'TIS THE SEASON TO GIVE

With Thanksgiving in sight and fresh holiday decorations ramping up cheer in your neighborhood, it’s the time of year when it is hard not to feel more festive and grateful than usual. Whether you are motivated to contribute to a worthy charitable cause or thinking about helping family, let’s take a very brief look at some financial instruments you may want to consider using to help you make a difference.

 DIRECT GIFTING TO CHARITIES: Philanthropy is an important aspect of generational wealth transfer because it allows you to earn income tax deductions and transfer money out of your estate to avoid additional estate taxes. Although there are many strategies for philanthropic giving, the most common is through direct gifts. Even though this method of giving may seem straightforward, there are options for how you can choose to give and benefits to each. Whether it’s through cash, securities, real estate or other assets, you can provide for a cause and receive tax benefits through direct gifts to charity.  PRIVATE FOUNDATIONS: For families interested in donating a considerable amount of wealth, setting up a private foundation may be a viable option. Private foundations are completely tax-exempt, although they can only grant up to a 30% income tax exemption rather than the 50% granted by direct donation. Private foundations are typically managed by a board consisting of family members and financial advisors, who define charitable goals and manage donations. They allow this board to act as intermediaries between the donor and the chosen charity. Private foundations provide a unique way for families to come together for philanthropy because they allow relatives to be named to the board of directors.

 DONOR-ADVISED FUNDS: Donor-advised funds are designed to allow you to grow your donation to charity through investment. Donors, who can be individuals or groups, take donations and have a sponsor organization invest them. Although these sponsors charge fees for the creation and management of DAFs, the investment returns they can produce may help to build the value of the fund and could generate more money for charity than a simple gift. In addition, many DAFs have no minimum distribution requirements. In terms of generational wealth transfer, DAFs can be especially significant because they allow the donor to choose a successor advisor to continue the gifting tradition within the family. While DAFs do have many tax benefits that private foundations do not, they also allow the donor less control. You should consider that the official controller of donor-advised funds is the sponsor, who retains the right to disregard

a donor’s choices if he or she deems a recipient charity to be unqualified.  CUSTODIAL ACCOUNTS: Anyone can open a custodial account for anyone else under the age of 18. These are commonly known as UTMA Accounts (Uniform Transfers to Minors Act). The person who opens the account must name a custodian (which can be him- or herself) to manage the account with a fiduciary duty to the beneficiary. While the custodian controls the account and manages the investments, anyone can donate to it and there is no limit to how much can be contributed. The beneficiary owns the assets immediately but cannot access them until he or she reaches the age of majority, which varies by state from age 18 to 21. The custodian is allowed to withdraw funds from the account before the beneficiary reaches the age of majority, but only if those funds are used for the benefit of the child (for instance, for a new laptop or summer camp fees). While some people see the flexibility of a custodial account as a benefit, others see it as a drawback. If you donate to a custodial account so that your child can go to college and then he or she decides not to, you have no say in how the money is spent. The beneficiary could squander the money at a casino and you would not have any legal authority to keep him or her from doing otherwise, despite contributing the money in the first place. Another potential drawback is the effect of the funds on the Free Application for Federal Student Aid (FAFSA). If the sole purpose of this account is for future college expenses, you will want to talk with your financial adviser about other options.  KEEPING IT SIMPLE: These are quick overviews of common vehicles used for clients seeking to make an impact while leaving a personal legacy. When seeking to maximize the impact of your personal giving, work with your financial and tax advisers both so that you can make smart decisions and leverage your impact. If you are seeking fresh insight into your personal situation, our team would love to chat!

This material is intended for information purposes only and should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney, tax advisor, or plan provider. Investments in securities involve risks including the possible loss of principle.. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Tom McCartney and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

 Tom McCartney is the Founding Principal of My Advisor & Planner and a Wealth Manager. Securities and Investment Advisory Services Offered Through Raymond James Financial Services, a Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. My Advisor & Planner is independently owned and operated. Tom and his team can be reached at info@ mapyourfuture.net, at 630-457-4068, or you can visit them at www.mapyourfuture.net.