The Many Benefits of Gifting

check writing

November 24, 2021

Some say selfish…I say damn straight.

You should be selfish when giving your money. First, you should be able to decide who, where, and how much you donate your money to. You worked hard for it, maybe invested and took risk with it, and now you’re in a position to help others and yes you should be rewarded for it.

Second, you don’t need to get caught up with your company’s program of giving your money to who ever they think is the best option. In an effort to be good corporate citizens, many organizations embark on a program for the masses to get some headlines by capturing the “big number”. Like most things in this world, the intentions are good, but results sometimes left lacking. The cost to administer inside the company go up, usually by hiring an internal philanthropic coordinator, or several of them. Because the pool of funds now grows to a nice number that provides the opportunity for the picture with the giant check, it becomes easier to give the money to another organization so that they can distribute the funds to other 501c3s in the area. And what does this bring? Another layer of expenses. Again, great intentions not well executed.

Third, you should receive a benefit for your giving, namely by way of a tax deduction. Look, don’t make this out to be a bigger deal than what it is. The alternative is you pay the additional money in taxes, and then the biggest bureaucracy of all gets to decide where it goes, and it’s likely not in your neighborhood. 

Now if you do want to give, have the ability to do so, and believe like I do that the tax man does not spend our money that wisely that we should give them any more than we have to, then read on. This is not just about giving, it’s about effective giving.

(Let’s make a better analogy here.) Effective giving is like a teeter totter, there are two sides that need to be in balance.  One side holds the money that you are able to give. A lot of people would love to help but are doing the grind that all of us had to go through at one stage or another. They will be with us one day, but today is devoted to climbing the ladder of life.

The other side of this is finding the area you would like to affect change. Sure, you can as described above, blindly give to United Way or any of the other middlemen of charity and have faith that the organization is able to distribute your funds in the most effective way possible, or you can take the time to determine the need in your community and what steps you can take to aid the problem. 

The first side (should I make it left and right) is on you. I have written a 10 step plan to wealth creation (click here for it), but ultimately, this side of the teeter is on you.

The second side is where I can help and give you some ideas to drastically impact your life, and the life of many others. 

If you’re like most people I talk to who have the means to give, but are not sure where, who, or how, then this is for you. Just because you haven’t found your philanthropic passion yet doesn’t mean you should wait till you do to start. In fact, when you find it, you’ll look back and wished you’d prepared for it. Gone are the days that your name needs to be Gates, Rockefeller, or Ford to start your own foundation, and affect great change. Today you can start your own legacy for around $10,000. They are called Donor Advised Funds. This is basically like your own mini version of the Gates Foundation. They are very easy to start, hardest part is giving it a name, and come with very little cost to start if any at all.

The best part for those of you with the means but not the outlet, is you can donate money now, claim a tax deduction and invest that money till your ready to grant it out to your ultimate 501c3. You can add to it every year, and there is not a deadline in which you need to distribute the funds out of the Donor Advised Fund.

head explosion, mind blown

One of my favorite tax planning tools in contributing highly appreciated stock into the Fund. Say for instance you have a stock with a $10 cost basis, and it’s grown to $100. If you sold it and donated the money, you would potentially get a tax deduction for the $100 but you also paid tax on the $90 of gains. Instead, you could just donate that stock directly to your Donor Advised Fund, getting the $100 of deduction and never having to pay the $90 in gains. Sounds great. Better still, if you loved that stock you donated, you could immediately turn around and buy it again, getting today’s cost basis. Head explosion!!!

Now, everyone’s circumstances are a little different, so we need to evaluate this on a case-by-case basis, however there are a lot of cool tax planning tools available in and around charitable giving. I love win/wins, and I think this is one of the best ones we have available in my space.

Mick Graham, CPM®, AIF®
Branch Manager Raymond James
Financial Advisor Melbourne, F
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Mick Graham, CPM®, AIF® Branch Manager Raymond James Financial Advisor Melbourne, FL

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Mick Graham and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.

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