Feb 26, 2019
You don’t have to be a millionaire to be charitably inclined; but you do have to be passionate about helping others. Being charitable or philanthropic is often compared to providing leadership.
When you express interest in causes that you find compelling, what you are really saying is that you recognize a need or a problem, and see a way you can make a difference by committing your dollars, time, knowledge, advice or expertise to solving this need or problem. That’s what leaders do. And that’s what a prominent leader told me a long time ago. And it stuck.
With philanthropy, it’s more about values
With solid gains in the stock market and a strong economy generating increases in charitable giving in 2017, Giving USA’s 2018 Annual Report on Philanthropy for the Year 2017, released in June, reported charitable giving exceeding $400 billion in a single year for the first time.
The report called for heightened interest in the overall economic environment and other factors to help nonprofits sustain this type of growth over time. Researched and written by the Indiana University Lilly Family School of Philanthropy at IUPUI, Giving USA is the longest-running and most comprehensive list of its kind in America.
Despite recent 2018 estimates that reported the new tax law likely dampening the charitable giving spirit by as much as $20 billion, not all financial experts see it that way. Perhaps because more than 184 billionaires from 22 different countries, including Warren Buffett, Bill and Melinda Gates, Jeff Bezos and others, have already signed the Giving Pledge, a campaign to encourage wealthy people to contribute a majority of their wealth to philanthropic causes.
Non-billionaires, however, will use stocks or bonds with a low cost basis while taking advantage of the tax planning aspects; cash or trusts, or working with their CPA, attorney and the charities they’re most interested in to benefit others. And that’s the real objective. Your generosity, caring and selflessness benefits you and your family while also preserving your legacy, regardless of the amount.
Yes, I was here … on this earth … for a reason
We all want to know that our lives had meaning. What is important to you, and how can you give back to others, is strictly personal. No one can tell you what’s already in your heart. But they can direct your attention to the process of giving back.
For example, one way to maximize your charitable giving is with a donor-advised fund (DAF), the vehicle of choice for families with significant wealth. By making an initial contribution invested into one of the pre-approved investment options, the charitable contribution is immediately deductible.
Donor advised funds help teach the responsibility and benefits of charitable giving to the next generation because it involves them directly. When you are ready to distribute money to charity, you contact the DAF sponsor and submit a grant request. And you can make multiple grant requests if you wish to support multiple charities.
The value of the DAF fluctuates, so ask your Hefren-Tillotson advisor for more information, and about how “bunching” can maximize your individual tax savings.
Family mission statements: creating a bond between parents and children
You’ve probably heard that conventional wisdom urges privileged families to organize themselves around their wealth and their children. The goal of family mission statements is to help keep the peace in affluent families. By agreeing on a basic set of principles, families avoid lawsuits between relatives about money.
The family mission statement gives a sense of unity in how the members want to see the continuation of their family’s beliefs and purpose for future generations. It starts as an open discussion about the family’s commitment to retain, maintain and share in the future as a family unit, and if they want to be openly or quietly charitably inclined.
A family mission statement, a shared vision, is also a form of intergenerational planning as is planned philanthropy. Escalating wealth has made it so more families and charities are benefitting from larger-than-ever donations from younger donors, underlining why planning is so important to the desired outcome.
It’s about planned giving
After Dad died, Mom routinely gifted money annually to her children. And as a gift to herself, with her own charitable remainder trust, she, too, received income. One year, and guided by her advisor, she decided to exit a long-standing, highly appreciated asset with the intention of eventually leaving this money to one particular charity she was fond of.
Mom wanted to educate her three sons on what she believes in; how she wants to be remembered, and what she feels is important to her legacy. The advisor suggested a charitable lead trust – the inverse of a charitable remainder trust – as the teaching tool.
A charitable lead trust is an irrevocable trust designed to provide financial support to one or more charities for a specified period of time, with the remaining assets eventually going to family members or other beneficiaries.
Mom set up the family meeting, but since all the children lived in different states, and the charitable lead trust would continue with its annual distributions, she thought: “Each year, why not have one of the boys pick a charity in their community that would be positively impacted by this annual gift?”
As a result of this heartfelt suggestion, affectionately referred to by the family as “AFI,” or active family involvement,” not only do they choose which charity gets the gift, they use their discussion time for catching up on each other’s lives and other family business. AFI has truly brought them closer together. And having a plan to help others is really what selflessness it’s all about.
DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.