Giving Back in 2016

heart in handEveryone is talking about Mark Zuckerberg and his wife, Priscilla Chan, because of their remarkable philanthropic pledge to give away 99% of their Facebook stock in their lifetime.   The Chan/Zuckerberg Initiative generously provides some $45 billion as an investment in an LLC that is committed to helping solve some of the world’s problems. It is a new twist on charitable giving and is designed to change direction away from grant-making foundations where certain activities, like lobbying or contributing to campaigns, are prevented in order to keep their non-profit status. This new format allows for investments in for-profit businesses in fields like education and health care, which the Facebook founder and his wife believe will maximize their ability to achieve more of their philanthropic goals.

These kinds of stories can lead us all to thinking about our own charitable giving, especially as we start a new year. It turns out that it is good for you, too! According to a research study by Bank of America in 2015, giving of your time and money could be a key element to happiness in retirement. A study by The National Philanthropic Trust found that this country’s individual philanthropy has been increasing annually and Americans contributed $358 billion or $2,974 per household to charity in 2014. We have stepped up our charitable giving with an explosion of online contribution campaigns and gofundme pages, as well as through more traditional methods. We have our brazen consumption days like Black Friday, but now they are followed by ‘Giving Tuesday’ to celebrate and encourage charitable gifting. Americans are generous with their time as well and, in 2014, volunteering by Americans was worth $175 billion with 64.5 million of our citizens giving of their time. Seems as if this is a win-win for us all.

The end of the year is a popular time for making decisions about charitable giving as people have abundant holiday spirit and a good sense of their year-end balance sheet. As folks get caught up in the generosity that comes late in the year, this spirit can lead to impulsive contributions rather than a purposeful strategy. We think it is better to have a regular annual strategy for giving to ensure that your time and money are spent in ways that are as thoughtful and productive as possible. It is important to make sure your charitable dollars will have the most impact on the causes that you believe in all year long.

Including a disciplined approach to philanthropy in your financial plan can be both rewarding and make good sense for overall tax planning. It is a good idea to talk to your financial advisor, like DWM, and a tax professional to make sure that you are benefitting from any tax savings opportunities. There are some great plans you can use to make your charitable giving proactive and have maximum benefit. You can use donor-advised funds which allow clients to make contributions at one-time, but pay out over several years and to different charities, even if you haven’t yet determined the exact charitable recipient. You can also harvest appreciated assets by giving those assets to a charity or a charitable account which can help balance your investment accounts and avoid some of the capital gains taxes. Another possible approach is to make donations to charitable annuities or charitable remainder trusts where a donor can make a one-time gift, but look for some measure of returns on these assets. These accounts generally have some high costs associated with them and should be thoroughly and cautiously investigated before using them. Another option is to use your RMD as charitable contribution funds. At the end of 2015, Congress passed legislation to reinstate this income-reducing provision, which also can be used retroactively for 2015. These types of plans can be great tools for combining smart tax-planning and personal philanthropy.

One last reminder is that it is also wise to avoid gifting to organizations until you have properly vetted them for adherence to the causes they promote and for responsible administration of their budgets. There are several watch organizations, like and media outlets, like Forbes, that rank charities on the success of accomplishing their missions. You may want to do some research to find out what a charity spends on administration versus what it spends on the goals of the organization before making a donation.

Having a consistent strategy in place will help guarantee that favorite organizations, like your alma mater or local church, don’t get left out of your generosity. As you start this New Year, we wish you all health, happiness and a plan for your financial freedom, including having the ability to give freely and wisely as you wish. We can’t all be as generous as Mr. and Mrs. Zuckerberg, but our giving can certainly have an impact on those causes that are closest to our hearts.