Some thoughts on Philanthropy... again

If you read my last 1000ish words, you’ll remember that I was recently at a Non-Profit retreat for whom I am a Board Member. In a timely turn of events, last week I attended “Human Services” day with Leadership Lake that highlighted about 10 local Non-Profits that serve Lake County and surrounding areas.

Each of these organizations have zeroed in on a specific need in our community; helping with food, shelter, finding and keeping a job. I was shocked by the how much effort is required to support Children and Youth facing homelessness, fostering and Guardian Ad-Litem programs. I learned about how one group is helping Veterans get through the unique struggles they face when returning from duty. An eye-opening exercise had us spend about 30 minutes blindfolded to experience some challenges facing the blind. There was even a presentation from a group that brings therapy dogs to hospitals, nursing homes, or anywhere they are invited to bring joy and comfort to those who need it.

This is the second in a two-part series on philanthropy. In part 1, I highlighted the need to find your passion and team with a Non-Profit which aligns with that passion. When choosing that organization, you should spend some time doing your homework: ask their cost to raise a dollar, how many donors they have annually, how many people they have helped, how long they have been around… the probing questions. I also gave a couple ideas of easy ways to give which, while they may take some planning, were relatively high-level; Qualified Charitable Distributions from an IRA, naming a charity or multiple charities as beneficiaries on IRA’s and Annuities, as well as gifting of highly appreciated assets.

Today, we’ll be going a little deeper. How can we create a more significant gift that could allow us to see the impact not only immediately, but potentially the effect it makes on the community? If I have a potential Estate Tax issue, can I donate money today, yet still receive a benefit from it during my lifetime? What are some of the other ways I can make a positive impact on my community?

A Donor Advised Fund (or DAF) is a way to give a significant amount in one year yet maintain a level of control over a longer period. A large chunk of money, let’s use $100,000 in this example, is given to a fund you’ve created and invested prudently, to allow for growth. Every year, the donor can recommend, or advise (hence Donor Advised), to whom the funds are given. The gift is considered a completed gift in the year it is given, so when then funds are given to the DAF, the $100,000 is applied for taxable purposes.  In maintaining some level of control, the donor gets to participate annually in the philanthropy. This strategy works well in a year of significant income or a liquidity event, such as the sale of a business. Donors are urged to consult their attorneys, accountants, or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.

A Charitable Remainder Trust and Charitable Annuity are treated similarly to the above situation for taxable purposes. A Trust or Annuity is created (the Trust is created by an Attorney, generally at the time an Estate Plan is done while the Annuity process is generally started through the charitable organization), and funds are placed in that entity. There is then a stream of payments, usually to the donor, which occur throughout the donor’s life. Then, at a predetermined event, the charitable beneficiary receives the lump sum of the remainder. There are many ways these payment streams are calculated, either as a fixed rate (annuity) or a percentage of the value of the assets (unitrust). This is a much more complex method of gifting, so ensuring it fits within your estate plan is key. Please be aware that there may be substantial fees, charges and costs associated with establishing a charitable remainder trust.

There are numerous other ways that charitable giving can be done. Which strategy could work for you is determined on a case-by-case basis. I have had the opportunity to work with individuals in each of these situations, so let’s discuss your goals and how we can help you achieve them.

Finally, another great way to give is to volunteer. I believe it is the most impactful and personally gratifying. Money can come and go, and it can make a huge impact on how an organization operates. But if you leave a gift in your Estate Plan or through a Charitable Remainder Trust, you don’t get the joy of serving your fellow man. You don’t get to look into the grateful eyes of someone as you serve them in their time of need.

Volunteers don't get paid, not because they're worthless, but because they're priceless. - Sherry Anderson

If you have something on your heart, you have many ways to give; time, talent, and treasure. Sometimes treasure is not the most immediate need, sometimes it’s your time. As we start to move into this holiday season, I am going to challenge you to put some thought into how you can do one thing to give back to the community. Maybe it’s donating some cans to a local food drive (hint: keep an eye out for an announcement), giving a few extra dollars to your church or making a one-time gift to a charity, or going to spend some time at the local hospice or habitat house, but do something to give back just a little to a community that’s given so much to you.