5 Practical Keys to Being a Cheerful Giver
Giving without Guilt
One of my favorite movie lines is from Christmas Vacation when Clark receives a membership in the Jelly-of-the Month Club instead of his expected year-end bonus check. In a bumbled attempt to make Clark feel better, Uncle Eddie blurts out, “It’s the gift that keeps on giving, Clark.” The gift that keeps on giving—a great definition for both jelly clubs and guilt.
If you’re like my wife and me, you probably receive an avalanche of requests from charities and organizations soliciting financial gifts at Christmas and before the year’s end. All those requests can provoke a bit of guilt, and guilt can be a powerful motivator for giving. But joy is even more powerful.
Joyfully sharing something we have with someone else will open our hearts to new possibilities. To quote Randy Alcorn’s wonderful little book, The Treasure Principle, “Giving is the only antidote to materialism.”
Most of us can’t give to all who ask, but usually several special requests need our attention. So how can we be generous without guilt and without breaking the bank?
Here are some guidelines and ideas for how we can give real gifts that keep on giving:
- Have a plan. The year-end rush is emotional, so avoid waiting and hurrying through last-minute giving decisions based on emotions. Bypass guilt by preparing to give in advance. Make a list of the charities and groups that mean the most to you and that you want to support. Then make a giving budget that includes how much total giving you want to do and how much each recipient should get. Budgeting your giving encourages you to be a consistent giver rather than a haphazard one, and being proactive brings joy.
- Giving appreciated investments may be better than giving cash.If you donate investments such as stocks or mutual funds directly to the charity, you can take a charitable deduction for the stock’s fair market value. You’ll also avoid capital-gains taxes on the increase in value, which you would have had to pay if you sold the stock and then gave the charity the cash proceeds. You can deduct the fair market value only if you hold the stock for more than a year before giving it away; otherwise you are limited to deducting the cost basis.
- Sell losing investments to create cash for giving. Many people rebalance their investments and harvest tax losses at the end of the year. If an investment has lost value, it’s better to sell the stock first and give the cash to the charity. You’ll be able to deduct your charitable donation, and you’ll also be able to take a capital loss when you sell the investment, which you can use to offset later gains.
- Use IRA Required Distributions for giving. If you are over 70 ½, you are required to take a portion of your IRA, called a “Required Minimum Distribution” (RMD), as income each year. Current tax law allows you to gift up to $100,000 of your RMD directly to charity and exclude that amount from your taxable income. Remember, however, that you don’t get to double dip by also deducting the charitable gift against your taxable income.
- Leverage giving with a donor-advised fund.A donor-advised fund (DAF) operates much like a mini personal foundation. Once you open your DAF account with a community foundation or brokerage firm, you can make tax-deductible gifts to your DAF, using cash or some of the methods described above. You can take a charitable tax deduction when you gift to your donor-advised fund, and you have unlimited time to decide which charities to support. The donor-advised fund may also accept privately held stock, real estate, and other complex investments.
If you have been blessed with material possessions, please use some of these ideas to make it easier to share and give at year end or during the year. Several of these ideas involve more sophisticated tax and financial planning, so be sure and check with your tax advisor, investment manager, and the charity to whom you wish to give before moving forward.
Remember, if you have a plan, you can give out of joy rather than guilt. So this year, I hope you are a cheerful giver and enjoy the bounty of the new year.
About the author – Andy Raub is known as “America’s Encore Coach” because of his passion to help retirees repurpose their lives and reorganize their money. Andy is the author of the new book The Encore Curve – How to Retire with a Life Plan That Excites You and the founder of the Encore Curve Program. See how The Encore Curve process can help you clarify your life and simplify your money at EncoreCurve.com