Charitable Giving

Mike's Market Commentary

Everyone has their own reason for gifting their assets or a portion of their income to charitable organizations.  Some find comfort in helping others who are less fortunate, while others simply want to share their good fortune.  Many of the institutions of art, sciences and education are supported in large part by those who want to give something back in appreciation for their contributions to the community or the individuals themselves.

Presently, the tax code offers incentives for gifting of one’s assets or incomes. Tax deductions are given for current contributions and, for estate owners, charitable gifts can reduce the size of the estate to help minimize estate taxes.

Often times, an individual will designate a charitable beneficiary in their will to benefit the organization after the individual dies.  By using charitable gifting techniques, a donor may be able to benefit the charity while living without having to sacrifice the…

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Choosing the beneficiaries of your assets

Choosing beneficiaries to receive your assets may seem like a straightforward decision. But it can get complicated. The following are considerations you should keep in mind when choosing beneficiaries.

  • Individuals under the age of 18 cannot receive assets directly, so it is not recommended that you name underage children as beneficiaries.
    • If you name them directly, the heirs will need to have a guardian appointed in court to receive the assets, and it is costly to go through this process.
    • If you have children whom you want to inherit your assets, have an attorney write a will that creates a trust for their benefit and name a trustee who will be responsible for the children’s funds until an age you choose. The beneficiary of your assets will then be the trustee of the children’s trust under your will.
    • After the children turn 18, they can be named directly. However, most children are not responsible with money until their late 20s or early 30s. It is still wise at that point to create a trust in your will and you can appoint a trustee to take care of their money until they are mature enough to do so.
  • Be careful leaving assets to people who may be on social assistance such as Medicaid. Inheriting assets directly may disqualify them for services. This includes disabled adults or elderly needing nursing home care. If you want to leave assets for these individuals, work with an attorney to create a special needs trust. The beneficiary of your assets can be the special needs trust which can be used for their benefit but not disqualify them for services.
  • If you plan to leave money to charity, it is good to do this as a beneficiary designation on retirement plans. Income taxes on retirement plans are paid by beneficiaries when the money is withdrawn. Charities are not required to pay income tax, so this is a great asset for charities to inherit. Leave assets such as Roth accounts and regular brokerage accounts to your beneficiary, as these will pass to them without tax consequences.

How to find unclaimed assets

There are many types of unclaimed assets – back wages, old retirement plans, refunds, old bank accounts and savings bonds. Periodically, a company will send you a letter stating they found an unclaimed asset and they can help you claim it for a fee. Most companies will only do this for assets with a value that makes it worth the effort for them. However, what they don’t tell you is that you can find unclaimed assets and totally claim them for free. How do you do this?

Places to find unclaimed assets

Each state has a database of unclaimed assets, and there are sites that list federal sources of unclaimed assets. Fortunately, all these sites are listed at the website. Start with the most obvious first states where you lived. If you know there is a possibility of unclaimed tax refunds, pensions, or back wages, check those sites next.

What to do if you have unclaimed assets

If you get a “hit” and have unclaimed assets, the next step is to file a claim for those assets. This is fairly easy. The state will request a form and some supporting documentation, such as verification of the address where you lived when you owned the asset. Before you know it, you will have a check sent to you.

What to do if a deceased family member has unclaimed assets

This is a little trickier, and all the more reasons to check for unclaimed assets before someone dies. If the asset is large enough, it may require the executor to open probate. Depending on the estate, the fees and attorney costs may outweigh the benefit. Each state has different requirements, so check into what is needed to help you decide whether to place a claim.

But my neighbor gets higher returns than I do

I took a call from a client over the weekend asking why they do not get the returns their neighbor does?  First thing I asked was to find out how much their neighbor was down in 2008.  They were not overly impressed with the answer they got back to that question.

Do you remember the children’s story of The Big Bad Wolf and the Three Little Pigs?  Fiddler Pig and Fifer Pig much preferred dancing, singing and playing to building protection against the Big Bad Wolf – in fact, they made fun of their cousin Practical Pig, who spent his time building his sturdy home of brick and stone rather than singing and dancing in the sun with Fiddler and Fifer.  Fiddler and Fifer, singing “Who’s afraid of the Big Bad Wolf, Big Bad Wolf, Big Bad Wolf?”, carelessly threw together their houses of sticks and straw and returned to singing and dancing just as quickly as they could.  As you probably recall, when the Big Bad Wolf inevitably showed up, he huffed and puffed and blew down the houses of Fiddler and Fifer pig, who ran squealing in mortal fear to Practical Pig’s brick home, begging to be let in before the Big Bad Wolf ate them up.  Practical Pig, feeling sorry for them, let them in and saved them from the Big Bad Wolf (interestingly, in the German version of this story, the Big Bad Wolf eats Fiddler and Fifer right on Practical Pig’s doorstep!).  The Big Bad Wolf even tried to sneak down the chimney of Practical Pig’s brick and stone house, but Practical Pig outsmarted him there, too.  This tale is directly applicable to our risk-managed investing.  

 Risk-Managed investors are Practical Pig, intentionally foregoing some singing and dancing and even enduring the taunts of Fiddler and Fifer pig who dance and play in the sunshine while making fun of Practical Pig.  But when the Big Bad Wolf shows up, well, the survivor is Practical Pig, and – unlike the children’s story – there’ll be no one around to save Fiddler and Fifer Pig from the Big Bad Wolf.  

 Check out this great old Disney Cartoon

( and think about how you, our clients benefit and should all be just like Practical Pig.