The Season of Charitable Giving

The year is almost over, and it’s time to make a few important decisions before 2020 begins. According to Cerulli Associates, a research firm that specializes in global asset management, a significant wealth transfer is expected to occur over the next 25 years. During this time period, an estimated $68 trillion will transfer from 45 million U.S. households to heirs and charities.

Naming your kids, nieces, nephews or other family as heirs is natural. It’s projected that Generation X will replace Baby Boomers as the wealthiest generation within 25 years. Some Boomers will leave their wealth to their kids outright, some may attach strings (trusts), while others hesitate to name their kids as sole heirs. These donors ask themselves, “how much is enough?” or, “we’ve invested in education and training—the kids will make their own way in the world.” And some fear the “Shirtsleeves to shirtsleeves in three generations” curse – the Scottish version goes “The father buys. The son builds. The grandson sells. And his son begs.” These types of discussions are not uncommon. Warren Buffett plans to “Leave them enough so they feel they can do anything, but not so much they could do nothing.”

While some people’s future may be left to their family, many find their gifts have great value with their alma mater, church, community health center and other favorite charities. As we find ourselves in the season of giving, we’re sharing some tips to plan for your next charitable donation.

Why Do People Give?

  • It makes them feels good
  • Their personal beliefs – making a difference, helping their fellow man
  • Personal experience – they or a loved one had a life-changing experience
  • Image and recognition – a way of being remembered
  • Reduce tax liability

There are also reasons why people don’t give. Maybe there are simply too many choices, they lack the funds, or they’re saving the money for the future or an emergency.

There are approximately 1.5 million non-profits in the U.S., so how do you pick one to donate to? What can you do to feel confident that you won’t run out of money in your retirement?

Charitable Giving Planning Tips

You can take better care of others once you’ve taken care of yourself. Before making a donation, meet with your advisors and implement a plan for a well-funded and secure future. This includes having contingency plans for life’s surprises.

Questions to Consider About Where to Give

  • What issues are important to me, and where do I volunteer my time?
  • How do I structure my giving (budget and means)?
  • How do I find and vet organizations?
  • Is it time to expand or refine my giving?

Year-End Giving Strategies

  • Get started early. Be aware of year-end deadlines from the Internal Revenue Service (IRS), charities or financial institutions. Plan ahead for illiquid assets, operational requirements, holidays, weather delays and vacations.
  • Review your appreciated assets – they can be good candidates for funding outright gifts, donor-advised funds and other gifting vehicles by avoiding or minimizing the capital gains tax.
  • Qualified Charitable Distribution (QCD) – individuals 70-years-old or older may contribute some of their Individual Retirement Account (IRA) to charity. The distribution goes directly to the qualified charity and can count towards satisfying your required minimum distribution.
  • Consider naming a charity as a beneficiary of your IRA. It could be more advantageous than naming them as a beneficiary of your trust.
  • Consult with your tax expert – share your intentions with your Certified Public Accountant (CPA) or enrolled agent and seek their advice in advance. Sometimes it’s better to make your donation in January rather than December because you aren’t planning to itemize, you’ll have more donations or taxable income next year, etc.

Leo Rosten says, “The purpose of life is not to be happy – but to matter, to be productive, to be useful, to have it make some difference you have lived at all.” Money can be a tool to help you have an impact on the things that matter most.

Secure your future wisely.

About Brian Loy

Brian Loy writes insightful and inspiring articles about the ever-changing world of personal finance and the global trends that affect the risk and return on investments and shape the financial- and retirement-planning process.
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