a good friend that volunteers for months at a time for Mercy Ships, a global charity that has operated a fleet of hospital ships serving the poor in ports of third world countries.  Many organizations have opportunities for short and long term service trips.  My friend was able to utilize her nursing skills, give of her time and donate funds to those who are greatly in need.  This experience has brought a tremendous amount of joy and satisfaction to her life. 

Give tax-deferred retirement assets.  Out-right gifts tend to be the most common to give, but if you’re looking for a little more bang for your buck, it can be an option to give away tax-deferred retirement assets.  IRA’s can be one of the most effective vehicles for charitable giving especially after you’re gone.  This allows the charity to receive 100% of every pre-tax dollar given versus a recipient receiving the monies post-tax.  In some cases a beneficiary would end up with only 50-75% of that dollar after taxes.  The last several years the IRS has permitted IRA holder’s to make outright gifts from their IRA’s up to $100,000 of the account value to a qualified charity.  We are still waiting to see if the IRS will permit this option in 2015. 

Donor Advised Fund (DAF).  Another popular vehicle is a Donor Advised Fund (DAF).  What is a DAF and how do they work? A DAF is a charitable vehicle that any person can create and fund.  When you set up a DAF you can call it almost anything you want.  For instance, one might name a DAF, The Jones Family Charitable Gift Fund.  When monies are gifted to a DAF they are considered an irrevocable gift and provide a charitable tax deduction at the time of the transfer.  This can work great for the person who desires to be charitable but has not yet decided on which organizations they wish to give.  Simply contribute to a DAF and make those gifting decisions later.  A DAF can also be a great option when you have a significant tax event looming.  Perhaps you sold a highly appreciated stock or piece of property?  That situation could present an ideal time to contribute some (or all) of the assets to a DAF, enabling a tax break, while allowing the charitable distributions to take place when you are ready.

Give shares of highly appreciated securities.  Another popular giving strategy is giving shares of highly appreciated securities.  Let us say you bought some Apple stock some time ago and have a huge gain.  Instead of giving cash to your favorite charity you could give a few shares of stock.  If you paid $10 per share and the stock is now worth $100 per share you would have a $90 gain in that stock if you sold it and then gave the cash to your favorite charity.  If you gave 10 shares of stock directly to the charity, you would get a charitable deduction of $1000 and have NO capital gains on those 10 shares, not to mention the federal and California surtaxes which is another 7.8% for the highest earners. (This is a hypothetical example. Results may vary.)

We are fast approaching the end of the year when it can be beneficial to make charitable gifts to receive a tax deduction.  Perhaps the techniques mentioned above could help you play a role in making a difference in the world.  For more information, please call The Gensler Group at 619-554-1300.  Happy planning! 

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.  Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is not guarantee of future results.  Investment advice is offered through The Gensler Group, A Registered Investment Advisor.




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