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Smart Philanthropy: Navigating Personal Values

By: Joe Delaney

Those with a desire to utilize their wealth to enhance the lives of the less fortunate must always balance their charitable intent against their ability to maintain overall financial health. Philanthropy is not throwing money at charities at a whim. It requires careful planning that comes out of a genuine desire to make the world a better place and pass charitable values on to future generations.

Below are key questions to discuss with your wealth manager as you make a philanthropic plan.

Question #1: How much do I give?

The simple answer is to not give more than you can afford to. You must consider charitable giving as part of a personal financial plan, and based on one of many important values. Stability, independence and family are some of the values that counterbalance charitable intent. Consider how sacrificing any of these would threaten the rest of the system. It’s important to make sure you can not only give now, but that you can continue to support the causes you are passionate about in the future.

Question #2: How do I give?

Giving Structure

One approach, best for gifts of roughly $100,000 to $10 million, is to give through a donor-advised fund (DAF). These can be set up through a community foundation or National Donor-Advised Funds, such as Charles Schwab or Fidelity. The main benefits are simplicity, charity research tools and maximum impact, as the organizations dispensing the funds generally have very low overhead and allow you more control over how much you give. Alternatively, you can set up a private foundation, best for gifts of over $10 million. Foundations are subject to 2% excise taxes and require donors to give 5% of the fund’s value each year; however, the main benefit is maximum control over how the money is spent. (You may designate it be used toward a specific hospital wing rather than the general fund, for example.)

Non-cash Gifts

Gifts of highly-appreciated stock or other assets are an excellent choice, because the tax benefits are twofold: you avoid paying capital gains tax, and you receive a deduction for the gift. Qualifying charities can then sell the stock and pay no tax on the sale.

Question #3: To whom do I give, and why?

Charitable Focus

When you focus on your personal mission, you are able to evaluate not only the amount of your charitable giving, but its effectiveness relative to your mission. What are you passionate about? What organizations are aligned with your personal mission? This process is not necessarily about fiscal return on investment. These are investments in human capital, which have intangible benefits from mental health to spiritual satisfaction.

Cautious Investing

Equally as important as the charity’s mission is its stewardship of resources. It’s important to have a trusted advisor with access to resources that reveal the details of how your funds are being used. (Consider the recent news regarding the Wounded Warrior Projectas a case in point.)

At Lifeguard Wealth, we take a holistic approach to advising you on how best to accomplish your financial goals. If you consider yourself a philanthropist, it’s important that we consider charitable giving as a factor just as important as any other in wealth management. Don’t fear that you will have to violate your head to appease your heart, or vice versa. We’ll work together to make sure that by the end of your days you will have created the legacy of a life well lived.

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The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2018, Lifeguard Wealth