When Stock Makes a Better Charitable Gift Than Cash

n9yfjkdc0va-jean-lakosnykMinnesotans are a generous bunch. A recent survey by WalletHub ranked Minnesota as the third most charitable state in the nation. We jump to #2 when you throw volunteering and service time into the mix.

While gifts of cash are always welcome (and usually tax deductible) at most non-profits, if you are looking to juice up your giving this year and get the biggest after-tax bang for your charitable buck, consider the gift of stock or a mutual fund instead.  

10 Reasons To Target Your Favorite Small Business This Saturday

In recent years, the Saturday after Thanksgiving has become known as Small Business Saturday – the one day each year when American consumers are encouraged to ditch the big box stores, go off-line, and support their local small businesses.

Started as a promotional event by a not-so-small credit card company, Small Business Saturday has grown into something of a movement with an estimated 95 million Americans shopping at small businesses on the first Saturday after Thanksgiving last year.

And why not? Small businesses represent a major part of the American economy. Nearly 29 million small businesses employ over 58 million people – almost half of all private sector employment.

In fact, 60% of net new jobs created since the Great Recession have come from businesses with fewer than 500 employees.

Give To The Max This Thursday


Visit givemn.org for Give to the Max Day 2015.

Visit givemn.org for Give to the Max Day 2015.

Part of my job as a financial advisor includes helping families make the most of their financial resources. I often recommend they contribute to a Roth IRA because of the tax-free growth or max out their retirement plan contribution so they can benefit from the tax deduction and possibly a company match.

But what about your charitable contributions? What’s the best way to make the most of the money you share with others?

Thursday, November 12th is Give To The Max Day 2015. It’s Minnesota’s way to make the most of the financial gifts you make to your favorite schools or charities. Last year on Give To The Max Day, over 60,000 Minnesotans donated more than $18 million to their favorite causes. Now that’s Minnesota nice!

Since many organizations also offer a matching contribution, Give To The Max Day may be an opportunity to double the size of your gift. Like a company match on your 401(k), when you make a donation via the GiveMN website on Give To The Max Day many organizations will match your contribution dollar for dollar.

Of course, not all organizations offer matching gifts, but many do. You can find organizations that will match your donation at www.givemn.org or by clicking here.

That’s the ticket. To sweeten the pot, GiveMN will randomly select one donor each hour throughout the day to receive a $1,000 golden ticket for their charity. Plus, two additional tickets will be selected for super-sized gifts of $10,000.

Do your research. Need to know more about an organization before you fork over your hard earned cash? Check out Guidestar. Guidestar has information on more than 1.8 million IRS recognized charitable organizations. Other resources include Charities Review Council and Charity Navigator.

Paws for thought. If you are still looking for a high quality organization to support, let me help you out. Long time readers of this blog know that I am a big supporter of Can Do Canines. Last year they raised over $40,000 through Give To The Max Day. This year their goal is $50,000. $50,000 is enough to provide not one but two assistance dogs to a person living with a disability in our community.

All contributions will be matched dollar for dollar (up to $10,000) and any contribution, no matter what size, will help change someone’s life forever. To learn more, visit their GTTMD page by clicking here. Or watch the video below:


Regardless of who you give to or how much, make the most of your charitable giving this year by giving to the max on November 12.

Three Easy Ways to Include Giving In Your Financial Plan

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Mobile-assist dog, Lilly, from Can Do Canines.

Every year the first week of August is designated as International Assistance Dog Week (IADW). This year it runs from August 2 – 8.

As a long time supporter and volunteer at Can Do Canines, a local non-profit dedicated to providing assistance dogs to people living with disabilities in our community, this week is always a great reminder for me to find ways include giving in my financial planning.

Below are three easy ways to include charitable giving in your financial plan without breaking the bank.

Workplace giving. Many employers allow employees to contribute to their favorite charity through a simple deduction from their paycheck. Some will even match your contribution dollar-for-dollar. The $5 or $10 you donate each pay period may not sound like much, but it adds up. Last year over $80 million was raised by the Greater Twin Cities United Way, much of it through payroll deductions and corporate matching programs. Depending on where you work other programs like the Combined Federal Campaign or Community Shares of Minnesota may provide similar opportunities.

Include your favorite charity in your will or estate plan. As they say, you can’t take it with you. So what happens with your money when you are gone? Your beneficiary documents determine who gets your IRA and other retirement assets when you die. For most people this means their family, and rightly so. But you can still throw a bone to your favorite dog-related or other charity by naming them as a partial beneficiary on your IRA or 401(k). Naming a specific charity as beneficiary on your retirement plan ensures that those dollars go directly to them pre-tax, without having to go through your estate first where they will surely be taxed.

Volunteer. Not everyone can afford to make a financial gift, but we all have something to offer. Most non-profits have plenty of volunteer opportunities. Here are a few examples:

Can Do Canines always needs of short and long-term puppy raisers, professionals with legal, financial or human resources experience, and creative people with experience in marketing, video production, graphic design, etc.

Feed My Starving Children has opportunities to pack food and feed others. You can volunteer as an individual or as part of a group. If you are especially ambitious you can organize a mobile packing event at your church or workplace.

Twin Cities in Motion, organizer of the Twin Cities Marathon and other local running events, has over 6,000 volunteer opportunities each year. Can’t stomach a marathon? No problem. Volunteer instead. You get to be a part of the fun and excitement without having to experience the thrill of hurling on the side of the road during the final mile – not exactly a bucket list item for most people.

Looking for a bigger commitment? Consider MAP for Non-Profits. They will pair you up with organizations looking for a board member with your skill set. Board membership is not only a great way to volunteer but also a great opportunity to have some influence with an organization you are super passionate about.

Opportunities to give through service are endless. And they are as critical to most non-profits missions as the financial gifts they receive.

Giving can be an important and rewarding part of your financial plan. Now you know three easy ways to make it happen.

How to Reduce the Tax Bill on Your IRA to $0

shutterstock_10546981 (2)What if you could avoid 100% of the income tax on your IRA? Or at least reduce the tax to as close to $0 as possible?

Most IRAs are funded with pre-tax dollars and distributions from these accounts are taxable at the highest rates. If you could find a way to avoid taxes on the distribution, it would be the holy grail of IRA distribution planning. Ahhhh, if only….

While a totally tax free IRA may seem like something that only exists in your dreams, there are some circumstances in which it may be possible.

Here’s how to make your IRA dreams come true:

Take distributions in a low-income year. Let’s assume that you are over age 59 ½ and you don’t have any penalties on your IRA distributions (to avoid penalties on your IRA distribution check out this blog post). Perhaps, you have a year in which you are unemployed. Or a year in which your business suffers a net loss. For whatever reason your taxable income drops to $0. Consider taking a distribution from your IRA up to the amount that would be taxable.

For example, if you are married with no dependents, you might be able to take as much as $20,300 from your IRA tax-free. This is because you are entitled to the standard deduction of $12,400 as well as a personal exemption of $3,950 for you and your spouse. If your itemized deductions are greater than the standard deduction you might be able to withdraw more. Not only does this save you tax dollars during your low-income year, but it also reduces the required minimum distribution you may have in later years due to your IRA having a smaller balance.

Diversify your income sources. If you planned right, you may be able to get money from a number of sources during retirement: taxable investments, tax-free investments such as municipal bonds and Roth IRAs, as well as tax-deferred investments like your IRA. By diversifying your income sources among various types of accounts, you may be able to take just enough from your tax-deferred IRA to meet your income needs while keeping your tax bill to $0.

In the previous example, you took out up to $20,300 from your tax-deferred IRA. What if you took another $20,000 (just to keep the numbers simple) from your Roth IRA, and received $20,000 in tax-free municipal bond interest? Now your income is a little over $60,000. One third of it from your tax-deferred IRA, all of it tax-free.

Donate part of your IRA to charity. In years past the IRS has allowed for Qualified Charitable Distributions if you are over age 70 ½ and the QCD is less than $100,000. QCDs are made directly from your IRA and the distribution is not taxable. If you are charitably inclined they can be a good way to avoid tax on a portion of your IRA. QCDs are best for people over age 70 ½, and do not itemize their taxes.

So far, Congress hasn’t passed legislation allowing the QCD for 2015, but as they have in the past few years, they may. We won’t know until the last minute, naturally.

List your favorite charity as sole beneficiary of your IRA. Donating 100% of your IRA to a charity during your lifetime isn’t a realistic or acceptable option for most people. But what about after you die? What then?

If you list your favorite charity (or charities) as beneficiary on your IRA, they will receive the IRA tax-free upon your death. As a 501(c)3 non-profit organization, they will not be required to pay tax on the IRA. 100% of your money will go to the charity of your choice. 0% goes to taxes.

Concerned about leaving your heirs with nothing while your favorite charity gets your IRA? Consider one of the life insurance strategies described below.

Make smart use of life insurance. A healthy person may be able to purchase life insurance with a death benefit equal to (or greater than) that of the income tax due on your IRA.

Let me explain: Let’s say you have a $1,000,000 IRA. The income tax due on that IRA could be as high as $400,000 or more depending on the state in which you reside.

Life insurance death benefits are income tax free. Depending on your health status, you may be able to purchase enough life insurance to cover the tax bill. Life insurance isn’t cheap, but it’s less expensive than the taxes your beneficiaries will pay when they inherit your IRA.

Don’t have the cash flow to make premium payments? No problem. Just take a distribution from your IRA sufficient to pay for the insurance. Technically, this isn’t exactly tax-free since the IRA distribution will be taxable, but you get the idea.

Leverage your life insurance. The example above assumes you will by just enough life insurance to pay the tax due on your IRA. That’s fine, but this next strategy takes that idea a step further.

Instead of purchasing only enough life insurance to pay the taxes, consider purchasing enough life insurance to replace the entire IRA – $1,000,000 in the above example.

In this case, when you die $1,000,000 would go to your beneficiaries income tax free through the death benefit of your life insurance policy. At death your IRA may still be worth quite a bit, maybe $1,000,000 or more.

Consider listing your favorite charity as the beneficiary of your IRA. This way, instead of your heirs receiving a $1,000,000 IRA with $400,000 or more going to income taxes, they get the full $1,000,000 from life insurance and your charity gets your $1,000,000 IRA income tax-free. Now that’s win-win.

Think you cant afford life insurance? If you are a healthy 70 year-old, your IRA Required Minimum Distributions may be enough to cover your premiums.

Assuming you don’t need the RMD for your own benefit, you could use it to buy a life insurance policy that would provide income tax free benefits when you die. If you want to lower premiums even more consider what is called a “second to die” policy. In these policies, the insurance company pays a death benefit when both you and your spouse pass away. Since its based on two lives these policies are usually less expensive and easier to qualify for.

Getting the most from your IRA. Some of the above ideas may be a stretch, but getting the most from your IRA means making the best use of these assets. Sometimes that may mean giving highly taxable money like an IRA to charity or using life insurance to leverage the net, after tax value of your IRA when you die.

While it may take some careful planning and even a health dose of creative thinking, you may be able to withdraw at least a portion of your IRA without paying taxes.

For more information on how to make the most of your IRA and retirement plan assets, just ASK MIKE.

Please note:  IRA strategies implementing various tax strategies or tax codes may not be appropriate for all investors. Please consult your investment and tax professional prior to implementing a strategy.