Charitable Alchemy

Charitable Alchemy

Article posted in Practice, Planning on 8 August 2017| comments
audience: National Publication, Two Hawks Consulting, LLC | last updated: 11 August 2017


The marriage of retirement planning and philanthropy is the subject of this "Opportunity Recognition" excerpt.

By: Randy A. Fox, Editor-in-Chief

Retirement planning is the major focus of many financial advisory firms – but guiding clients to a safe and prosperous retirement remains one of the great challenges that advisors face. So what does retirement planning really mean? Simply put, it requires the advisor to help their clients systematically accumulate assets for when the paychecks stop coming – enough to produce an income that will maintain a desired type of lifestyle. There are numerous challenges that must be addressed during the accumulation of wealth – not to mention additional challenges at or before retirement, when accumulation becomes distribution and growth assets must produce income.

One set of solutions that are often overlooked are the many charitable tools that can help facilitate this transition. These may include Charitable Reminder Trusts, Charitable Gift Annuities, Pooled Income Funds and a few others.

By utilizing charitable gifting tools, several positive results can occur:

First, low basis, appreciated assets can be sold without incurring capital gains tax. That means 100% of the asset can remain at work to produce the required retirement income. Simple math will tell you that it’s less stressful on a portfolio that uses all 100 cents of each dollar instead of 70 or 75 to produce the same income.

Second, each of the charitable gifts will produce an income tax deduction (dependent on a number of different factors). Savvy advisors will utilize the income tax savings to further enhance the retirement income stream. If the dollars aren’t going to the government, and instead end up in the clients’ pockets, they can be reinvested after all.

In some cases, it’s even possible to create income from non-income producing assets. Case in point is something we call the LEGA-C Plan™ – while this gift is unusual, in the proper circumstances it can be extremely powerful. It requires combining a gift of a residence in a life estate agreement and then exchanging the remainder interest (which exists only on paper) to a charity in exchange for a gift annuity. Knowing how to facilitate this gift allows retirees to remain in their home and receive an income stream for the rest of their lives without having to give up very much at all. Yes, when they die, their home will go to charity – but if the children really want the home, and usually they don’t, they can always buy it back from the charity at fair market value.

For every advisor involved in assisting clients reach and navigate a comfortable retirement, understanding the charitable planning tools and the power of properly deploying them to produce more income, avoid capital gains tax, or turn their home into an income producing asset should be common sense. And yet, many advisors either ignore these options or simply don’t take the time to become fluent in them.

Charitable planning is a clear competitive advantage and a win-win (win). Good for clients, good for society, good for advisors – it should not be overlooked or ignored.

Give me a call at (704) 698-4055 or email me at for more information on how charitable planning can benefit your clients.

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