Total Counsel Law Group

Why Do Older Americans Give More to Charities?

“Today’s retirees are almost six times more likely to define success by their generosity (85 percent) than by their wealth (15 percent).”

There are almost 50 million Americans over the age of 65. They control greater assets and have a higher net worth than any younger generation. This is also the group that is shifting their focus from income creation to asset preservation, retirement and a more relaxed lifestyle. They frequently increase their giving and volunteering, providing great benefits to their communities and to themselves.

The Denver Post reports in the article “On Philanthropy: Giving in the last third of life,” that older Americans are the most generous generational group in the country. Those born before 1964 are responsible for almost 70% of all charitable giving.

Research found that retirees who give, are more likely than their less-generous counterparts to report high levels of happiness and a sense of purpose. Many older adults volunteer their time to help other people or a specific cause. They report:

• A greater sense of well-being (89%);
• Less stress (73%);
• Better physical health (68%);
• Better emotional health (77%);
• An enriched sense of purpose (92%); and
• More happiness (96%).

Volunteering can also delay mortality among older adults, according to a Stanford University study. You’ll live longer!

Those who are considering philanthropy should ask themselves these important questions:

• How much of my net worth is needed to adequately take care of myself and my family for the remainder of our lives?
• How much money do I want to leave for my children?
• How do I want to be remembered and what’s my legacy?
• What difference do I want to make in the community, while I still can do so?
• What are my skills that might be useful to others?
• How do I want to share and express my values with my children and their children?
• What’s my passion?
• What philanthropic efforts could help me to achieve a greater sense of significance?

Prior to volunteering, look into the nonprofit’s need, safety and training to assure an experience that benefits both the volunteer and the organization.

For those in who are able financially, charitable activities in the last third of life can have great meaning and value.

Reference: Denver Post (April 15, 2019) “On Philanthropy: Giving in the last third of life”

How Can I Use My Life Insurance to Give to Charity?

“Financial planning is an ongoing process that examines your goals, situation and finances, in order to determine if and how these goals can be met. It’s not a product-centric process, but often we use financial products like mutual funds, annuities and/or life insurance to achieve goals in the most efficient manner.”

As Forbes explains in the article “2 Ways To Combine Charitable Giving And Life Insurance,” one of the core products for protecting wealth is life insurance. As you age, your need for life insurance may lessen, but sometimes it will increase. If you have a life insurance policy that you no longer need, one option might be to donate the policy to a charity. There are several ways that life insurance policies can be gifted or used for charitable purposes.

Gift Your Existing Policy. You can simply give away an existing policy, if you no longer need the policy for estate liquidity or estate taxes. You could gift the policy outright to your favorite charity or use a Donor Advised Fund (DAF). If you give the policy to a charity outright, you can change ownership of the policy and pretty much be done with it. You might get a charitable income tax deduction for the value of the policy at the time of the gift (it’s measured by the sum of the interpolated terminal reserve plus unearned premiums rather than the death benefit amount).

If the policy has ongoing premiums, those would be the responsibility of the charity. However, you can help them, by continuing to make the premium payments on behalf of the charity by directly paying the insurance company. You could also pay the value of the premiums to the charity and let it pay the insurance company. The premiums would then be tax deductible, since the charity owns the policy.

You could also simplify your life as the donor, where you could convert the policy to a reduced and paid-up policy and donate it with no ongoing premiums needed. This may be easier, because you don’t need to create an additional outflow of cash, after the gift is made to keep the policy in effect for the charity. You just transfer the policy value without any further obligations.

Charities typically like to receive gifts of policies with no ongoing premiums, because it eliminates the task of sending the donor a gift receipt, every time a premium payment is made. It also eliminates the issue of whether the donor or the charity is to pay future premiums.

Gift a New Life Insurance Policy. Another tact is to give a new life insurance policy. This can be a bit more involved, because if the charity’s going to be the owner, they must have an insurable interest in the donor. However, if you have a strong ongoing relationship with the charity, this requirement can be satisfied. You can then pay up the policy completely at the start or make ongoing premium payments over time.

Reference: Forbes (March 6, 2019) “2 Ways To Combine Charitable Giving And Life Insurance”

Here’s What You Can Learn from SurveyMonkey Exec’s Plans to Donate Her Shares

“SurveyMonkey board member Sheryl Sandberg plans to donate her stake in the company to charity, as part of her commitment to the Giving Pledge. Donating appreciated assets is a strategy that can benefit all investors, regardless of your level of wealth.”

If you donate to charity regularly, you may want to look at creating a donor-advised fund, according to CNBC’s recent article, “What you can learn from Sheryl Sandberg's plans to donate her SurveyMonkey shares.”

SurveyMonkey board member Sheryl Sandberg has plans for her ownership of the company. Sandberg, who is a member of the company's board and COO at Facebook, plans to donate all of the shares she owns, or the proceeds of the sale of those shares, to the Sheryl Sandberg & Dave Goldberg Family Foundation, according to the company's IPO prospectus. Her charitable plans are part of her strategy to participate in the Giving Pledge, whereby some of the world's wealthiest individuals, including Warren Buffett and Bill Gates, have agreed to give most of their wealth to charity. Sandberg has already donated Facebook shares to charity through a donor-advised fund.

Many people experience satisfaction in giving during life, and Sandberg’s actions are a good lesson in charitable giving. Giving appreciated investments to charity is a wise strategy. However, there are some things to consider before you do this.

The tax savings from charitable giving can be significant, but that shouldn’t be your sole rationale for giving. The reason is that you’ll still be parting with more money than the tax itself. Don't write a large check for charitable purposes, without reviewing it with your attorney. In many cases, she can increase the value and benefit of the gift at no cost to the charity. If you plan to give money away to charity on a regular basis, you may want to think about a donor-advised fund.

A donor-advised fund allows you to monitor your charitable donations, because the money comes from one fund. The IRS lets you take a tax deduction in the year you give to your donor-advised fund. You then can let the money sit in your account, until you decide that you are ready to donate it. Donor-advised funds also let a person shield their gifts from the public.

Another kind of endowed-giving vehicle is the private foundation. This generally work well for those with larger amounts of money. Typically, people don’t create a foundation for less than several million dollars, and they should be set up with an attorney. With a foundation, you can set up scholarship grants and employ family members. They are frequently used by larger donors who want that level of control and are willing to have all of their granting done publicly.

Reference: CNBC (October 4, 2018) “What you can learn from Sheryl Sandberg's plans to donate her SurveyMonkey shares”

Some Ideas for Charitable Giving

“Charitable planning can provide financial benefits, in addition to the satisfaction in helping others…”

Investopedia provides us with some things to evaluate, when considering charitable giving in the article “A Primer on Philanthropic Vehicles.” There are many strategies and techniques that can be incorporated into an estate plan, but many people prefer to focus on how they can contribute during their lifetime.

Cash is the most basic donation and is one most people know about. That’s as simple as writing a check to the charity or other tax-qualified organization of your choosing.

Gifts of appreciated securities, like shares of individual stocks, mutual funds, ETFs, or closed-end funds, can be made to qualified organizations. After contacting the organization directly to confirm they can accept such gifts, transfer the shares from your account to the brokerage account of the organization. You get the tax benefit of the charitable contribution, based on the market value of the shares at the time the contribution is made, and you won’t be subject to the capital gains that would incur, if the security was sold outright. This can be a large amount for securities that have been held for some years, with an extremely low-cost basis.

You can also choose to gift non-securitized assets. With real estate, stock in a privately held business, art, or collectibles, the value of the asset at the time of the gift is deductible, like publicly traded securities. Similar to publicly traded securities, you also won’t be subject to capital gains tax due on the amount of unrealized appreciation of these assets. However, the charity needs to be able to take these types of assets as gifts. Contact the organization and make sure that this is the case.  You’ll usually need to have a third party conduct an appraisal of the asset to be donated, to determine its value.

Giving directly to the charity is one of the most common forms of giving.

Donor advised funds are philanthropic funds created as public charities. Many major custodians offer a version of these funds that take donor gifts and invest the money on the donor’s behalf.

Depending upon the fund, donors can select from investment options offered by the fund or have the money invested in a way suggested by an advisor.

Reference: Investopedia (April 16, 2018) “A Primer on Philanthropic Vehicles”

A Tax-Free Transfer from an IRA to Charity Can Make a Significant Difference in Retirement

“Besides benefiting the charity, you may save a bundle on income taxes, as well as stay below the income cutoff for some other taxes and charges.”

At 70 ½, you need to begin taking required minimum distributions from your retirement accounts.

You can make a tax-free transfer from an IRA to charity and have that count as the RMD. However, you may question the advantage of doing that versus withdrawing the money and making a charitable donation on your own. If you itemize deductions, doesn’t it have the same effect?

According to a recent Kiplinger article, “The Advantages of a Tax-Free Transfer From an IRA to Charity,” if you itemize, the tax deduction will appear to be identical. That is, at first glance.

However, the transfer is deemed to be a qualified charitable distribution, which keeps your required minimum distribution outside of your adjusted gross income. This can help you remain under the income cut-off for some other taxes and charges. In addition, for those who don't itemize their deductions, making the tax-free transfer can benefit from their charitable gift.

If you are required to take large RMDs from your retirement savings, you could be lifted into a higher premium level for Medicare. However, making a tax-free transfer of that RMD to charity keeps that sum from the Medicare premiums calculation. If your AGI plus tax-exempt interest income is more than $85,000 for singles or $170,000 if married filing jointly, you'll have to pay higher Medicare Part B premiums. That could be a substantial difference: the monthly premiums are about $109 per month for most people who have their premiums deducted from their Social Security payments or $134 for new Medicare enrollees. Those subject to the high-income surcharge must pay from $187 to $428 per month for Medicare Part B in 2017, depending on their income—plus an extra $13 to $76 added to their premiums for their Part D prescription-drug coverage.

A lower AGI can also help you lower taxes on your Social Security benefits. You need to look at your provisional income, which is your adjusted gross income, not counting Social Security benefits, plus nontaxable interest and half of your Social Security benefits. If your "provisional income" is less than $25,000 and you file taxes as single or head of household—or less than $32,000 if you file a joint return—you won't owe taxes on your Social Security.

If you’re single and your provisional income is between $25,000 and $34,000—or between $32,000 and $44,000 if married filing jointly—up to 50% of your benefits may be taxable. If it’s more than $34,000 if single or more than $44,000 if married filing jointly, 85% of your Social Security benefits could be taxable. Keeping your RMD out of your AGI can help reduce your provisional income.

Remember: if you're over 70 ½, you can transfer up to $100,000 tax-free from your IRA to a charity annually.  However, the funds must be transferred directly from your IRA to the charity to stay out of your AGI.

For more information, please visit our website at www.totalcounselor.com

Reference: Kiplinger (May 12, 2017) “The Advantages of a Tax-Free Transfer From an IRA to Charity”

Businessman’s Estate Hands out $1M to Community Organizations

“During his life, William C. “Bill” Marks went from a farm boy in the Grant community to attaining significant wealth.”

By the time he died, William C. “Bill” Marks had become the managing partner in Wilson County Rock Products, Inc., a principal shareholder in Wilson County Concrete Co., an investor in several other businesses and was the owner of numerous development and rental properties, as reported by The Lebanon (TN) Democrat in an article “Marks’ estate endows $1 million to four community groups.”

“Bill once told me that he got his start digging potatoes in Grant and hauling them to town to sell,” said local attorney and former state Senator Bob Rochelle. “He was a smart, hardworking businessman who was very involved in the commercial, political and community aspects of Wilson County.”

Mr. Marks began work on an extensive estate plan in 1997. That plan included the creation of a trust designed to benefit his family for 20 years. Following that, the trust would then be distributed to four charitable institutions, which Marks thought were most beneficial to the community during his lifetime.

Marks was savvy enough to designate trustees to manage the trust assets.

In early May, the trustees, Mike Flanagan and Rochelle and Randall Clemons disbursed the trust funds to Cumberland University, Friendship Christian School, the Lebanon-Wilson County Library and College Hills Church of Christ.

“Bill was a wise man who wanted to give back to his community,” Clemons said. “It has been an honor to help carry out his intent.”

Flanagan said the gifts were given without restrictions.  Therefore, each of the four institutions would be able to decide how to best use the funds for themselves.

The distributions totaled $1 million.

For more information, please visit our website at www.totalcounselor.com

Reference: Lebanon (TN) Democrat (May 6, 2017) “Marks’ estate endows $1 million to four community groups”

Learn More about Deferred Charitable Gift Annuities

“For those who would like to leave a legacy and include a gift to charity in their estate plan, a Deferred Charitable Gift Annuity is a powerful tool to consider.”

Lee’s Summit Journal says in a recent article, “Retirement planning power tool,” that a Deferred Charitable Gift Annuity may be a great retirement planning tool for charitably-minded baby boomers, who may already be maximizing contributions to their IRAs.

A Charitable Gift Annuity (CGA) is a contract with a non-profit. The agreement states that, in exchange for a contribution, the non-profit guarantees an annual payment of a set amount to an individual or a couple for their lifetime. The remainder of the gift is used by the charity for their own purposes. A Deferred CGA is where the contribution is made now and the annuity payment is deferred to a later time.

Here’s an example to illustrate how this works and the benefits. Let’s say we have a married couple, Bob and Fran, who are now both 56 and in the prime earning years of their careers. They have IRAs and are making the maximum contribution annually, but they’d still like to put some more away into a retirement account.

They could always use another tax deduction, and they’d like to create a legacy gift to benefit their church. Bob and Fran create a Deferred CGA contract with a local community foundation. They are planning on contributing $4,200 annually for six years. That’s a total contribution of $25,200. Bob and Fran will defer their annuity payment, until they reach their full retirement age for Social Security, age 67. Over the six years they’re making the contribution, Bob and Fran receive a partial tax deduction for their contribution of $5,392. This saves them $1,779 in taxes, since they’re in a 33% tax bracket.

At age 67, they start to get an annual annuity of $1,512 based on a 6% annuity contract (that’s 6% of the contribution amount), which they’ll keep receiving for the rest of their lives. This amount doesn’t change from year to year, but will remain at $1,512. In addition, more than half of this amount ($858) will be income that’s tax free. A similar taxable investment would need to earn 8.2% to have the same return. It’s estimated over their lifetimes that Bob and Fran will receive $42,741.

The foundation investment committee and professional advisers will invest the contributions and track the investment returns and annuity payments in a fund specifically set up for this annuity. Estimating a conservative average annual return of 5%, the fund would have $54,547 remaining in the fund after their lifetimes, to create an endowment to benefit their church that would pay out approximately $2,700 annually to their church.

The Deferred Charitable Gift Annuity allowed Bob and Fran to provide an impactful legacy gift to their church. They also received reliable income for themselves in their retirement and a tax deduction during their peak earning years. This example shows why this is a powerful retirement planning tool for those who want to leave a legacy and support their favorite charity.

For more information, please visit our website at www.totalcounselor.com

Reference: Lee’s Summit Journal (March 28, 2017) “Retirement planning power tool”

Making That First RMD

“If you turned 70½ last year, you had the option to delay your first required minimum distribution until April 1 of this year. Fair warning: That's a Saturday, so don't wait until the last minute.”

If you turned 70½ last year but did not take the required minimum distribution (RMD) from your IRA, then you had until April 1 of this year. So, did you make it in time?

Kiplinger’s recent article, “Meeting Your First RMD Deadline,” explains that although the IRS is extending the April 15 deadline for filing your tax return to the 18^th this year because of the weekend and a Washington, D.C., holiday, there was no break or delay coming for taking your required minimum distribution (RMD).

If you turned 70½ in 2016, you were required to take your first RMD by April 1, 2017 (if you haven't already withdrawn the money). If you didn’t, you'll pay a penalty that’s equal to 50% of the amount of money you should have withdrawn.

Note that if you delayed taking your first RMD, you’ll also have to take the one for age 71 by December 31 of this year. That withdrawal can increase your adjusted gross income a bit. It may also bump you into a higher tax bracket.

In addition, it could make you subject to the Medicare high-income surcharge, if your adjusted gross income (AGI)—plus tax-exempt interest income—totals more than $85,000 if you’re single or $170,000 if you are married and filing jointly.

A good way to shelter your required withdrawal from your AGI, is to make a tax-free transfer from your IRA to a charity. If you're 70½ or older, you can transfer up to $100,000 per year to a charity from your IRA. This will count as your RMD, but it isn't included in your adjusted gross income.

For more information, please visit our website at www.totalcounselor.com

Reference: Kiplinger (March 15, 2017) “Meeting Your First RMD Deadline”

Michigan State Grad and Employee Gives Back through Estate Planning

“Through a charitable bequest, the Montgomery’s will creates an accounting scholarship to benefit the next generation of financial managers, especially those who might return to school while working.”

Valarie Montgomery may have retired from overseeing Michigan State’s financial operations, but she used her estate plan with her husband Mark to leave a legacy that will be felt forever. This legacy was reported by MSU Today in the post titled “Returning on an Investment.”

Val first realized her love for accounting under the instruction of her favorite teacher at Quincy High School. However, at graduation, she opted to fast track her entry into the workplace by earning a certificate in general business, not a bachelor’s degree. This was enough for her to gain experience at several financial institutions and businesses before she landed at MSU as a clerical technical level six employee in 1989.

Val didn’t forget about her love of accounting. While working full-time, she took advantage of Michigan State’s tuition assistance program and a flexible work schedule. She obtained her bachelor’s and master’s degrees in accounting from the Eli Broad College of Business. Taking just two classes per quarter—one at night and one during the day—it took Val 13 years to complete both degrees. She said that a scholarship also played a key role along the way.

As her education and skills took shape, she rose through the employee ranks of her department. She retired last spring from the Office of Treasury and Financial Management as the manager of MSU’s Treasury Services, a high-level administrative professional supervisory position.

The Montgomery Endowed Scholarship for Accounting will give preference to students who graduated from Quincy High School and are returning to school, after having been in the workforce for a time.

“We wanted to pay back MSU for helping me obtain my degrees and for giving me a place to have a fulfilling career,” says Val.

For more information, please visit our website at www.totalcounselor.com

Reference: MSU Today (January 31, 2017) “Returning on an Investment”

Mary Tyler Moore’s Money Savvy Results in Big Contributions to Her Favorite Charities

“Smart career decisions early on, paved the way for America’s Sweetheart to enjoy a long and comfortable final act. Now her last husband stands to claim whatever undoubtedly lavish bequests to signature causes leave behind.”

When actress Mary Tyler Moore was told she had diabetes, her doctors gave her a 50-50 shot at living another 35 years. A recent Trust Advisor’s article discusses how the actress overcame those odds by more than 10 years, described in “Mary Tyler Moore: Will Charities or Estranged Relatives Inherit?”

One thing that really helped was the awareness and millions of dollars she helped raise as a celebrity advocate for research.

Mary lived as comfortably as her health permitted, courtesy of the television empire she built after her signature roles ended. As far as estate planning, Mary buried her only son and never bonded with ex-husband Grant Tinker’s children. She called them “his” family, when he died a few months ago.

Since we can assume the stepchildren won’t receive a sizeable chunk of her estate that leaves her husband of 33 years, Connecticut cardiologist Robert Levine as her primary heir. He’s legally entitled to at least a third of whatever Mary left behind under state rules.

Even though there were rumors and reports of domestic disputes during Moore’s declining health, she could have divorced him and cut him out of the will at any time. But Moore died married. As a result, Connecticut law says her husband will get the spousal share, estimated to be about $20 million.

One of her best career moves was withdrawing from active celebrity life in the early 1980s. Intentional or not, moving out of the limelight gave her time to focus on the TV production empire she’d built with then-husband Grant Tinker.

The company, MTM Productions, bore her initials and was very profitable into the late 1980s. The company produced shows like “Hill Street Blues,” “Newhart,” and “St. Elsewhere,” and MTM earned more than $40 million a year.

Once Tinker was gone, Moore got a quarter of that cash flow. This steady income allowed her to decline roles she did not like. The sale of the company in 1988 realized $60 million and one last stock payout of $5 million. It was a smart executive exit.

Mary Tyler Moore will be remembered as a star, but she lived like an entrepreneur—generating a great deal of passive income. She gave much of her corporate payout to her favorite charities, such as juvenile diabetes research and animal protection. She also began her philanthropy early. She got to see her money doing good things.

Mary Tyler Moore worked hard for decades, then lived the life she wanted. She also spent a lot of money making a difference for several deserving charitable organizations.

For more information, please visit our website at www.totalcounselor.com

Reference: Trust Advisor (January 30, 2017) “Mary Tyler Moore: Will Charities or Estranged Relatives Inherit?”