Philanthropy

The Power of Giving the “Right” Assets to Charity, Part 1

You can donate appreciated marketable securities to your favorite causes in lieu of cash —don’t miss out on the tax benefits you deserve.

Key Takeaways:

  • Cash may be the worst asset you can give charitably.

  • Charitable gifts of appreciated marketable securities can provide dramatically enhanced tax benefits.

  • Real estate and privately owned businesses may offer the greatest overall charitable tax benefits.

 

Charitable gifting of non-cash assets can be especially advantageous in high-income-tax states such as New York, Vermont, New Jersey, Oregon and California.

What is the single biggest mistake that generous and affluent people make when it comes to planning their charitable giving? Giving exclusively in the form of cash.

When it comes to charitable giving, most people think about writing a check or dropping some cash in the Salvation Army’s red kettle at Christmas. This mindset can be unfortunate—and costly. Non-cash assets can be a much better way to give.

First, there are generally enhanced tax benefits to giving certain non-cash assets such as marketable securities, real estate and privately owned business interests, thus enabling you to pay less in taxes and/or give more to your favorite charities and causes.

Second, non-cash assets are where the majority of your wealth probably resides. According to IRS statistics, of all the giving that is done in the United States each year—about $380 billion—80 percent of all giving in the U.S. is simply made in the form of cash. That means only 20 percent of gifts are made in the form of non-cash assets, much of which include tangible personal property such as clothing, appliances, books, etc. that are gifted to organizations such as the local Goodwill.

That’s a huge lost opportunity.

However, if we look at the cumulative composition of wealth owned by families, cash represents less than 10 percent. Therefore, much of the wealth comprising the other 90 percent provides excellent opportunities for charitable giving, but too often is never considered.

Why cash is not king

As mentioned earlier, cash is often the least advantageous asset to give charitably. True, you generally receive a charitable income tax deduction, which may significantly reduce your tax liability. But, certain types of appreciated non-cash assets—such as marketable securities, real estate and privately owned business interests—may provide double tax benefits by securing the same or similar charitable income tax deductions, and helping you avoid capital gains tax that would otherwise be triggered upon the sale of such assets.

A charitable gift of cash is eligible for a charitable income tax deduction against ordinary income tax rates up to 60 percent of your adjusted gross income (AGI). This can be a very significant benefit and incentive for you to give charitably. For example, you can save up to 37 percent on cash contributions to charities for federal tax purposes and may save additional taxes at the state level. In high-income-tax states, with rates as high as 13.3 percent (California), the highest-income taxpayers may be paying almost 50 percent of their income in combined federal and state taxes. In such situations, you may essentially be receiving a matching dollar-for-dollar contribution from the federal and state governments for your charitable contributions. For every dollar you give, you save as much as 50 cents in taxes.

Clearly, our federal and many state tax codes provide generous incentives and benefits to taxpayers who are generous.

However, even greater tax benefits can be secured by giving certain appreciated assets instead of cash. Consider a taxpayer in the highest federal income tax bracket (37 percent) in a state with a 5 percent income tax rate—a 42 percent total tax rate. He’s considering making a $250,000 charitable gift in support of a charity that is building a hospital in Africa. If he simply writes a check for $250,000, he’ll save $105,000 in taxes.

The power of giving marketable securities to charity

Now, instead of writing a check, suppose he selected some of his most highly appreciated stocks from a marketable securities portfolio, gave the stock to charity, and then took the cash he otherwise would have given to charity and repurchased the same stocks (or different investments if desired). If the stocks selected were originally purchased for $100,000, upon sale he would recognize $150,000 in capital gains. Taxes owed upon sale would include a federal capital gains tax of 20 percent, a state income tax of 5 percent and the Obamacare tax on net investment income of 3.8 percent for a total tax rate of 28.8 percent. On $150,000 of gain, this amounts to a tax liability of $43,200.

However, by giving the stock to charity and allowing the charity to sell the stock, the $43,200 of taxes otherwise due upon the sale would be completely avoided. He would receive the same charitable income tax deduction of $105,000 as he would have by giving cash.

So, a $250,000 cash gift would have cost him $145,000 due to the tax savings from the charitable income tax deduction, while a $250,000 gift of appreciated marketable securities would cost him only $101,800. He would save $43,200 more in taxes by simply giving stock instead of cash. The charity ends up with the exact same amount of funding, though some of you may decide to give some (or all) of this additional tax savings to charity as well—for which you will receive an additional charitable deduction. It’s important to keep in mind that gifts of non-cash assets to public charities are deductible up to 30 percent of the giver’s AGI, compared to cash, which is deductible up to 60 percent of AGI (50 percent if a giver makes a combination of both cash and non-cash assets). Of course, gifts exceeding these thresholds may be carried forward to future tax years for up to five additional years.


Conclusion

Charitable giving in general, and gifts of non-cash assets in particular, can help you mitigate your tax burden significantly while doing more to support the causes you believe in. In Part 2, we’ll explore the value of giving real estate and privately owned businesses.

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, and

  • 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 regs.

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.

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.

 

 

Diversified Asset Management, Inc. - 2019 1st Quarter Newsletter

New Year's Resolution: Review Your Estate Plan

Before you ring in another New Year, you may want to take time out of your busy schedule to observe another annual ritual: a review of your estate plan. If you're like most people, you probably stuck your will and other documents in a drawer or a safe deposit box as soon as you had them drawn up-and have rarely thought about them since. But changes in your personal circumstances or other events could mean it's time for an update.

Good Riddance To The Alternative Minimum Tax

Perhaps the most despised federal levy is the alternative minimum tax, which Congress passed in 1969 to prevent the loophole- savvy ultra-wealthy from shortchanging Uncle Sam.

Over the years, AMT's reach expanded to include households with more than $200,000 in AGI (adjusted gross income) annually and two- earner couples with children in high- tax states.

Reduce Your Widow’s Tax Bill Materially Annually

This is a good time to consider converting a traditional individual retirement account into a Roth IRA. Tax rates are low but unlikely to stay that way. Here's a long- term strategy that takes advantage of the current tax policy and economic fundamentals - a tax-efficient retirement investment and avoids a new twist in the Tax Cut And Jobs Act that penalizes widows.

Giving More to Loved Ones- Tax Free

While it may be better to give than to receive, as the adage contends, both givers and receivers should be happy with the new tax law. The annual amount you can give someone tax-free has been raised to $15,000, from $14,000 in 2017.

Protect Yourself Against Spearphishing

The Russian conspiracy to meddle in the 2016 presidential campaign relied on a common scam called "spearphishing." While the history-making scam may sound sophisticated, this form of digital fraud is running rampant. Anyone using email is likely to be attacked these days. Here are some tips to protect yourself.

Sidestepping New Limits on Charitable Donations

If you think you're no longer allowed to deduct items like charitable donations on your income tax return, think again.

The new tax law doubled the standard deduction, slashing the number of Americans eligible to itemize deductions from 37 million to 16 million.

To read the full newsletter click here.

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.