Happy Holidays, the season of giving. In addition to doling out presents to family and friends, the holidays are also a great time to give to charitable causes and help those less fortunate than yourself. Better yet, build giving into your financial plan through planned giving.
Charity isn’t just about a random act of kindness during the holidays, which is of course appreciated. For many, charitable giving is a purposeful part of your financial plan and an expression of who you are and your legacy on this world.
Many more people want to give than actually do. Whether it is not fully understanding how to give, the benefits of giving or just the sheer fact that when it isn’t planned, life gets in the way, planned giving coordinated with your advisor can help maximize the benefits of the gifts for you and the beneficiaries.
Everyone is familiar with the concept of donating money, toys or other tangible goods during the holidays. Americans do this regularly and you are provided a charitable deduction for this type of giving. This is, however, not a substitution for a planned giving strategy.
Some of the more common ways to work charitable giving into your financial plan are through trusts and other investments. These can all provide generous contributions to a charity or cause.
As one example, a charitable remainder trust is set up such that the donor(s) will receive income from the trust for a predetermined period of years. At the end of the term, the balance of the assets is distributed to the charitable beneficiary. Charitable trusts can provide gift, federal and estate tax benefits when structured properly.
While donating regularly to a charity is an excellent option, donations through life insurance are also a great way to give large sums of money to your favorite cause. You can designate an existing policy, assign dividends from a policy, or take out a new policy with the charity as the beneficiary. This way, you can make smaller annual insurance premium payments and leave a charity with a much larger amount than you could otherwise have afforded.
All of these strategies are common ways to incorporate planned giving into your broader financial plan and some can even be used in conjunction with one another. While the complexities and nuances of such plans are beyond the scope of this article, you need to be aware that there are myriad ways to give that are beneficial to your own financial plan. If giving is important to you and your legacy, make sure your financial advisor understands that and is helping maximize your giving.
This article is meant to be general in nature and is not intended, and should not be construed as personal financial advice. Please consult your financial advisor prior to making financial decisions. Gary Parsons is a Financial Advisor with U-Vest Financial®, a separate entity from Waddell & Reed and can be reached at 850.300.7055. Waddell & Reed, Inc., Member SIPC
(12/20)