February 12, 2020
It’s been a rough few weeks in Hollywood. I feel like every time the news has been on there has been a super sad story. We lost Kirk Douglas at the grand age of 103, Kobe Bryant, his daughter and several others in a horrific helicopter crash, and then Shannon Daugherty gave an interview discussing her terminal cancer diagnosis. All of these stories’ effects each of us differently, and like many others, my heart just breaks at the loss or grave illness of young people.
I have never been a fan of the TV show 90210 and have not closely followed Shannon Daugherty’s story. But the other morning I caught a glimpse of the interview she gave with Amy Robach (another young cancer survivor) and she said something that stuck with me. She wanted to “do something that was bigger than herself.” I think a lot of people want to leave a legacy behind, when the time is right, of course. But how often do we stop to think about the things we can do while we are alive that can make a larger impact?
I have done a lot of philanthropic and charitable planning in my career. I have also practiced what I preach with gifts to organizations and causes I believe in. I think that being part of making the world a better place, or helping to further the cause of a mission or project, is becoming a more popular theme with the general population to include young adults. If this is something that appeals to you, here are some ways you can better leverage your assets to enhance how you are able to be part of that greater purpose:
Donate Life Insurance. As we age and accumulate wealth our need for life insurance protection traditionally goes away. If you are older and have a policy from when you were younger that you no longer need, consider donating it to a charity or organization you support. Often times the policy may be paid up, so you are not out any additional out-of-pocket expense. If you are younger and contribute to an annual fund on a reoccurring basis, consider taking that annual gift and purchasing a policy where your money will ultimately give a much larger donation at some time in the future. Your $500 or $1,000 annual donations could purchase a policy with more than 50 – 100 times the value (depending on underwriting) in the form of a death benefit.
Use Charitable Trust Planning. A popular way to leave a legacy is in the form of trust planning. We often see this for people who may have inherited stocks that they cannot sell for tax reasons, or people who wish to create alternative income streams for themselves during retirement. There are two popular trust options – a Charitable Remainder trust (CRT) and a Charitable Lead trust (CLT). Both are irrevocable trusts that would be created by an attorney. There are several tax nuances associated with this type of investment vehicle so you would also want to engage with an accountant. In a remainder trust, the income beneficiary may receive the trust income over a specified period and the donor may add to the trust during their lifetime and amend the names charities as they wish. In a lead trust, the beneficiary may donate the income and also, the charities cannot be altered.
Set Up A Donor Advised Fund. Many communities and investment custodians offer the ability to set-up donor advised funds for people who have a philanthropic intent. If you partner with a local community foundation you would have the opportunity to work with a strategic gift planner to make sure the funds you are donating are used for the purposes intended. You can name specific projects, such as scholarships, or define parameters for certain causes to have your money be donated to. In this instance, you would design and execute a fund contract with the foundation and allow them to administer the funds on your behalf. If you use a third-party custodian for your assets and wish to have more control over fund administration, you can allocate funds to a donor advised funds and make distributions to organizations or projects you wish to support.
With any of these living strategies, there are several factors to consider and you should consult with a trusted advisor to have them help guide you along a path that makes the most sense for your specific situation and objectives. Once your goals are established, your advisor should then work with your outside counsel to implement your plan. Legacy gifting, or giving assets away at your death, is by far the easiest way to be philanthropic. But, as Kathy Calvin (former CEO of the UN Foundation) once said, “Giving is not just about making a donation. It’s about making a difference.” No matter which way you choose, you will become something bigger than yourself. The question becomes which view do you prefer?
Iris Buczkowski is the founder of Birch Wealth Management (birchwealth.com). Original content provided by Iris is for educational purposes only and should not be construed as investment advice.