3 Considerations for a Meaningful Giving Strategy

In our Insights piece last month titled, “Do You Feel Called to Philanthropy,” we talked about how someone who is philanthropic sacrifices out of love for mankind. Giving of our time, talent, and treasure can bring about tremendous happiness in life and it can be even more impactful on our children than any professional success we may enjoy. If you’ve determined that giving is important to you but you’re not sure where to begin, we’ve outlined three considerations when establishing a charitable giving strategy.

1. How much can I afford to give?

There are different ways to approach this question. Some decide to give a certain percentage of income to a church and/or charities each year. This certainly is an effective way to give, but what if you could afford to give more or what if you’re no longer working and still want to give from assets you have? It’s helpful to first determine how much you need to live your life as you want to live it. Consider thinking through your cost of living such as housing, travel, medical, education, insurance, food/entertainment, and any other recurring expenses you have. Next identify your existing assets, consider future income such as Social Security, pensions, or any other expected income, and project the effect your core living expenses would have on your assets and future income. There are many important assumptions that go into an analysis like this, so unless you have experience making such projections, it’s best to get help from a good financial planner. The result of this exercise is it will start to become clear if you have enough to support your ongoing financial needs. Provided that you do and you appear to have more than you need, you can adjust your projections by reducing the initial assets you have to see what you actually need to meet your goals. The level of assets you have beyond what you really need could be considered excess capital and used today (rather than at death) to have an impact now while you can see it and appreciate it. We’ve seen families become clear on how much of their wealth is truly excess and then decide to:

• Help family members in need
• Fund education for grandchildren
• Take family on trips to create memories
• Give to charitable causes important to them
• Start scholarships at a school
• Start a business
• Consider new aspirational goals they might not have pursued otherwise

There is much to consider in a core-excess capital analysis, but the important thing to note is many don’t go through this exercise and will go their whole life without truly having the impact they want (and can afford) to have now, and they might even hold back on experiences they could be enjoying. We don’t want this to happen to you. It’s all about having the clarity you need to make intentional decisions along your journey to fulfillment.

2. I know I want to give, but to where?

Once you know you have more than you need, it’s natural to want to be prudent with how you spend the “excess” dollars to do good. Some families know right away where they want to have an impact while others take time to determine what’s important or what feels right. Here are some practical ways to identify where you might give charitably.

• Consider setting up a giving fund at a local community or faith-based foundation. Community and faith-based foundations are a wealth of information regarding local charities or causes that align with your values. These charities may not get the publicity other larger, more well-known organizations do, thereby allowing your dollars to have an even greater impact.
• Meet with the director of a charity of interest. Request a tour of their operations or ask to see examples of their work if it’s something like a neighborhood built by Habitat for Humanity. Ask them questions to help you gain comfort and feel inspired to support their cause.
• Visit the school if you’re interested in helping them or promoting education. Determine how you want to have an impact whether it’s helping fund someone’s education through a scholarship, a project the school would like to embark on, or a project you think the school would benefit from.
• Volunteer with an organization. Volunteering will give you an inside look at how the organization operates and how it benefits those it serves.
• Play the card game. If you’re just getting started or still unsure about where to give, there are card decks available online (21/64 motivational values and picture your legacy) with virtual/electronic formats as well that can help you explore what’s important or meaningful to you.

3. What’s the best way to give?



We wrote an Insights piece last November titled, “6 Ideas for Charitable Giving in 2021,” that is still conceptually relevant today. As an update, standard deductions are higher now ($25,900 for married filing jointly, $12,950 for single, $19,400 for heads of households, and an additional deduction of $1,400 if you’re at least 65 years old or $1,750 if using the single or head of household filing status). It’s easy to simply write a check, but there are usually better ways that can minimize taxes and maximize your gifts to charity. If you’ve held an appreciated investment for more than a year and you plan to itemize deductions on your tax return in the current year, then donating the investment allows you to avoid realizing the capital gain. You can always repurchase the investment if desired and you’ve essentially reset your cost basis. Given how high the standard deduction is today, it’s harder to get a full deduction for charity if even one at all. Some will pre-fund multiple years’ worth of gifting by giving to a donor advised fund, which allows you to get the tax deduction in the current year and give from the fund over time as you deem appropriate. For those age 70.5 or older, you can give up to $100,000 per person from your IRA without it counting as a taxable distribution for income tax purposes. It’s especially beneficial at age 72 or older since this can count towards the required minimum distribution that the IRS mandates. There are also charitable trusts you could consider establishing for large one-time gifts with flexibility to have an income stream to you over time or elect for a lump-sum remainder distribution to beneficiaries. If benefiting yourself or family isn’t important, then you could always fund large charitable gifts to the donor advised fund we mentioned.

For those who have been blessed with financial resources beyond their needs, giving back is often a main driver of fulfillment. Stephen Covey is credited with identifying 7 habits of highly effective people, one of which is to begin with the end in mind. Giving comes down to ultimately leaving something behind that people will either remember us by or benefit from. When we get towards the end of our life, we want to know we made a difference. We want to know our life mattered. Those who give of their time, talent, and treasure get to experience the joy of giving and build a meaningful legacy that will last for generations to come.

Journey Beyond Wealth (“JBW”) is an Investment Advisor registered with the State(s) of GA, TN, LA. All views, expressions, and opinions included in this communication are subject to change. Registration of an investment advisor does not imply a certain level of skill or training. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions.  Please contact us if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.