By Nancy Hughes Coe, As featured in At Home Tennessee, December 2006 Issue
"Ask yourself what you are trying to accomplish.You WILL give away everything when you die. Develop a strategy. "
WHETHER YOU ARE GIVING TO FAMILY MEMBERS OR charities, for the holidays or for estate planning purposes, for tax deductions or out of spiritual conviction" there arc many issues to consider. First ask yourself what you are trying to accomplish. Then develop a strategy for doing that. It may be possible to fulfill several goals at the same time.
If you want to give money to children or grandchildren, do you want
them to have it in their own name and thereby control it once they reach age eighteen? Or do you wish to fund a trust that can protect them from youthful financial impulsiveness and creditors until they are older and presumably more responsible? Are you trying to provide a college education and enable independence or subsidize a lifestyle and encourage dependence? Is the goal to give financial security or consumer comforts? Your answers will help determine your plan.
Most people know that you may give up to $12,000 per person per year (twice that if you are married, and rising to $13,000 in 2009) without incurring gift taxes. You may give five times that amount at one time fit is to a 529 college savings plan, which has the added benefit of growing tax-free. Perhaps with children you wish your giving to be an incentive for work by matching dollars given to dollars earned, whatever ratio you establish. Or you want to promote the habit of saving and so you match by gift to them any money they put into an IRA. Maybe you wish to help with the down payment on a house but not with the monthly note. You may choose to provide evenly but differently for children, taking into account who is the saver and who is the spender. What is your timeframe? Is your gift more effective now or later? Take care to consider that the provision of money to another person has the power to influence behaviors and attitudes, for good or bad.
Americans are the most generous givers of any nation. Many give 10% or more of their income every year to churches and charities. If your goal is to make a difference and not just a donation, then you must know well the recipients of your money and how the money is spent. A new opportunity has come with the Pension Reform Act of 2006 which allows someone over 70 to give the Required Minimum Distribution from their IRA directly to a charity, without tax being paid Establishing a donor-advised fund at a community foundation is a helpful tool for giving to charity and involving your family at the same time. The dollars you deposit there are dispensed at the direction of advisors whom you name-perhaps yourself for now and your children when you are gone, thereby mentoring them in phiIanthropy.
You WILL give away everything you own in this life when you die. Estate planning is simply the map and directions for doing so. Whether you are positioning assets to avoid estate taxes for heirs or listing the eventual disposition of your possessions, you need professional advice and service. Without knowledge of complex laws, you are likely to make big mistakes. But no attorney or financial advisor or accountant can tell you what you should do. You will need to search your own heart and hopes for what you wish to accomplish and then ask them how to do it. They will have many ideas you may not know about.
Most of us have more than enough physical possessions. The growth of the storage unit business is shocking. The best gifts to give are ones that please the heart of the recipient. If you are one of those thousands of people without a will, there is hardly a more important gift that you can give your family .. right now. Comfort your spouse with getting (not promising) a full medical check-up. Giving away the clutter of the garage and closets can be a gift to de-stress your family with less crowded living space.
Take a day to spend doing only what the recipient wishes to do. Write down your personal life history. Let a grown child 'shop' your home for an item they would treasure in their own home now, not when you die. In other words, give yourself sacrificially.
It is a great blessing to have enough in this life, and an even greater blessing to have enough to give. But it is both hard work and joy to give wisely. The effort spent clearly defining what you want to accomplish with your generosity is worth it. Before you write that check contemplate your investment in the lives of real people.