I know what you’re thinking. For sometime now you’ve been wondering what exactly Mr. and Mrs. jlcollinsnh have in common with Bill and Melinda Gates. Here it is:
We both have Charitable Foundations
Now you’re thinking, “I knew it! jlcollinsnh is a billionaire!” In this you’d be, sadly I must say, mistaken. More monk than minister, I’m afraid.
The Gates Foundation Building
Our foundation has no building at all
We talk a lot on this blog about investing and building your own F-you Money stash. Very little time is spent on, well, spending it. Since we personally don’t much care for owning things we’ve not much to say. We like travel. We do spend on that. Sending our daughter to college is money well spent, as she is so thoroughly embracing the experience.
But the money we’ve spent that has provided us with the most pure pleasure is that we’ve been privileged to give away.
In fact, I can specifically pin-point the $1200 that has given us the most satisfaction return of all. I hesitate telling this story as it will be easy to read it as bragging when it’s only meant to illustrate. Hope you take it in that spirit.
Many years ago we attended a charitable auction held by the Catholic grammar school our daughter then attended. We had always been impressed with the teachers and the Mother Superior who ran the place.
One of our favorite local restaurants was Parkers. Parkers had donated for auction a gourmet dinner for ten. On the spur of the moment we decided to win it and gift it to the school’s teachers.
Bidding was spirited but as the amounts reached the actual cost of dinner for ten at Parkers, the competition dropped off. At around $1200 we were the winners.
When I gifted it to the Mother Superior I also gave her two obligations. First, she would have to choose which ten, of the about 15, teachers would get to go. Second, she herself would have to attend. See, we know this Mother Superior and needed to head off her selfless ways.
Parker stepped up
When word spread a couple of very interesting things happened. Parker stepped up and expanded his donation to dinner for 15 so everyone got to go. Another bidder offered to foot the bill for the wine.
Well, you know what happens when you mix fine food, wine and Catholic school teachers. Let’s just say, a good time was had by all, and leave it at that….
In addition to personal pleasure, one of the benefits of charitable giving is the tax deduction. Of course, to gain this benefit you must itemize your deductions on your tax return. But if you have less than $11,600 (Married and Filing Jointly. $5600 if Single) in itemized deductions you are better off taking the standard deduction and saving yourself the effort.
Five or six years ago it occurred to me that two life changes were coming down the pike that would affect my personal tax situation. We were planing to sell the house and I was planning to retire. Without the house and it’s associated deductible costs we’d no longer be itemizing. Upon retiring I’d be in a lower tax bracket. Both these things would be lowering the tax advantage of charitable giving. The solution:
The JJ Collins Charitable Fund
If you’ve been reading this blog much you already know I’m a big fan of Vanguard. So it should be no surprise that in setting up our foundation we used The Vanguard Charitable Endowment Program. Here’s why:
- You don’t have to be a billionaire. You can open your own foundation with as little as $25,000. Fancy building not included.
- You get the tax deduction in the year you fund your foundation. So I got to take the tax benefits when they mattered most to me.
- If you have stocks or mutual funds or other assets that have appreciated in value you can move these directly into your charitable foundation. You get the tax deduction for their full market value and you don’t have to pay any capital gains taxes on the gain. Double tax win and more $$ for your charities.
- You can choose a variety of investment options so your donation grows tax free while waiting for you to allocate it.
- You decide what charities receive your money, how much and when. You can set this up to happen automatically.
- You can add more money to your foundation whenever you choose.
- Because it is run thru Vanguard, expenses are rock bottom.
- Now I can tell unwanted solicitors, “We only give thru our foundation. Please send us your written proposal.” We’ve gotten exactly zero proposals.
- It keeps our personal names off the lists some charities sell to future solicitors.
In addition to the tax advantages this offers, it also plays into some of my conclusions regarding charitable giving:
- It is best to concentrate your giving. We have selected two charities.
- Giving small donations to many charities might be satisfying to you, but it dilutes the impact and a greater percent of your gift is eaten up in the processing of it.
- Many small donations also gets you on many mailing lists.
- Never give to phone solicitors.
- The more I see a charity advertising, the less likely I am to believe they are focused on delivering my cash to those they claim to serve.
- You need to do your homework. In addition to scams, lots of charities simply aren’t very efficient in delivering your dollars to those in need. You can check them out here: http://www.charitynavigator.org/
You don’t need a charity to help
There is also something to be said for giving outside the traditional, and tax-deductible, places. Helping your friends and neighbors directly isn’t deductible, but it has immediate benefits all around. This is something I’ll be trying to do more of in the coming years:
Finally, while giving is a fine and pleasant thing, no one has an obligation to do so. Anyone who tells you differently is trying to sell you something, most likely the idea of giving to them and/or their pet projects.
As individuals we only have one obligation to society: To make sure we, and our children, are not a burden to others. The rest is our personal choice. Make your own and make the world a far more interesting place.