All about the challenges of Midlife Finance

Giving So It Helps

  Want to help something or someone you care about? Donating to a charity, helping a local cause out, or aiding someone you love…there are practical ways to do it that not only help the recipient, but give you concrete ways to make the best of it.

Let’s talk about family and friends first. Most, if they can afford it, take the direct approach: money.  IRS guidelines say you can gift up to $13,000 tax-free annually to any single person. (If you’re married, each of you can donate, effectively doubling that total to $26,000.)

There are two other ways to give money: from your estate, and the trust tax: gifting to generations after your children. (Grandchildren, great-grandchildren and so on.) Oh, and by the way, you’ll can donate more, but will have to hold it to a $5 million lifetime limit. (Thought you’d want to know that!)

Another possibility applies to education. Educations and medical expenses can be covered indefinitely, not only for family members, but for anyone. However, these can only be made directly to the college involved to be truly tax-free; medical gifts must be made to the hospital or medical provider. IRS instructions (Form 709) specify that an educational gift can only cover tuition. Medical gifts cover a much wider range of expenses – but cannot be used for anything that’s covered by the recipient’s insurance.

Finally, you can just give Stuff: vehicles, stocks & bonds, jewelry, furniture, even homes. However, bear in mind that gifts like land and stocks can trigger capital gains taxes when they’re sold. If Nephew Ernie decides to sell that that 40 acres of farmland, he’ll have to pay the taxes, instead of you. And if the land has gone up in value, those taxes will be higher.

     Go here for a long, involved discussion on gifting to family and friends, plus some helpful links.

giving so it helps

 Charities also love the direct approach. But cash donations are less than you think. According to one study, American households who were earning less than $50,000 gave about 6% of their income to charity. The higher-earning households gave even more — right?. Actually, households with more than $200,000 annual income only gave about 4%. (So much for the traditional idea of ‘tithing’  your income – giving 10%.)

There are other ways to benefit your favorite cause. Got a car, motorcycle, camper or trailer you’re not using anymore?Donate them, and take the tax write-off. These are usually auctioned off, but not always; our old-but-still-running Jeep Cherokee went to the local high school’s automotive class, to act as a guinea pig for aspiring mechanics.

Even better: volunteer your time, as well. Many groups can use help with everything from office work to acting as a docent for a museum.  (That sounds high-faluating, but is just a fancy name for a tour guide.) Even a few hours a month at your favorite shelter help out; you can also deduct items like mileage from your taxes for doing so.

giving so it helps

     Make sure, however, that your money, donations and time are being used well. Is the money going to telemarketers, instead of the group you’re ostensibly giving to? How would you enjoy knowing that your hard-earned cash went to fund a fundraiser? (One nasty example: all $5.3 million of the American Cancer Society’s funds raised in 2010 went to a telemarketing firm. The charity got nothing. )

Is your favorite nonprofit truly helping the world in a responsible manner — or are they just wasting it on fancy offices and high salaries? One good way to check: Charity Navigator.

Take the American Red Cross, for example. According to Charity Navigator, it only spends 4% of donations for administrative expenses — but nearly matches that with another 3.7% used for fundraising. Its CEO also earns a hefty $500,000-plus in annual salary. (The group has had some trouble with keeping its leaders, nonetheless — five went through the hopper in six years, including one man who resigned after having an affair with one of his staff.) 

The Red Cross, by the way, ends up with a 3-star rating out of 4.

One major drawback of this helpful website: it doesn’t evaluate religious nonprofits. “Many religious organizations are exempt under Internal Revenue Code from filing the Form 990. As a result, we lack sufficient data to evaluate their financial health. This is the same reason we are unable to evaluate the Salvation Army,” they say.

They do, however, have Top Ten lists (the Greater Chicago Food Depository is #1, and a full 4 stars!) And their forums are excellent; e.g.,  “7 Questions to Ask Charities Before Donating” or “Tips for Giving in Crisis.” 

Giving to others may be a convenient tax credit, or a warm fuzzy, but it’s much more than that. By giving of your time, possessions and money, you affect not only your family, friends and neighborhood for the better — you can change the world.

This post was included in the following carnivals.

http://wealthartisan.com/dividend-articles-and-a-carnival/

http://termlifeinsuranceinc.com/carnival-of-retirement/

http://www.iheartbudgets.net/2012/10/yakezie-carnival-baseball-playoffs-edition/

http://youngandthrifty.ca/weekend-ramblings-pf-blog-love-real-world-vs-school-world/

http://www.cultofmoney.com/2012/10/04/carnival-of-financial-planning-the-second-coming/

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