Heart Happiness by Iris Buczkowski
It has become amazing to me that the minute Halloween is over I find myself watching Christmas commercials, scrolling through a never-ending list of holiday movies I can watch, all while laughing at the memes of the Thanksgiving turkeys telling Santa Claus to sit and wait for his turn. Every year I get older, I feel like each year goes by faster and faster. I am starting to receive annual appeal letters from various agencies looking for holiday donations, and while annual giving is critically important to fulfilling short-term needs, I, myself, have always gravitated toward a longer-term vision. Lately though I have built a plan to do both because that is what makes my heart happy. 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, has become a more popular theme among 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 named charities as they wish. In a lead trust, the beneficiary may donate the income, and 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 donor advised funds and make distributions to organizations or projects you wish to support.
You should definitely keep your checkbook handy for the annual appeals you like the most. The holidays are the perfect time of the year to give back! 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. Kathy Calvin, the 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 plan makes your heart the happiest?
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.