Charitable giving is one of the top financial issues Bob Bove hears about as Wealth Advisor & Certified Exit Planning Advisor at The 4:8 Group. Individuals and families want to know how to maximize the benefits to all participating parties for the best possible outcomes.
The best results come from the best-laid plans, and that is also true when it comes to philanthropy. However, it is often done haphazardly, with the planning part of the process overlooked. Considering all of your assets allows you to plot out a path to results that are worthwhile to all parties involved — you, your family, your business and the charitable organization that is the recipient of the giving.
Smart Business spoke with Bove about how a wealth adviser can help maximize charitable giving efforts for both you and the recipient organization.
How can you best achieve your goals with charitable giving?
There are many ways to accomplish charitable giving. A will bequest meets the personal needs of many people, allowing you to leave a charitable gift that does not go to the charity until the will is probated. Bequests are still available to you during your lifetime, and your estate can take an estate tax deduction for the value of the charitable bequest.
With a private foundation, a private, nonprofit organization receives most of its contributions from a single wealthy individual or family, and a minimum amount of the foundation’s assets must be distributed annually.
Another option is a donor-advised fund, a charity that invests in pooled investment vehicles similar to mutual funds. What you donate earns a federal income tax deduction for the entire gift, because the DAF is technically a nonprofit. You can then, at your own pace, pinpoint charities and decide how much to give to each one.
What are some other charitable giving options?
Life insurance uses a traditional financial tool in an innovative way. As the owner of your life insurance policy and the donor, you designate a charity and can generally take a tax deduction for the premiums, creating a significant charitable gift.
In addition, charitable trusts are extremely attractive planned gifts for many people with wealth and strong charitable intent. With a charitable remainder trust, the benefit to charity is delayed because income from the trust is reserved for you, as the donor, or some other person you specify.
As part of the gift, the trust provides income for you for your lifetime or a set number of years. Once the trust is terminated, one or more charities chosen by you will receive the assets it held.
With a charitable lead trust, you transfer assets to the trust for life (or a specific number of years), and the trust’s income is paid to your charity of choice. When the trust expires, its assets are either returned to you (or your estate) or passed on to heirs you designate.
Does working with a professional to create a coherent strategy really make a difference?
If you don’t sincerely care about meaningfully supporting charities or causes, charitable gifts are probably not for you. If certain charities and causes are dear to you, however, philanthropy can be a very effective way to do something truly worthwhile for others while doing well for yourself financially.
Taking a do-it-yourself approach to charitable planning and giving is possible — but the probability that you’ll miss something important that could impact your ultimate results is high. High-caliber wealth managers, philanthropic advisers, private-client lawyers and accountants can help ensure you achieve the results you desire, helping you evaluate whether charitable gifts make sense for you — and which options may be ideal for your situation.
The expertise of these professionals is especially valuable in helping you implement your giving strategy. ●
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