Charitable Contributions And Tax Benefits: Part 2

Charitable Contributions And Tax Benefits: Part 2

July 5, 2018

By Jeremy Reif, CRPS®, Financial Advisor and Owner of Point Wealth Management

Many people want to give to charity and create a legacy of generosity but feel limited by their options. They think that as soon as they give their money away, they lose control of it. And no one wants to donate a large chunk of cash to an organization that changes its values or services down the road. Is there a way to have your cake and eat it too? In other words, can you give in a way that will benefit all parties and let you retain some control?

In a previous post, I presented some alternatives to traditional donations, such as donor-advised funds (DAFs) and gifting your required minimum distributions (RMDs). Now it’s time to dive a bit deeper into other giving strategies to consider.

Create A Charitable Foundation

Did you know that you can create your own charitable foundation? You don’t have to be Bill Gates or some other well-known celebrity to do this. I have helped clients successfully create their very own personal charitable foundations that allow them more control of their money.

As an example, let me tell you about a couple I worked with in this way. These clients of mine regularly donated to a church and a few other religious-related charities. They wanted to continue this practice but also wanted to do it in a way that benefited both the organizations and themselves. We worked together to create their own charitable foundation in which they deposited a large amount and received the current tax benefits associated with such a gift. They were then able to do some unique things with their income for the next few years, such as transfer money from taxable investments to tax-free places.

This charitable trust now has a large value associated with it. The couple decided to make it a gift that keeps on giving. By using the rule of thumb for distributions and taking no more than 4% annually, this charitable trust could potentially continue indefinitely. They also desired to get their children involved and brought up to speed on their values, beliefs, and wishes so that, down the road, their kids could continue to give out of this trust based on what their parents wanted.

Gifting Without Disinheriting

Another question many people have when deciding how to distribute their money is, “how do I make a gift for tax purposes but not disinherit my family?” A strategy to consider comes in the form of tax credit. When you make a charitable gift, you receive a tax credit in the year the gift was made which can usually be carried forward a few years. What if you used that tax credit to leverage your own investments in your own personal planning?

If you were to give your heirs the choice of a taxable investment or a tax-free investment, of course they would choose the tax-free option! Well, many times people turn to charitable giving to gift money that would have originally been taxable to the original owner, to the person receiving the inheritance and replace the money with tax-free options. Sometimes this could be as simple as using a life insurance policy to give tax-free money to your heirs, which in turn replaces all or more than the original gift amount.

You Have Options

I hope all of this communicates to you that you have options. If you have money to give and want to create a personalized strategy that benefits everyone involved, schedule a call and meet me virtually. I’d love to share more ideas with you.

About Jeremy Reif, CRPS®

Jeremy Reif is an independent financial advisor with more than a decade of experience in the financial services industry. He is also the owner of Point Wealth, LLC, an independent financial planning and investment management firm. With advanced credentials and training in retirement planning and financial planning, Jeremy focuses on helping individuals and families pursue financial independence. Regardless of the services he’s providing, he focuses on talking openly about financial planning, the industry, common questions about retirement planning, and more to help everyday investors gain more confidence in their financial opportunities. Based in Wausau, Wisconsin, Jeremy serves clients throughout the state and can work virtually with clients throughout the country. To learn more, visit http://pointwealthmanagement.com and connect with Jeremy on LinkedIn.

Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Point Wealth Management, TCM and RWA are not affiliated. Securities offered through TCM Securities, Inc. Members FINRA-SIPC. Material discussed is meant for general/informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Past performance is no guarantee of future results. Diversification does not ensure against loss.

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