It’s not breaking news that retirement is one of those life events that requires years of planning. But when the occasion finally arrives when enjoying lazy mornings with copious time spent on the links, traveling and/or volunteering is the rule, some additional thought regarding future charitable giving should be considered, according to local experts.
“With many of our clients, we set up a donor advised fund, which is established through a number of entities like Charles Schwab, Fidelity or Vanguard, and the individual makes contributions to the fund, which are tax deductible in the year in which the contributions are made,” says Stephen Green of Optimum Wealth Management. The money can grow within the donor advised fund, he adds. “Administrat - ively, it’s very easy for seniors to later distribute monies to nonprofits, and it doesn’t have to be in the same year as the contribution. The fund could actually grow fairly substantially, and children and/or grandchildren could be designated to make future distributions, so a charitable legacy can be built.”
David Obedin of Renaissance Financial Corporation notes that when giving to a charity, it is important to know the intended use of donated funds. “The size and type of asset donated may be dependent on the intended use of the gift,” Obedin says. “If a donor has a highly appreciated asset, it may be beneficial to discuss with an adviser and/or the charity how to make the gift. Transferring an appreciated asset to the charity may allow the donor to bypass potential capital gains tax implications and possibly make a larger gift to the charity for the same net dollars out of pocket.”
And as an alternative to making gifts during a lifetime, Obedin points out that due to the recent volatility in asset values, clients also are interested “in will bequests and gifts at the end of life, so that the donor does not alienate themselves from their net worth as part of their charitable giving plans.”
In fact, giving away too much of their net worth can be a mistake made by some seniors, according to Obedin, as well as “making emotional decisions with respect to the magnitude of their gifts absent of an overall financial strategy and structure for giving to organizations.” Obedin also encourages clients to ask questions about the organization before contributing to a cause.
Obedin recommends watching Congress for changes in tax laws that will allow for more effective giving. “Up to Dec. 31, 2011, individuals age 70 1/2 years and older could give money directly from their individual retirement account (IRA) to a qualified charity, with gifts limited to an aggregate amount of $100,000 per year, and have the dollars also count against the amount that they are required to distribute from their IRA and pay taxes on,” Obedin notes. “This was a tax-free way to give dollars to charity, and we’re hoping that Congress will renew the law early in 2012.”