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The “Cash Only” Donor Savvy giving benefits your family and the organizations you care about. By ADAM MILLER, CFP® Adam is a CERTIFIED FINANCIAL PLANNER™ professional. As a trusted fiduciary and fee-only financial planner, he works passionately to help families preserve and manage their assets. By encouraging families to communicate their values, he helps them to make an impact, sharing their wealth and wisdom with the people and organizations they care about. Discover more about stewardship and impact at www.elderadofinancial.com

There is this great little bakery that my family loves. I couldn’t even tell you what it’s called because we refer to it as “The Cash Only Bakery.” I was quite embarrassed when I offered to take good friends to that bakery…my treat! We ordered our food and I pulled out my debit card. The woman behind the counter seemed a bit weary saying it again as she tapped on the sign taped to the counter that said “CASH ONLY.” I don’t frequently carry cash and my friends were kind enough to cover the bill. According to the most recent data from the U.S. Census Bureau, the average American family has about 11% of their total assets in cash (this includes CDs, money markets, savings, cash and checking). Everything else is in the form of noncash assets…our stuff. Investments in publicly traded stock are a big item and investments by business owners in their own companies is at the top of the chart as well. Real Estate is way up on the list too. When you really look at it, Americans have way more “stuff” than they have cash. Americans are charitable and many support nonprofits and community benefit organizations they care about. When we are asked to give, we generally associate that with cash giving or writing a check. According to the IRS, only about 25% of charitable giving includes gifts of assets while the vast majority are gifts of cash. Donors are giving and being asked to give cash, a small portion of our assets, while more abundant resources are being neglected. The benefits of non-cash giving. For a family to write a check to a nonprofit, they have to have cash in the bank. Wealth, for many

of us, may be tied up in other assets. Even wealthy donors may have cash flow issues and struggle with liquidity. Much of the real estate, family businesses, investments and other assets that a family owns were purchased for a cost that is much lower than today’s value. In order to turn these assets into more cash, they must be sold and taxes must be paid. Turning assets to cash may cause a painful tax burden. With only so much cash to give, families must decide what piece of the pie they are willing to give to each organization. There is a better way to support the nonprofit organizations we care about. Giving more & giving more efficiently. If families were to give appreciated assets, they could avoid paying taxes on the gain; because a non-profit is a tax exempt entity, they won’t pay tax either. You can maintain your liquidity and keep your cash while giving more! Most donors who learn to give non-cash gifts prefer to continue giving more generously through these gifts. Here are a few of the many examples: - Small business and big giving. The words cash flow and liquidity are familiar to the small business owner. Many are still giving cash or writing checks, but the vast majority of their net worth may be wrapped up in their company. A planned giving expert can help these business owners to reduce taxes and improve cash flow by making gifts of their company stock. It is a bit more difficult to gift a nonpublicly traded company, but with the right expertise and the right circumstances, small business owners can give a very meaningful gift. A donor may give a lump sum or create a fund that allows them to support charitable organizations long term. Now the cash that was


devoted to giving can help their cash flow while assets that were locked up in their business can be used to support nonprofits. It is a win-win situation. - The Tax Procrastinator. The government makes it easy in some accounts to defer taxes, and many Americans have taken advantage of tax deferral. These assets can feel ‘trapped’ in accounts due to the pending taxes. In fact, we see many families who have amassed all of their savings inside of tax deferred accounts. Billions of dollars are in retirement plans like IRAs and 401ks. When these assets are distributed, the taxman takes his cut. Many retirees procrastinate paying the ordinary income tax and refrain from using these assets, but at age 70½ the government requires a distribution. The IRS allows what is called a Charitable IRA Rollover which allows you to transfer a gift directly from your IRA to a non-profit organization and NEVER pay taxes on that money! Similar gifts of highly appreciated real estate or stocks allow donors to drastically reduce taxes. From a business sale to a classic car, real estate to a piece of art--any gift of appreciated property can help a donor and a nonprofit simultaneously. - Charitable planning aligns donors’ needs with nonprofits they care about. Many families would be wise in their financial management to give effectively and avoid taxes, but sometimes these options don’t meet all of their needs. Perhaps someone owns these assets but needs income for life. A charitable gift annuity or charitable remainder trust could create income for the future and a current tax benefit while setting a nonprofit up to receive a substantial gift down the road. On the other hand, some donors don’t need any more income today. Oil and gas royalties, rental income from real estate and dividend paying stocks can add to a family’s income when they don’t need it, forcing them to pay higher taxes. Through planning, they can shift a stream of income to a worthy cause for a term of years until their needs change.

Donors don’t have to split up the cash pie anymore. Not only can charitable planning meet their needs, but it can allow them to give more abundantly. Through this sort of planning you can give more which leads to more impact, pay less in taxes and better meet your personal financial goals. Seeking wise council. Some of these assets are easy to give, and painless for a nonprofit to accept, while others are much more complex. Don’t be concerned if this is overwhelming. You may have advisors who are versed in charitable planning. On the other hand, it may be time to find an advisor that can help you to plan the impact you’d like to make and to unleash your true potential for giving. Empower these professionals to help you give more effectively. Get past the “CASH ONLY” perspective and watch the difference a giving plan can make. We can help you with a plan to bring your family together as you support your community. Our mission is to support clients in their stewardship and in realizing their full charitable potential. Even if you have already implemented charitable giving in your estate and financial plan, we can offer a second opinion to determine if you could be more effective and efficient in your charitable and financial plan.


The Cash Only Donor: Savvy giving benefits your family and the organizations you care about.