Smart Women Smart Money | Harris & Harris Wealth Management

It’s the most wonderful time of the year. This is one of the many songs I hear in my head as we approach the holidays. Now, I probably have you humming it in your head if you are not in full voice singing it. This is the time when giving is in the air. So since everyone is in a giving mood, I thought it was only appropriate to discuss a tax advantaged way to giving to your special causes.

In one of my previous blog posts, I briefly discussed donor-advised funds. I even interviewed the executive director of a locally based donor advised fund, United Charitable Programs. I’m reading more articles about this major transfer of wealth to women. With the shift in financial responsibility, comes this shift in financial focus according to the article “Big Idea 2014 – Investing will completely change” written by Sallie Krawcheck. With women, there may be less focus on achieving the highest return and more focus on being a socially conscious investor.

According to Sarah Libbey, president of Fidelity Charitable, at least $1.3 billion flowed into Fidelity’s donor advised funds for 2013. This is a huge figure considering the current state of the economy. One of the reasons for the attraction to donor advised funds is the simplicity to participate in one. So how does it work? Well, your advisor can help you easily establish one with as little as $5,000. The fees to set up compared to setting up a family foundation are considerably lower. One hiccup to the donor advised funds is restrictions on how the funds are used and who can be given the funds.

Initially when I discussed donor advised funds, I talked about it along with giving circles. Which are individuals joining together collectively to support or enhance their philanthropic ambitions. This is one way families, friends, and like minded individuals can partner to collaboratively support a specific cause within the community or globally. Also, donor advised funds can be used in conjunction with trusts to fulfill family giving goals. So if you desire for your children to appreciate and understand the importance of being charitable, why not establish a charitable lead trust in combination with a donor advised fund. This may be one instrument in your family’s legacy toolkit to encourage your kids to think consciously and generously with an added bonus of helping you minimize taxes.

Here is how it works:

Charitable Lead Trust

• You contribute investments (securities or other appreciated assets) to a charitable lead trust.
• The trust makes fixed annual payments to a charity for a period of time.
• When the trust terminates, the remaining principal is paid to your heirs.
• The amount and term of the payments to the charity can be set to reduce or even eliminate transfer taxes due when the principal reverts to your heirs.
• All appreciation that takes place in the trust goes tax-free to the individuals named in your trust.

Now, isn’t this a wonderful way for your children to earn their inheritance.

As a mother, I feel teaching my daughter specific values, her societal responsibility, and compassion is key to raising a respectable and responsible child. And from all the mothers I’ve talked to, I feel I’m not alone. For I know that if I achieve that, I have a wonderful reason to kick up my heels and jump for joy because of the strong legacy I’m leaving in her.