When you want to fix the world, planning is important

By NECHAMA KATAN

article created on: 2008-11-01T00:00:00

What is important about money to you?

For many, the answer is the ability to give back to the community to make the world a better place. Jewish tradition focuses on the directive of tikkun olam—to “fix” the world, charitable giving can be a great place to start.

How can you leverage your financial plan to maximize giving? Your financial plan should include all of your financial values as wells as goals; retirement as well as giving.

There are two main ways to look at giving.

First are the gifts that one gives while alive and often annually. An advantage of this type of giving is that you get to see the impact of your gift. Second are the gifts one makes through their estate plan. Both methods of giving benefit you as well as the organizations that you want to support.

USE FINANCIAL PLANNING

A good financial plan will review your entire financial situation starting with cash flow, what you are saving money for (a new home, college etc), your taxes, retirement planning, risk protection and estate planning.

Charitable giving can impact most of those areas of your financial life. A good planner will work with you to understand how much you can give on a monthly/annual basis. He or she will work with your accountant and lawyer to understand the best types of gifts to give to minimize taxes both now and in the future. In some cases charitable trusts can be used to provide income in your retirement.

It is important not only to have a comprehensive plan but to make sure that your financial advisor is working closely with your accountant and lawyer.

But what if I don’t have a lot of money to give?

You don’t need to give millions of dollars to make a difference. Many Jewish schools teach kids to give a penny a day.

Make a budget, decide which charities you wish to support, and set up automatic payments. Most organizations will be happy to charge your credit card once a month. A $2 latte a day comes to more than $700 a year. For just about everyone, $2 a day is easier than finding $700 at the end of the year.

If you don’t have money but have time, charities run on volunteer help. For some, charitable giving is helping an older or sick member of the community get to the doctor, or tutoring a child after school, or working in a food bank.

For those that want to support charities financially there are many tax benefits to giving property to charitable institutions. Consult your accountant to understand how these might benefit you. These benefits can help reduce your tax bills now as well as lower annual tax liability. Because some charitable contributions are tax deductions, the actual cost to you might be significantly lower than the amount of the check that you write.

Generally, good property to give include the following:

Highly appreciated or rapidly appreciating property such as some stocks or real estate. The stock market crash has provided an opportunity where some stocks are undervalued and may make great gifts.

Cash is easy to give and the simplest for the charity to deal with.

Income producing property, if you don’t need to the income why pay taxes on it; instead pass it on to the charity of your choice.

Tangible personal property such as cars, jewelry and art work.

Remainder interests in property. This lets you use the income from the property while alive and then the charity gets the property after you have died.

Life insurance. There are many ways to use life insurance to give to your favorite charity.

GIVING THROUGH YOUR ESTATE PLAN

You can make a charity of your choice the beneficiary in your will and estate plan. The biggest benefit of this is that it reduces your estate for estate tax purposes. You need to work with your lawyer, accountant and financial planner to make sure that your estate plan meets your needs.

There are many ways to give. Regardless of how you choose to give, develop a plan, budget your time and or dollars and give regularly.

The opinions expressed are those of Nechama Katan and are meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Nechama Katan and Waddell and Reed does not provide legal or tax advice. Please consult your accountant and lawyer prior to making any tax decisions. Please consult your financial advisor prior to making financial decisions. Nechama Katan is a financial advisor with Waddell & Reed and can be reached at: Waddell & Reed, 8625 SW Cascade Ave. Suite 410, Beaverton, OR 97008, 503-627-0740, Ext. 119, nkatan@wradvisors.com, www.nkatan.wradvisors.com, Waddel & Reed, Member SIPC.