Philanthropy and You

Philanthropy is a tradition in America. It started voluntarily as communities built and developed schools, roads, and parks with dollars, time, and materials collected by local citizens. In the early 20th century, the government imposed income and estate taxes on its citizens and began to develop the country with tax dollars raised from citizens. 

Therefore, each of us is a philanthropist. A percentage of each dollar that we earn, save, invest, or transfer to others by gift or at death is committed to the common good. Most philanthropy occurs involuntarily thorough the collection of income, capital gains, and estate taxes. These taxes are then allocated to the communities in which we live, through legislative action.

However, our present tax structure allows each of us to become voluntary philanthropists, if we desire. Specifically, by isolating all or part of your wealth that is designated for taxes, you can control your wealth by managing and directing it to accomplish objectives for the community. These funds that were previously earmarked for taxes can be referred to as your philanthropic capital.

Philanthropy has been defined as “voluntary action for the common good.” Each of us is a philanthropist. Through the use of planned giving vehicles such as wills, trusts, beneficiary designations on life insurance and retirement plans, we can choose where our philanthropic capital goes now and after our death. Or, we can have our philanthropic capital taken by the government in the form of taxes to benefit the public good. Planned giving which utilizes charitable trusts allows us to plan our philanthropic involvement now, and receive tax and asset preservation benefits while helping the community organizations we care about.

Benefits of Philanthropy

In addition to realizing control over their philanthropic capital, donors may achieve significant personal financial benefits when they strategically engage planned giving through the use of certain tools and techniques sanctioned by our government.

These benefits may include:

·       Reduced risk through diversification of financial assets.

·       Tax-free accumulation of assets earmarked to benefit the donor.

·       An increase in current income or cash flow.

·       Retention of philanthropic capital in your asset base for extended periods, to help build your income and asset building needs.

·       The transfer of assets to family members and heirs with reduced taxes.

Besides these important incentives, voluntary philanthropy can lead to your increased activity in the community and a better quality of life for you and your loved ones.

·       Voluntary philanthropy can take several forms. Among those most popular are:

·       Current, outright gifts to charitable organizations.

·       Beneficiary designations in wills, life insurance, or retirement plans.

·       The use of charitable trusts to benefit the donor and the charity.