There is no one-size fits all strategy for gifting or transferring assets. Make sure your advisors know your unique needs and motivations
Before you can ask your advisors for help, take some time to think about what’s most important to you and your family about giving back.
Sometimes volunteering time is more fulfilling than donating money. Make sure you and your advisors are in sync when it comes to mapping out your philanthropic and life goals.
There is no magic formula for deciding how much to donate vs. how much to pass on to your heirs. A skilled advisor can help you set the appropriate criteria.
Giving time and money to causes you support is one of the most powerful freedoms that wealth provides. But, just showing up to volunteer without a plan or just writing checks when the pleas flood into your mailbox, can leave you feeling unfulfilled with a trail of missed tax-saving opportunities in your wake.
Giving can be done effectively at any age, but as Boomers age out of careers, many are finding fulfillment in giving back to their community by volunteering. Also, with children typically grown and out of the house, Boomers generally have more capacity to give. If that sounds like you, use this period to begin to convert dormant assets into planned gifts and also to help increase community involvement.
One of the key findings in the latest U. S. Trust study is that affluent Boomers want to give more than they currently do, but they need help discovering what they are passionate about. A good advisor knows how to tap into your passions and values by asking the right questions about your financial and life goals—on an ongoing basis.
No two people (or families) have the same motivation to give. It’s important that your financial advisors don’t apply a one-size-fits-all approach to your philanthropic goals.
What research says about how and why we give
Both Fidelity Charitable and U. S. Trust conducted extensive national surveys about charitable giving trends among the affluent and soon-to-be affluent. Here are just a few of the ways that successful people differ when it comes to giving back:
Fidelity found that women tend to be more committed and strategic in their giving. They tend to volunteer more time, ask more questions about the financial aspects of their gifts and generally feel that giving to charity is a very satisfying aspect of having wealth. According to Fidelity, women tend to be more spontaneous; captured by a cause, a movement, or an empathetic response.
Parsing even further, Fidelity research indicated that Millennials seemed particularly motivated to give more than just money to the causes they believe in. Why these reactions occur is not entirely understood, but industry observers see both Millennial men and women wanting to see results and to measure the impact of their giving. The younger age cohort also seems to desire hands-on experiences and involvement, more so than other groups, sometimes even leading their own efforts ala Zuckerberg/Chan of Facebook fame.
Much has been written about how Millennials are re-shaping giving and our firm works very hard to understand the different populations we serve.
Further, different gifts make sense at different ages. In fact, some younger donors may not even qualify to implement a Charitable Remainder Trust (CRT)—a common tax-advantaged way to give to charities and beneficiaries--because the trust won’t qualify under the 10 percent remainder test.
The 10-percent minimum remainder value test says that all CRTs must have a remainder value that is equal to, or greater, than 10 percent of the funding amount. If a CRT fails the 10 percent test, it does not qualify as a charitable trust and loses all the favorable tax treatment that a qualified CRT enjoys.
In terms of giving their time, U.S. Trust found that HNW volunteers are highly motivated to respond to needs (51% agree) and by the belief that their service makes a difference (49% agree). Other important motivations include: Personal values or beliefs (39% agree), concern for a particular cause or group (32% agree), and concern for the less fortunate (28% agree). Researchers found that women were significantly more likely than men to indicate that “responding to a need” is a top motivation for volunteering
Researchers also found that women and younger individuals were significantly more likely than other cohorts to say that education was a top public policy concern of theirs and they were more likely to express confidence in a nonprofit organizations’ ability to solve societal or global problems. According to U.S. Trust, African Americans were also more likely than other groups to give to religious organizations and both women and African Americans of both genders were more likely than other groups to give to women and girls’ causes and/or organizations. U.S. Trust also found that women and younger donors were more likely to give to causes that support animals and K-12 education. Younger individuals were significantly more likely to make giving decisions independently of their partners/spouses. Finally, younger donors were significantly more likely than other groups to donate online or through crowdfunding.
If you don’t agree with all of the generalizations about giving patterns above, that’s okay. Just make sure your advisors do NOT assume you want to give along the lines of the findings in these widely cited reports about philanthropy and volunteering.
If philanthropy is truly one of America’s great freedoms, then it is incumbent upon your advisors to help you best enjoy that freedom. Make sure your advisors have a deep understanding of your life goals, family values and causes you support so they can help you structure the smartest way for you to give with the maximum impact. Contact us any time if you or someone close to you has questions about planned giving or legacy building ideas.
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 email@example.com.
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