WORKING TOGETHER TO CREATE CHANGE
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A well-planned gifting program, explains Mark A. Adkins, a certified financial planner and wealth management advisor with The BWA Wealth Advisory Group of Merrill Lynch, can also significantly reduce or eliminate federal estate taxes, eliminate capital gains taxes, and reduce income taxes. “Planned giving helps ensure that your property goes to the organizations you want to have it. Unless planned for carefully, a large share of your family’s wealth could eventually be lost to taxes.”
Properly structured gifts, he says, can provide an income stream for the life of the donors. Giving may actually benefit your family after you’re gone.
A planned gift can be made with cash or by donating assets such as stocks, bonds, mutual funds, real estate, or business interests—even property/collectibles such as artwork and books (although those are often more complicated to administer). When it comes down to it, charitable giving is fundamentally an expression of values.
One organization that has greatly benefited from planned giving is Minnesota’s Nongame Wildlife Program, working to protect the state’s 500 species of wildlife. Funds have helped protect the loon, bald eagle, trumpeter swan, Eastern bluebird, Peregrine falcon, and osprey. Donors can designate the DNR Nongame Wildlife Program as a beneficiary when doing estate planning, or write in a tax-deductible donation on the check-off part of their tax forms (the line with the loon symbol beside it). The needs of Minnesota’s wildlife and land depend more than ever on all partners giving what they can.
Minnesotans, as a whole, are a very philanthropic group. There’s a certain charitable spirit here among the 10,000 lakes, says Burns. “Pretty much everyone, during their income tax return, gives something to charity,” he says. “The goal is to educate more Minnesotans about the benefits of charitable giving.”
When people of all ages, incomes, and social statuses come together to declare that the work of a nonprofit organization has an important place in the future—no matter what the cause—the results can make a profound difference.
How to Give
At one point in time, establishing a private foundation was the preferred way for single donors to retain maximum control over grant-making while creating a legacy of family philanthropy. It wasn’t cheap (there are extensive set-up fees), it wasn’t easy to operate, and it wasn’t, well, private (private foundations are required to file detailed tax returns on grants issued, investment fees, trustee fees, staff salaries, asset size, etc. and then publish a notice to the public that the tax return is available for public viewing. These are public records and are often compiled into grant-seeker directories).
Eventually, community foundations—tax-exempt public charities created by and for the people in a local area—started popping up in states across the country in an effort to simplify the giving process. Operating as a sort of savings account for the entire community’s benefit, with funds growing in an endowment account, these foundations enable people to easily and effectively support the issues they care about.
The benefits of donating money through a foundation include helping donors meet their charitable goals through a variety of funds and planning options, knowledge and planning expertise, tax advantages, and simplicity. A community foundation is a public charity, allowing donors to receive maximum financial benefits.
“We make it easy to support the issues you care about, while allowing the organizations you support to stay relevant as community needs and opportunities change,” explains Schein with The Minneapolis Foundation. For example, arming high school girls with digital cameras would have been unimaginable for Martha H. Gould, creator of one of The Minneapolis Foundation’s first funds. Neither the Perpich Center for Arts Education nor multimedia arts existed in 1922 when a provision in Ms. Gould’s will established a fund “for the assistance of young girls in an effort to obtain an education in art.”
Community foundations, such as The Minneapolis Foundation, The St. Paul Foundation, and the Minnesota Community Foundation, also help families develop their priorities so they can focus on organizations that effectively utilize their contributions of time, talent, or money.
Tools for Giving
One way a person can give is by creating donor advised funds.
“A donor advised fund is a like a “charitable checkbook” account,” Schein says.
It’s essentially a charitable giving vehicle that allows a donor to make an irrevocable, tax-deductible contribution to a foundation or financial institution and make grants to charities over time. “People usually set up donor advised funds after an inheritance, year-end bonus, or other major life events that allows them to focus on their giving.”
It’s convenient, cost-effective, and an easy way to involve future generations in giving.
The costs associated with donor advised funds are so low that 99 percent of all the dollars contributed go to charity. Donor advised funds are a beautiful thing to nonprofits, which don’t have to accept securities as contributions—they simply receive a check instead.
Charitable giving trusts also have unique advantages, allowing donors to distribute their wealth to both family members and charities through the same tool. They can be complicated, though, so it’s important to talk to a financial advisor or attorney.
LEAVING A LEGACY
Whether you’re just starting the estate planning process or have had a plan in place for awhile now, think about the legacy you want to leave.
“Planned giving is a great way to carry your individual or family charitable legacy beyond the scope of your life by supporting the causes, organizations, or issue that matter to you most,” says Schein. “It’s a deeply rewarding, effective, and meaningful way to make a lasting impact.”
A planned gift has the power to keep giving long into the future.