By Iris Buczkowski
The holidays are my favorite time of year for several reasons! I find that no matter where I go people are generally happier, caring and more helpful because that is the true spirit of the season. There is simply just something magical about it. Webster Merriam defines philanthropy as the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes. I think it is safe to say that most people agree it is good to help people and causes that need additional assistance and support, but there is no one way to do it.
In my practice I am often tasked with helping clients achieve their goal of leaving a legacy. Most times legacy planning is centered on their families, but several people have joined a continued movement to leave a legacy to help others. Charitable giving has become very popular over the past few years. What most people don’t know is that you have ways to leverage your money to make a more meaningful impact to those you wish to support. A few examples would include the following:
- Charitable Trusts: A charitable trust allows you to place assets into trust and generate an income to yourself while you are alive, or to your charitable recipients with the promise for them to receive the principal in the future time of you passing. This is popular for those with the good fortune to have highly appreciated securities in their portfolio and can use these assets for tax planning purposes. The most common types of charitable trusts are called remainder trusts and lead trusts, with the difference being how you structure the income derived from the trust while you are alive.
- Donor Advised Funds: Donor advised funds have become increasing popular because they are easy to administer and do not require the use of an attorney to established them. Many custodians have a donor advised fund platform that allows you to work with your financial advisor to open an account where may choose several charities you wish to support. This allows you to make charitable contributions with more flexible terms and grow the contributions you make over time through investing in the financial markets.
- Using Life Insurance: Many people have policies they have taken with accumulated cash value they may not need or where premium payments are no longer due. You can donate life insurance to a charity and take a deduction for the gift in the present. When you pass away, the charitable entity receives the death benefit. Philanthropists of any age can do this as part of their planning. For example, a healthy 40-year-old person could buy a $100,000 life insurance policy with an annual premium of $1,000. The life expectancy of this person may be 45 years. If they live to be 85, the $45,000 they paid during their lifetime will give a gift of $100,000 at their passing for a gain on their investment of $55,000. This can be a very effective way to give if your goal is to make a larger, longer-term impact.
- Using Employer Sponsored Charitable Programs. Many companies offer their employees the opportunity to give to charity through payroll deduction. This makes giving very easy because it is done automatically as you receive your paycheck. Inquire if this is available to you and if it is not, ask your human resource department if they would consider setting this up as a benefit to their employees as it will likely cost them very little or no money at all. Sometimes you can donate to a general agency that supports many smaller not-for-profit companies in your local community or donate directly to agencies of your choosing.
A core tenant of how I live is with the belief that you cannot get ahead in life unless you give back. Money is not the only way to do this because you also have your time and talent. If you combine the three you accomplish what science says you get from philanthropy – a healthier mind and body experience because our whole being medically benefits from the psychological impact of giving back. Along with the science though is the art you can create. You can use some or all of these strategies and if you do you will complete a beautiful masterpiece that will live far beyond you with your personal style embedded in it. That is the true art of giving back.
