You have a couple options when it comes to how to spend your money.
Option 1. Accumulate wealth and then create an estate plan so that upon your death, money goes to support the various causes you believe in. Hope that everything goes to plan after you die.
Option 2. Accumulate wealth and instead of waiting until after you’re dead, donate the money during your lifetime so you can see its impact on the world.
Can you tell which option I’m in favor of? Of course it’s Option 2. Not only do you get to see that money in action and the good it does in the world while you’re alive, but you can often combine that giving with smart strategies that make it a win-win situation. Today I’ll touch on a few of these strategies.
Impact in Action: Giving Your Money Away During Your Life
If you had the opportunity to remain financially secure, reduce your tax burden, and donate to causes you believe in, would you do it? I’m guessing the answer is yes.
Here are four strategies that allow you, if done right, to give your money where you believe it can do the most good while also creating favorable tax consequences for yourself. The key is to think outside the box. There are more ways to give to charity than to simply give cash.
#1 Donate stock
Rather than cash, give stock that has gone up in price instead. You’ll skip paying the capital gains tax you’d be faced with if you sold your shares, plus the gift is tax deductible as a charitable contribution. You could use the money saved by the tax deduction to buy more stock, if you want.
#2 Donate your house to charity before you die
This may sound scary at first, but hear me out. By giving your home to a cause you believe in before you die, you get a tax deduction that you wouldn’t get by leaving your house to your children. You can live in the house for as long as you want as part of the terms of your agreement, and upon your death the house will belong to the charity outright.
What about the children? If none of your children actually want to live in the house, and would plan to sell it anyway, then it’s not a problem. You can plan to give them other assets instead.
#3 Donate a Life Insurance Policy
You can give a life insurance policy outright to a charity if it’s no longer needed – say, for instance, you got a policy to cover the outstanding mortgage and the kids’ education in the event of your death, but now many years have passed and you no longer need the policy for those reasons.
#4 Create a Charitable Gift Annuity
Donate some assets to the charity and in turn the charity will set up an annuity that pays you cash every year for the rest of your life. You get an income tax deduction for the donation, plus you get guaranteed income that pays more than CDs.
What good could your money do?
If you support Alzheimer’s research, wouldn’t it be wonderful to watch the money you give help support the next breakthrough? If you believe in the arts, wouldn’t it be thrilling to watch a gallery break ground on a new wing partially funded by the money you donate? There’s no reason you can’t be alive to see some of the results of your charitable contributions.
If you’re worried that by giving so much away you’ll be jeopardizing your financial security, or you want to learn more about smart strategies like the ones listed above, call us at the Renn Wealth Management Group today to discuss your situation. We want to help you manage your wealth so you can make the impact on the type of world you believe in.