Smart Ways to Give to Charity

Everyone has questions about money.  Give us two minutes and we’ll see if we can answer yours.  Mike McCormick is a Registered Investment Advisor in Bozeman, Montana. His clients have complicated financial lives that are put in perfect order and kept that way. The information in this podcast is for informational purposes only and cannot be construed as financial advice.

“We just got through a holiday season in Bozeman, Montana and it was evident in many ways what a giving community we live in. We could see people ring bells outside of the stores with full buckets, plenty of envelopes were being sent in the mail to things we care about and there were also lots of gifts under the tree that are more than material things. One of the joys of having your financial house in perfect order is giving back to those that touch you. 

At McCormick Financial, we suggest considering three important details when looking at charitable giving:

Be deliberate. Don’t overdo it. And play that tax game.

• When I say be deliberate, I mean make sure the money you give is going to the highest good, get the best value for your buck. My wife and I had an experience recently where we went to the coffee shop. We ordered simple drinks and a pastry. She left a generous tip as she is prone to do. And then we walked out with our treats across Main Street and passed a group of musicians. They were in the cold. They weren’t particularly well put together, but they were trying hard. We were out of cash to give. A little bit of planning would have maybe made us feel better about how we allocated our scarce resources.  Do some research on the Internet. You can look up each charity, see what proportion of the funds that they receive, go to active program development versus salaries. There’s a lot of independent studies out there that can help you make sure that the dollars you’re given are going to the things that you care most about. 
• Second, don’t overdo it. Beware the tactics that they use in this business of getting you to part with your hard earned dollars. From receiving free gifts in the mail to having an open bar at their annual gala. It’s well understood what opens people’s pocketbooks versus what gets them to reconsider and plan. And regarding planning, I suggest to my clients and friends that each January, plan out how much you plan to give for the entire year, identify charities and causes that you care about, ones that other family members care about and come together with a game plan.  And recognize it’s OK to be spontaneous as well. It feels good to give money. It should. You’re doing the right thing. 
• And last play the tax game. Recognize first off that you can’t make money by giving it away.  But you can give the tax liability away. If you have high basis stock, meaning you bought it at a low price and it’s gone up a lot and it’s in a taxable account, you can give that away. You can also give away some money out of your IRA. In some situations, you’re passing along the tax liability to that entity, and since they don’t get taxed, you’re giving more dollars. In other situations where there’s more money to be given away and more planning needed based upon variable tax rates, it might make sense to open a donor advised fund. This is today’s lightweight version of the Family Charitable Fund. They can be set up with your broker, sometimes at your local bank, and allow you to receive sometimes instantaneous tax benefits while being able to maintain some control over where the funds are going, how they’re growing, and involve other family members as well. Lastly, don’t forget that there are some state programs out there that make it really attractive to give in a planned way.  In Montana you can utilize the Montana Endowment Tax Credit (*so long as it is in effect). This in some cases can save you $10- $20,000 of Montana State income taxes. This is a complicated way to give, but one that savvy people utilized to their benefit. Let’s make sure that in 2018 and beyond, every time we give money, it’s going for the maximum benefit for you and for the charity.”

Thank you for turning into the Montana money minute. If you’ve got a question for us, send me an email. I also appreciate any feedback. Have a great day and remember to go easy on yourself. Life’s hard. Let’s make the money part as easy as possible.