February reminds us of the Valentine’s Day tradition of giving hearts to those we love. For those with a heart for giving, it’s also a good time of year to be reminded to contribute to people, causes, and charities that you care deeply about. With proper planning and a little know-how, heartfelt charitable giving can continue well into your retirement years. In fact, planned giving can easily be made part of an overall financial portfolio, says Will Stone, CFP ®, of McMullin, Stone & Associates of Fayetteville.
“We find a lot of clients have an inclination to give but they don’t know what they can give without sacrificing their long-term needs,” Stone says. “With some people the financial planning we do frees them up so they can give more than they thought, and with others it helps them set some healthy boundaries around what they give.”
For Stone, the first step is helping clients determine what their monthly needs are and how much of their money they’ll need to live on, and for how long.
“We generally plan for clients to live into their 90s if they are married couples,” he says. “Based on higher life expectancies and medical advances, there’s a high probability that at least one spouse will live that long.”
After assets for living expenses have been set aside, and there are funds left over, Stone then sets up what he calls an “aspirational bucket.”
“We help them understand how much of their money they’re going to need for the rest of their lives, then what they’ve got left over to give, and how they would like to give that money,” he explains. “Would they like to give a certain amount every year? For some people it’s helpful to decide at the first of the year how much they want to give.”
For example, he says, most clients know how much they want to give to their church every month. But then they may hear about someone going on a mission trip or about a need at an animal shelter. So they’ll already have an amount of money set aside for the year to draw from.
Other clients, however, desire to participate in capital campaigns drawn out over several years for a church, university or organization to which they have connections.
“We’ve seen clients participate by giving a large up-front gift, or choosing to give a certain amount each year over the course of the campaign,” Stone says. “So then it becomes a question of how many gifts will there be and where is the funding come from for these gifts. Is it coming from income each year or from existing accounts?”
Often a client will be able to give gifts of securities or investments as opposed to just cash, and there can be beneficial tax reasons for doing that, Stone says. For example, suppose a client invests $10,000 and after a while that investment doubles in value to $20,000. By donating the full $20,000 investment to a non-profit organization, the client can avoid paying taxes on the $10,000 gain.
“This may allow them to use some of the growth of their investments to fund their giving goals,” Stone explains. “So it may be better to give investments that have appreciated in value rather than sell them and give a gift of cash.”
Recently Stone has been seeing more clients take advantage of a rule that allows someone over age 70 and a half to give the money they’re required to take out of their IRAs directly to a charitable organization.
“For clients who don’t really need the required minimum distribution to live on but are interested in giving, that can be a great way for them to provide some financial benefit to an organization without increasing their own taxable income,” Stone says.
Whatever the method, Stone encourages his clients to be smart about giving and to always involve their tax professional in the conversation.
“Thinking it through and planning for it gives someone the reassurance and framework to be able to listen to their heart and give in a way that’s most meaningful to them, or in a way they feel is most impactful to the organizations they support,” he says. “And you can extend that to family giving as well.”
For example, many clients have an interest in giving to their children or grandchildren, particularly if they have special needs. Others desire to help pay for college, graduate school, or private school tuition. Or it might be the gift of an experience, like a cruise or big family vacation.
“There are lots of different ways to give if clients are inclined, and what we encourage clients to do is just think about it more,” Stone says. “If it’s something meaningful to them and they’re interested in, there’s often a way to do it.”
For more information about the services offered by McMullin, Stone & Associates, or to schedule an appointment, visit the office at 101 Devant Street, Ste 903 Fayetteville, GA 30214. You can also call 770-471-6674,
Securities offered through Raymond James Financial Services, Inc. member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. McMullin Stone and Associates is not a registered broker/dealer and is independent of Raymond James Financial Services. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Financial Advisors of RJFS are not qualified to render advice on tax or legal matters.