Financial Literacy

Giving Thoughtfully

It’s that time again. It’s the time when we are actively reminded about how blessed we are. We are reminded that we can participate in walking, running, shopping and eating for a greater cause.

The needs are great! Now, the fundraising through social media for birthdays is happening every day. I am often overwhelmed by the constant asking that I receive for the many great causes there are in our world.

I am still stunned by the oversight of the artists of Aretha Franklin and Prince, who have or will have extreme tax liabilities because of no planning. I encourage people to be thoughtful about giving.

I fervently believe that we should give of our time, talent and treasure. Yet, we should be thoughtful about how we give. We should be strategic about our giving. I was raised believing that service was the rent we pay to live on the earth.

​While we are not simply giving to get, it makes sense to be strategic in our giving. The new tax law doubles the standard deduction so there is a higher threshold for the need to itemize. 

Those folks who are committed to causes and faith are still giving. Yet again, we should take the steps to give thoughtfully to create the greatest benefit.

​One of the more popular approaches to strategic giving for those who give substantially is the Private Family Foundation, a separate nonprofit tax-exempt organization that is privately funded by a family and is established for a charitable benefit.

There are many family foundations that are historic such as the Bill & Melinda Gates Foundation or the Ford and Rockefeller Foundations that have been around for generations. The distinction is that the money that is used to fund this foundation is private money and not sought through public giving.   Many of the foundations are millions of dollars but not all of them. While establishing them typically requires a substantial outlay for legal fees there are indeed benefits.

​Some of the benefits of this organization is to first and foremost give to the charitable causes:

1. Creating a legacy that lives beyond you.  Your Private Family Foundation provides an opportunity for your values and interests to live beyond you. The foundation would maintain a commitment to the organizational standards that you create.

2. The private foundation can employ you and/or family members to direct the organization which can provide employment income for the person who is serving the foundation.

3. The foundation is a charitable organization itself and as such there are tax exemptions that provide benefits, such as capital gains taxes on highly appreciated assets. Interest and investment earnings are subject to income tax that could instead be used to support the charities.

Such a foundation provides many opportunities in private philanthropic giving. There are requirements to operate as there are requirements for all legal entities. The benefits that are provided expand clearly beyond the family to benefit the greater community which justifies the tax exemption.

Again, the truth is that there are great opportunities that provide great benefits and, in cases like Aretha and Prince, could help avoid substantial taxation. Millions may not always be at stake, but every bit helps.

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