Charity

This Powerful New Tax Strategy Is a TRIP

Key Takeaways

  • Total Return Pooled Income Funds (TRPIFs) can be powerful tools for gifting, estate planning and minimizing taxes.

  • TRPIFs allow you to make gifts of cash, publicly traded stock, closely held C Corps, unleveraged real estate, tangible personal property like art, cars, antiques and even LLC interests.

  • TRPIFs have many similarities to charitable remainder trusts, but it’s important to understand the differences. Always consult with your financial advisors before signing on the dotted line.

Now that your tax returns are hopefully completed I thought I’d share with you one of the best kept secrets in estate planning and tax mitigation. It’s been around since 1969, but most successful taxpayers and their advisors still don’t know about it.

How about a strategy that completely eliminates capital gains tax, provides a gigantic income tax deduction, distributes all its income (maybe for three generations) and is completely legal? Sounds too good to be true. Well it’s not. Here’s why:

The Pooled Income Fund (PIF), created in code section §642(c)(5) in 1969, and long the red headed step child of planned giving tools, has gone “beast mode.” Thanks to a perfect storm of low interest rates, technology and charities now understanding the need to be responsive to CPAs and other professional advisors (and donors) has ushered in a new type of PIF called the Total Return Pooled Income Fund (TRPIF). This vehicle is one of the most flexible, powerful and thought-provoking planning tools you can deploy.

Yet not many advisors and philanthropically-minded individuals know about them.

With a TRPIF, you may make gifts of cash, publicly traded stock, closely held C Corps, unleveraged real estate, tangible personal property like art, cars, antiques and even LLC interests. Income can be paid for one, two or three generations of income beneficiaries if they’re alive at the time of the gift. Competitive TRPIFs pay out all rents, royalties, dividends and interest as well as all short-term gains and up to 50 percent of post-gift realized long term gains.

Charitable beneficiaries are decided on by the donor, not by the TRPIF trustee. That means the donation goes to any charities the family feels are worthy.

If you know a little bit about CRTs you’ll find that TRPIFs are similar. However, you and your advisor should be aware of some important differences. For instance, a donor can’t be the trustee of his or TRPIF as they can with their CRT. That may be a drawback. However, young donors (couples in their 40s), for instance, can’t even qualify for a CRT as they won’t meet the 10 percent remainder test. With a TRPIF, there is no such test. That means an income beneficiary can be any age. The charitable income tax deductions of a TRPIF can be greater than a CRT’s by a magnitude of four or five times. The methodology by which a new TRPIF (less than three years old) calculates its income tax deduction is governed by a complicated formula based on the ages of the beneficiaries and the assigned discount rate (1.4% for 2018). This is what produces the large deductions.

Conclusion

From a planning standpoint, TRPIFs can allow you much more planning flexibility than many other trusts. When selling a low basis security, for instance, it may be possible to leave more shares in the seller’s hands and still pay no tax because of the larger income tax deduction. And, low-basis assets are only one of the many opportunities that you may applicable to the TRPIF strategy. There are only a small handful of charities offering this new, competitive, Pooled Income Fund. Therefore, it’s important that you ask a lot of pointed questions to the charity.

 

DISCLAIMER: The views expressed in this article do not necessarily express the views of our firm and should not be construed as professional tax advice.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

 

 

Future of Charitable Planning

Key Takeaways

  • Studies show that one in four affluent people (23%) consulted with at least one advisor about charitable donations last year.

  • A confused donor is an unhappy donor.

  • Always review your goals and check with your advisors before whipping out your checkbook

 

Generally planned giving CRTs (charitable remainder trusts) and CLTs (charitable lead trusts) immediately come to mind. We seldom think about charitable giving in the context of non-charitable trusts, but according to Al W. King III, co-founder and co-CEO of South Dakota Trust Company, the amount of wealth that high-net-worth individuals own in trusts is surprising.

  • “The top 1 percent currently have 38 percent of their assets in trusts, and

  • The next 9 percent have 43 percent of their assets in trust,” observed King.

Some families intentionally incorporate charitable planning and provisions into trusts they create. You can too by:

  • Setting a target value for the trust that will be available for family members with any growth and appreciation above that amount being directed to charity

  • Supplementing distributions to family members who work for a charitable organization

  • Matching beneficiaries’ personal charitable contributions

Families are also discovering strategies to incorporate charitable goals and objectives into trusts that were initially created with no charitable intentions. This is often achieved by changing the trust’s situs (legal jurisdiction), reforming or modifying the trust, or “decanting” in states with flexible decanting statutes that allow trustees to change the terms of an otherwise irrevocable trust, which may include adding discretionary charitable beneficiaries.

Common trusts and trust strategies that are increasingly incorporating charitable goals, objectives and planning include:

  • Dynasty trusts—Because of the long-term nature of these trusts, families often desire to make provisions and provide flexibility for both family and charitable goals and objectives.

  • Existing non-charitable trusts—Irrevocable trusts can sometimes be reformed or modified to allow for distributions to charitable organizations. Depending on the applicable state law governing the trusts, it may be necessary or helpful to change the situs of a trust to a state that has more flexible trust decanting laws.

  • Purpose trusts—Some trusts are created for a specific purpose, often to care for “something” rather than for “someone.” For example, a trust may be created to care for a pet; to maintain family property such as antiques, cars, jewelry or memorabilia; or to maintain a family residence or vacation home. Once the pet dies or the property is sold or otherwise disposed of, the remaining assets might pass to charity.

  • Health and education exclusion trusts—These trusts provide support to beneficiaries over multiple generations for certain education and health-related costs. As long as distributions to cover such costs are made directly to an educational or health care institution, then gift taxes and generation-skipping transfer taxes can be avoided indefinitely. However, in order for the vehicle to qualify as a health and education exclusion trust, one or more charitable beneficiaries must have a substantial present economic interest.

Laura Peebles, former tax director of the national office of Deloitte and a consultant to Charitable Solutions, shared these nuggets of wisdom gained from nearly four decades in the charitable planning arena:

  • The donor’s charitable intent determines whether a gift is made. However, the tax benefits can influence the fulfillment of the giver’s charitable intent in terms of the asset that is ultimately given, when the asset is given, and the manner and structure through which the asset is given.

  • A confused donor is not a happy donor.

  • Some tax aspects of charitable giving don’t have good answers, some don’t have inexpensive answers and some don’t have any answers at all.

Charitable giving with retirement benefits

According to author and attorney Natalie Choate, an estate planning and retirement benefits consultant, advisors and many charitably inclined people are well-aware of the substantial tax advantages of giving retirement benefits to charity, particularly in a testamentary capacity. In addition to avoiding any estate tax liability that might otherwise apply, the charity also avoids tax on “income in respect of a decedent” that would otherwise result in the imposition of income tax on retirement benefits received by the owner’s children or other heirs.

In some cases planning charitably with retirement benefits can be quite simple; for example, if a charity is named as the sole retirement plan beneficiary. However, other planning scenarios can involve complex issues and obstacles that must be carefully navigated. For instance:

  • When there are charitable and non-charitable beneficiaries of the same plan

  • When using formula bequests in beneficiary designations

  • When leaving retirement benefits to charity through a trust or estate

  • When using disclaimer-activated gifts to charity.

 

Conclusion


A recent study by U.S. Trust and the Philanthropic Initiative found that one in four wealthy individuals (23%) consulted with at least one advisor about charitable donations in the past year. In addition, nearly 70 percent of charitable remainder trust donors reported learning about the planning vehicle from their advisors.

These trends indicate a growing opportunity for investors and their advisors to have a regular dialogue about charitable methods that meet personal planning goals. Call us at 303-440-2906 if you or someone close to you would like to incorporate a strategic and regular giving strategy into your overall financial plan.



Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Start Your Own Charity

Don’t let a lack of available charities stymie your charitable passions (and tax savings opportunities)


Key Takeaways:

  • If you are passionate about a particular cause and there is no charity that supports it, you can start your own charity.

  • Charities can be set up to support overseas causes as well.

  • Self-started charities can be especially beneficial for those planning to donate over $10,000.

 

Let’s say you are at the stage in life when you want to start giving back in a more consistent and meaningful way. The only hurdle: There is no existing charity that supports the exact causes or initiatives you feel most strongly about. In the past, you’d have to take your checkbook elsewhere.

The good news: With the right planning, you can start a charity to support exactly the causes you care most about--anywhere in the world. There are many charities that are registered in the U.S. that support overseas causes. For instance, Help for Animals India, a charity based in Seattle, was started to help the animals of India. Many alumni groups also set up nonprofit organizations to support the educational institutes at which they studied.

Having said that, while such nonprofit organizations can be formed, the ultimate use of funds is determined by the board of trustees. Under U.S. rules, a domestic charity can’t be committed to give to a particular foreign organization. It can be formed with the intention of supporting a specific organization, but the U.S. board of trustees must make an independent determination that the overseas organization in question qualifies under U.S. rules.

So what does it take for you to set up your own U.S.-based charity, and what should you look out for?


Types of organizations that qualify

According to IRS regs, an organization may qualify for exemption from U.S. federal income tax if it is organized and operated exclusively for one or more of these purposes:

  • Religious.

  • Charitable.

  • Scientific.

  • Testing for public safety.

  • Literary.

  • Educational.

  • Fostering national or international amateur sports competition.

  • The prevention of cruelty to children or animals.

Examples include:

  • Nonprofit old-age homes.

  • Parent-teacher associations.

  • Charitable hospitals or other charitable organizations.

  • Alumni associations.

  • Schools.

  • Red Cross chapters.

  • Boys’ or girls’ clubs.

  • Churches.

To qualify, the organization must be a corporation, community chest, fund, foundation or other entity with articles of association. A trust is a fund or foundation and will qualify. However, an individual or a partnership will not qualify.

Set-up process

Step 1: The basics
The basics include:

  • Identifying a cause.

  • Selecting a name and checking with the state corporation office to see whether the name is available.

  • Formulating the mission statement.

Step 2: Incorporation
You and your advisor(s) will need to draw up articles of association and bylaws. The organization must be set up under a state not-for-profit statute. Experts strongly recommend using an attorney experienced in the formation of nonprofit organizations to do this. File the articles of association with the state corporation office.

Step 3: Tax formalities
First the charity will need to get an employer identification number (EIN). This ID is similar to an individual’s Social Security number.

Then you must apply for federal and state/local tax-exempt status as a private foundation. You will also need to fill out Form 1023 or 1024, depending on the type of organization you wish to form. This is by far the toughest and most expensive part of the process. The form runs up to 26 pages with questions that require detailed answers. All the correct documents must be attached to the application to make sure the process runs smoothly.

The user fee per application is $400 for organizations with gross receipts that do not exceed $10,000 annually over a four-year period and $850 for organizations with gross receipts that exceed $10,000 annually over a four-year period.

Further, it takes about a year to be approved. The organization must figure out how to operate while waiting for approval from the IRS. Most organizations say, “IRS tax-exempt status is pending.” The donor shouldn’t claim a tax deduction until IRS status is approved. Also, the organization needs to understand the documentation rules it must follow when other people give contributions.

Conclusion

Again, the upfront time and effort might be best for those considering donating amounts upward of $10,000. There is also an ongoing commitment of time and expense to comply with annual filing requirements at both the federal and state levels. Make sure you and your advisors have all your paperwork in place before getting started. But, most who’ve gone through the process will tell you it’s worth the effort to get it right from Day One. Once you do, you can focus your energies on what you do best—funding causes you believe in, not wrestling with tax rules and regulations.

Contact us any time if you or someone close to you is thinking about taking their philanthropic game to the next level.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Life Never Stops Changing

Neither do your giving and financial decisions


Key Takeaways

  • The most impactful gifts are often the result of personal tragedy or triumph.

  • We spend so much of our lives in the wealth accumulation phase that it’s easy to forget the positive impact that our money can have on others.

  • An astute advisor not only helps you optimize your investments, cash flow and wealth protection, but your legacy as well.

Meetings with your financial advisors bring to mind thoughts of balance sheets, net worth statements, stock options, investments, insurance policies and employee benefits. While these documents tell your various advisors what you have, they don’t tell them who you are, what you want or what truly motivates you.

I’ve learned over the years that after gaining a client’s trust, and after carefully opening the door to their personal side, we find out what truly makes them tick and what shapes the lens from which they see the world.

Often we come across tremendous stories of tragedy and triumph (or both). These are pivotal moments in an individual’s background – typically turning into a focus for future action. And sometimes that action is philanthropic – one that highlights the triumph or attempts to solve the problem that caused the tragedy.

For instance, a daughter’s death at the hands of a drunk driver left a family with such a need for a voice that Mothers Against Drunk Driving (M.A.D.D.) was brought into existence. Today, M.A.D.D. is the largest advocacy group in the country focused on preventing individuals from driving while intoxicated – its existence motivated by a heartbreaking loss.

Everyone deals and reacts to adversity in their own way – we must understand and accept that.

While tragedy is one side of the equation, there are also triumphs to celebrate – easier to discuss and just as big a motivation. Many years ago I worked with an extremely wealthy individual who kept telling me that he wasn’t charitable and that he didn’t really care about much of anything. He went on at length about how he was “self-made” and had come from nothing.

It wasn’t until when he revealed that he’d been raised in an orphanage that I realized how critical the orphanage had been to his upbringing and success. Today, that orphanage is endowed by a large gift by my client. It not only represents his personal victory, but an acknowledgment to the people who helped him triumph over his circumstances.

For some, it may be a coach, teacher or program that launches a successful athletic or academic career. It may be the person who helped you discover that you were good at math or the person who took the time to elicit your musical genius when no one else could see it. By doing so, we may discover a desire to make a gift, to return the favor, to pay it forward.

Life Never Stops Changing

Change is an inevitable part of life. We start new jobs, we send kids off to college, we lose a parent or gain a grandchild. Change can be daunting – but viewed through a different lens, it presents opportunity to raise the important questions about philanthropy.

In many circumstances, philanthropy can be the best solution to the change that’s taking place – if only we think to ask our advisors how.

Let’s look at some major life changes and see where you and your advisor might discuss gift opportunities at the appropriate time.

Suppose you are approaching retirement. Let’s assume you are the major breadwinner of your household and you are also hoping to downsize. As ordinary income (your paycheck) ceases, the desire to convert dormant or low yielding assets into supplemental income normally increases. This may be an opportunity to reposition low-basis assets into a pooled income fund (PIF), a charitable remainder trust (CRT) or even a gift annuity. Furthermore, the downsizing might free up additional capital with which to consider similar split interest gifts.

The birth of a grandchild may inspire a fund for college education. You can go the traditional 529 route or consider certain types of CRTs that turn into income in 18 years.

Widowhood is another significant life change that triggers emotional and financial upheaval, and often changes to family dynamics. If your late spouse was the main financial decision maker in your relationship, you may feel lost and frightened about the future. Perhaps the best solution is simplification and consolidation – taking multiple accounts and creating one large gift annuity, charitable trust or pooled income fund that delivers quarterly income. You should also examine gifts such as life estate agreements – which relieve the children of dealing with a house they usually don’t want anyway.

A serious illness is another major life change that brings a host of emotional and financial worries. But as you and your family delve into researching your loved one’s illness and treatment options, it can also motivate giving to support further research into curing or ameliorating that illness or disease.

Change is everywhere and change is constant. While some changes go unnoticed, others represent a prime turning point in our lives. We spend so much of our lives in the wealth accumulation phase that we sometimes forget the power our wealth can have to make lives better for others.

Conclusion

Just as an astute advisor can help you optimize your investments, cash flow and wealth protection strategies, he or she can also help you optimize the power of your giving.

All you have to do is email us or give us a call.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

 

Teaching Kids and Young Adults about the Power of Giving; Part 2

Teaching Kids and Young Adults about the Power of Giving

You can have this discussion any time of year. Second in a series

 

Key Takeaways

  • Philanthropy can help smooth family friction is there is a common cause they all support.

  • Empower the next generation by letting them make charitable decisions on their own. It’s a very effective way of helping kids and young adults mature.

  • Even families that don’t get along well can find ways to get everyone involved in the giving process.

In Part 1, we discussed the importance of introducing children to giving and re-introducing young adults in your life to philanthropy as well. Giving not only supports worthy causes, but empowers young people to make financial decisions and helps sustain family values.

But, not all families are in sync about many things (big surprise), including the causes they support. Does that mean they shouldn’t give? Of course not.

Even if there is significant disharmony in an extended family, most will rally behind a cause with only a few outliers not participating. In those situations, it’s important to find something that is a passion for the ones who are out of the center--or who at least feel like they’re out of the center. If we can find an alternative cause while maintaining the family’s primary values and goals, it brings the family together and helps many deserving people in the process.

That’s because the children who always felt like they were on the outside, suddenly feel like they’re on the inside, and it’s helping everybody. What families should NOT do is say: “We’re just going to take a vote and the majority rules.”

When that happens, the person on the outside, or the little kids [who] are on the outside, will feel even more disenfranchised. But if somehow we can focus on something that they’re really interested in, you can bring harmony back into the family.

Three things are really important when a family rallies around philanthropy:

1.      Philanthropy, in and of itself, can help the family communicate and heal some of the old stuff that they haven’t been able to heal before.

2.      It’s okay if a family has a main philanthropic mission that not everybody agrees with.

3.      If you allow the next generation the freedom to select things that they’re interested in on their own, you’re empowering them. By letting them know that you believe in their ability to make a good decision. It’s a very effective way of helping young adults mature.

Sometimes as you get more into the “for what purpose” questions—why is it that you’re really into this?—you’ll find that they have some of the same basic targets even though they’re doing it different ways.

I was at a professional conference recently and one of the speakers was a young woman whose great-grandfather owned the patent for barbed wire? Her family had a large foundation, and each generation received a certain amount of money to give away. As you can imagine, the kids were giving a lot of money to a very liberal think tank organization and grandma was giving a lot of money to a very conservative think tank organization. That was causing friction because grandma was just negating them. But, as they started talking about their conflicting goals, both generations came to understand more about the other generation’s goals and values and why they supported the organizations they did.

Long story short, the liberal and conservative sides of the family still have their differences, but now the family foundation sponsors a debate between the two think tank organizations they support. Sometimes if you get deeper into what is behind the passion, there may be some synergy that we didn’t realize existed.

A lot of times we don’t take the time to really understand the other person’s reason, and when we understand the reason, we find it’s a similar reason that we have except the way the other person is approaching the problem is different from our approach.

Conclusion

Whether a young person in your family feels like they’re in the mainstream, or an outlier, the more you can empower them to make their own giving decisions, the more likely they are to instill those values into their own children and the generation that follows.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

 

It’s Never Too Early to Teach Kids about the Power of Giving

…..And adult children are never too old to relearn. First in a series


Key Takeaways:

  • Listening and communication are keys to successful giving.

  • Children as young as five or six can be introduced to the power of giving.

  • Philanthropy can help bring families closer together.

  • It’s okay if a family has a main philanthropic mission that not everybody agrees with.

 

The concept of “philanthropy by design” is gaining traction as charitable organizations increasingly understand that successful giving starts by tapping into the donor’s passions—not the funding needs of the organization.

Let’s talk about the next generation a little bit and how to get the kids involved. Where do you start and at what ages, and then how do you step up as they get older?

Children can start giving at any age. It doesn’t have to be formalized philanthropy. A client of ours had a child who started giving when he was five or six. The son was playing T-ball and our client, his dad, was trying to teach his son the concept of philanthropy and helping other people. He said, “I want you to think about what we can do to help someone else.”

The boy had a kid on his T-ball team who didn’t have a mitt, so he was borrowing a glove from everybody else. Our client and his son went out and bought a glove and gave it to the kid. Just that concept of helping someone else and getting the adrenaline rush of seeing the difference you’re making in somebody’s life can start really early.


Stake your kids so they can set their own charitable goals

Next, giving kids a small amount of money and letting them decide what to do with it can be very powerful and rewarding. I had another client who started this practice when his kids were about 6 and 8 years old. Each child received $500 to give away, not to spend on themselves. They had to do research on the worthy causes and they had to bring their intended organizations to the family “grant committee,” which was mom, dad, grandma and grandpa. They talked about it Christmas afternoon or the day after Christmas.

 

Children have things that they’re concerned about. One of my clients had a son who was 15 when he started talking about giving. The boy was concerned that some kids at his school couldn’t hear well and that it was affecting their grades. The teen actually created a nonprofit and went to the audiologists in town and got them to volunteer to give [hearing] exams to the affected kids. Then they hearing experts got the teen in touch with the people who sell hearing aids for school age kids.

The point is, you don’t have to wait until your kids are old enough to understand money from the standpoint of having a part-time job or having to pay for some of their own expenses like gas, movie tickets or trendy clothes. No, they don’t have to be 15, 18 or even 20 years old. You can start at a much younger age, and the earlier you start, the more they’ll start identifying things that are important to them. By the time those children reach their teens, they can be pretty serious about giving.

So, what happens when Generation Two in a family is already in their 20s or maybe even their 30s?

If they’re in their 20s and 30s, those are kind of interesting years because normally they’re just getting started with adult responsibilities like budgeting and paying rent, utilities, credit cards and other bills. It’s almost like you’re starting over with them. It’s like when they were little and you were giving them small opportunities to make a difference. But it makes it easier in terms of the family situation because there are limited resources, and so together they can make a bigger impact than they would have been able to do separately.
So, if as a group, if there are two or three siblings, they can decide together about a couple of things that they really want to make a difference on, then by pooling their money they can do something that will really make a difference rather than just give a little bit to different charities. In many ways, you use the same process with those in their 20s and 30s that you use with teens.


Conclusion
It’s never too early to teach your kids and grandkids about the power of giving and it’s never too late to remind your adult children about philanthropy. Even if their current financial situation makes it difficult to give a lot—the act of giving will make them feel better, will help those in need, and will set a great example for their own children.

By the way, you can give all year round, not just during the Holidays and before end of year tax deadlines.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Flash Report - Five Reasons to Make Philanthropy a Family Affair.

Getting your family involved in charitable giving can create a powerful legacy

A growing number of successful people have a strong urge to “pay it forward” by financially supporting causes and organizations that are near and dear to their hearts.

Many of you already make regular and sizable charitable contributions. And we know from research that one key reason successful people like you want to become even wealthier is to help other people increase their own success and advance in the world.

But have you gotten your family involved in philanthropy? If not, you could be missing a truly massive opportunity to teach your children and other loved ones about smart financial decision making and impart key financial values that can guide them throughout their lives.

Round up the kids

If you’re like many people we work with, your deepest financial concerns are focused on taking care of your family and ensuring they enjoy lives that are financially stable and financially responsible.

 

Click here to read more:

Five reasons to Make Philanthropy a Family Affair-Flash Report

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.