By We’ve noticed some patterns in our nearly two decades of financial planning.
So when it comes to charitable giving, I know I’ve seen patterns over the 19 years I’ve been in this business as people make the decision to give their hard-earned money to an organization or cause.
There are actually a few categories most people fall into. Let’s face it, at the end of the day, nobody really wants to give away their money. When I see clients with excess money, the last thing on their mind is how to get rid of it – after all, they’ve usually spent years delaying gratification in order to have that excess money today.
But let’s talk about the first category. Even though I’m required to ask the financial planning question of all clients: are there any charities, churches, non-profits, etc., that you actively support (meaning gifts of more than $1,000), I know the vast majority of you will say no. Sure, you give now and then to the Humane Society, drop off clothes at Goodwill and toss a few bucks into the collection plate on Sunday morning, but nothing of significant value.
So, even though we ask this question as part of the planning process, I don’t typically anticipate hearing anything more than the above. But every now and then I’m surprised.
Now, let’s talk about the second group of people. These are the folks who give when there’s a personal tie-in. When someone answers this question by saying that they do give significant amounts away, I then ask where they choose to give their money. The client will then tell me, and follow that up with a personal story about why they chose this organization – without being asked.
Sometimes they’ll tell me of an opportunity they were given, and they want to pay that forward. Sometimes there are family connections. Other times it’s a pledge to a fraternal group they’re deeply involved in, or to a non-profit where their donated funds are being used toward a specific project that will help a specific group. People tend to give when they have experience with or connections to the recipient, or if they feel the project won’t happen without their support.
How are these gifts made, you may be wondering? When it comes to actually gifting, some people give openly and write a big check all at once, and other people sign a pledge form and make installments over time as funds allow. For others, there’s no need to write a big check or get their name on a building. They’d rather support who they support anonymously on an ongoing or daily basis – it’s more their style.
So let’s say you’ve thought about making a gift, and one of these situations applies to you. The next step in our planning process is for you to check out a charitable gifting fund. For those of you who may be trying to effectively plan for a large, one-time gift or pledge, you may want to consider a donor advised fund (we’ll be exploring these more later this month). The concept is simple however: you can gift all kinds of non-liquid assets such as real estate, stock options, etc., which could potentially reduce your tax liability while maximizing the gift you’re making.
For the rest of you who are just giving as you feel compelled, that’s great. Keep doing what you’re doing. You’re supporting a lot of great local causes. And if you’re taking a lot of great stuff to Goodwill in a men’s XL, let me know! I’m always searching for a deal.
Seriously though, call us with any questions you have and our team will be happy to give you more details.
Article by David Smyth, CLTC, Senior Partner at Family Financial Partners — a financial services firm in Lexington, Kentucky.