How Strategic Giving Shapes Your Retirement and Your Legacy

In this episode of The Capitalist Investor, Derek and Dave break down what smart philanthropy really looks like inside a long–term wealth plan. Giving isn’t just something you do at the end of the year. When you build giving into your plan with intention, it can lower taxes, support causes you believe in, and shape the legacy you want your family to carry on.

They walk through donor advised funds, qualified charitable distributions, the warm hands vs cold hands conversation, and the timing mistakes that cost families impact and control. If you’re nearing retirement or already in it, and you’ve ever wondered how giving fits into the big picture, this episode is a great place to start.

Transcript

0:00

Philanthropy isn't just writing a check at the end of the year. Today, we're breaking down how strategic giving can transform your wealth plan, impacting your taxes, your legacy, and the world you care about. All right, Dave, you're back. How's it going, man? Good. Good to be back. Tony is resting up. We're just waiting for the day when he's fully healthy. Yep. It's getting close. Today is not that day. No. Yeah. He's, in rough shape with the voice, so hopefully, he gets over this pretty quick here, but that gives you an opportunity to step in, which I know you're excited about. So excited. All right, well, we we let you pick out the topic this week, and, it's a good one. Especially, you know, I'd say this time of the year, kind of when we're going through, you know, some end of the year stuff, tax related, philanthropy related as well. But, you know, I'd say we can kick this off. Yeah. I've you and I, we present, you know, a lot of financial plans. Probably not as many as Tony. He seems to be keeping a running. Running tally. I don't know how many I've done, but it's been a lot. And you know it. There's for a large number of people out there. There's there's usually a significant amount left over compared to, you know, kind of what they're starting with. And, and we've talked about it, you know, quite a bit. You know, how, you know, retirement is an adjustment. And when you've been spending or when you've been saving your whole life, it's tough to get into, you know, spending all that, all that money that you've saved. But, you know, I think philanthropy in, in having a plan on giving away, some of your money, is important because it impacts the, the overall picture. You know, so having a strategy going in, obviously you can change, but having a strategy going in, especially to retirement, I think is pretty important. Yeah, definitely. I think you hit it. You set it up. Well in terms of like what? Once people have gone through the process, crunched the numbers and understand or get to that sense of comfort where, hey, I'm ready for retirement. This part is kind of, you know, set up, to take care of me. That really opens their eyes to say, okay, I've got this cushion or this amount where I can kind of use as a slush fund. And part of that, you know, for the charitably inclined, like, it's a great way to give back. And, you know, just firsthand, we've seen clients who, you know, have important causes. They believe strongly in how much and how much it impacts their well-being and how much, you know, gratitude, they show and really the payback they get from that, from doing that. Yeah, absolutely. And, you know, for some people, it's a, it's a, you know, I'm, I'm spending a good chunk of chunk of my retirement, you know, working, with or for, you know, this cause or that cause, we, we talk often about making sure, you know, you have have at least, at least three places to go, you know, in retirement. And, you know, working with, you know, a charity or a church, whatever, you like to do. Can be an important part of the overall, strategy because of the strategy just isn't about money, or the strategy is about how you're going to live. Exactly. Exactly. And then once we get to step one, we'll call that, you know, that light bulb moment where, hey, we've got the ability to do this and then desire to do this, then it comes down to, well, what's the best way to do this? To optimize the giving so that, you know, it kind of killed, kills two birds with one stone. How can we make this benefit our financial situation and achieve the overall number one goal of the giving, as part of our strategy? Yep. For sure. So let's dive into it. You know, so, we'll say step one here is, crafting, your, your overall blueprint. So what what does your overall strategy look like? And that's probably done, you know, after your financial plan and then you've determined, you know, we have, you know, X amount of dollars or X amount of time that we want to, you know, push towards our, our, our beliefs and our passions. You know, it's it's important to get that blueprint together for to, I don't know if doing it properly is the right way to say it, but, executing to maximize, the benefit to yourself and to the charities. Exactly, exactly. And, you know, as part of that, there's a saying that I heard from an estate planner. It's kind of catchy. At least I remember it. It's. You ask the client, you know, or they're, you know, who they're working with. Are you. Are you thinking warm hands or cold hands? And in the fall with that is like do you want this giving to happen while you're alive. And you can kind of see it in your, the body's warm. Yeah. Or is this a cold hands thing where you know at your demise or second demise of your family. Do you want it to happen at the end? That's the cold hands part. So is this warm hands? Cold hands could be a blend. But it's, you know, the the the right answer is really custom to your situation and how you want to see it play out. Yeah. For sure. So a couple, a couple ways to do things. Donor advised funds. Private foundations, charitable trusts. So, you know, I'll just touch on, on one of those that the donor advised fund. I think it is, is good for, planning purposes because it kind of makes you think about things. So, just real quick, a donor advised fund, you put money into a fund. And when you put the money into that fund, that is the, the taxable, events or whatever. So that that counts as your deduction. Right. For the charity. And then you so you then have that fund where you can dole out funds, you know, throughout the year. So it's not a, you know, December 31st Scramble Fest, which, you know, I've been on before. Those are fun. I don't want to take away from the fund. And then to add to the donor advised fund like we have you know, we have several clients. Really the best way that we've seen them work in the wild is for those folks where it's, it becomes it's become so hard to, itemize your taxes and get the full benefit of those charitable deductions. So when you have a situation where you are giving, you're charitably inclined, but you're not giving enough to actually register on the tax return because you're below the standard deduction. This is a good way to kind of what they call like bunch years together. So say you you know, you plan to give $10,000 a year or you might pre fund a donor advised fund, $50,000 in one year, get credit for like these had in the in the year that you gift and then you still have control to spread out that gift over that time horizon. So that works really well to kind of get a tax advantage where you otherwise wouldn't. And then the kind of the bonus on top of that is you can also gift appreciated securities. So instead of just cash out of your checking account that Nvidia or that, you know, tech stock that's, that's claimed and you want to kind of get rid of it. Some of it anyways, you could gift that and get rid of that unrealized, capital gain that you would have otherwise have to sell to fund a cash donation. Awesome stuff there. Those are two really good, really, really great points. So, I hope you guys were listening to that because I'm not repeating it, but that that is, excellent. Excellent advice. And, you know, I think, when, when the. Have you did you ever see the, the movie The Founder? That's the about the McDonald's, guy? Yes, yes. Ray Kroc, is that his name? Yeah. So, that movie has stuck with me to this, to this very day. Basically what happened when he died? His wife inherited the McDonald's fortune, and she gave it all to the Salvation Army. Okay, all of it. So that leads me to a lot of questions like, what did they do with it? Why are there still, you know, it doesn't seem like if they got $1 billion back in the 80s that they they should be doing a little bit better, making more of an impact. But obviously that was extremely, extremely poor, poor planning. So, you know, I always tell people that charities can waste money, too. So, you know, just giving your money away at the end isn't necessarily a strategy. So, be be thoughtful about it, you know, and honestly, like, if you don't want to give your money away, then then spend it. You know, that's what the plan is for that. That's just it. Like there isn't a right and a wrong answer to this. It's kind of like it lines up with your priorities, your core values, as a person. How you view the world, like there isn't like you should be doing this percent right or anything like that. And and sometimes clients come to me and ask questions and remember this. Like your overall financial position is not going to be improved by just giving away more and more money. Like there needs to be, kind of a if you were planning to do this anyways, there's a better way to do it and it can help your situation by doing that. But by just, you know, some people say, can I just give my son, you know, ten grand this year and get the tax? Like, you have to know how the rules work and and giving stuff away isn't going to overall help your financial position in a vacuum like that. Yep. For sure. So yeah, you know, to that point, you know, I see you have, QCD here, written down since I copied your notes and since the printer wasn't working. But it is QCD, season. And those are, qualified charitable donations. So but it it brings up, it brings it back to the point that you just said. Right. So what what that is it when you reach RMD age. Actually, I don't think you actually have to. 70.5. Yes. So the old army. Yeah. So I don't know why they did that, just to make it more confusing. But but that is true. So you don't have to be RMD age anymore. They've moved the RMD age out. So it's now 73. But they left the 70.5 starting point for Q CDs. So long story short you can take money out of your qualified accounts. You know like your IRAs 401 case. And you can directly donate it to, a charity. So, you know, I work with a lot of my clients. We got the address of where it needs to go to. They got mailed a physical check right from our custodian. And and that amount that they give, say, is $1,000, does not is not taxable. So, you know, if you have a $30,000, let's just say your, your RMD age, if you have a $30,000 RMD, and you do 10,000 of QCD to charities directly from your IRA, you only have to pay taxes on 20,000, which is good, but you've still given $10,000 away. So you are you have less money than you would have if you just, you know, took the money out and paid taxes on it super efficiently. Right. Mean I got clients that are doing this and you know, it can be where you can put your check out directly with there is also the capability of getting a checkbook on the IRA. So it's really made this convenient for, for our, clients that are, you know, inclined to do this and like you're saying, no one, I haven't come across the person that doesn't like the idea where you can escape taxation. Right. And this is what this move is allowing you to do. So if you were planning on, you know, giving away a certain amount anyways, funding it from that IRA and it really helps out when you weren't really planning on consuming all that distribution that you were forced to take out anyways, it kind of kills another bird with the same stone. Yep, for sure. So yeah. So, any any final thoughts? On this topic? I think it's a good one. I think it's timely. You know, we're heading into Thanksgiving season here. So, you know, just if you haven't given us some thought, like we said, step one is kind of thinking about those causes or organizations that you, you know, have, a strong belief in and figuring out is, is this important enough to me to build into my overall wealth plan? Yeah, for sure. And, you know, I think it is a it's kind of like, a secondary type of planning. You know, the things that we talk about, you know, once you get that plan, once you get into retirement, you're living in retirement for a couple of years. You're kind of comfortable now. So when you come in and you see that, you know, ending estate value, I think that's kind of the, the right time to, to really hone in on that, you know, where what are we going to do? Are we going to spend a little bit more? Are we going to, you know, spend more on our kids and grandkids while we're alive? Or are we going to give some of that away? And, and if those are the things that you want to do, you know, just make sure you plan well for them. You all said. So. Well, thanks, everyone for listening this week. We hope you have a very happy Thanksgiving. If you guys have any questions or comments, hit us up at info@connect.com and we'll talk to you next week. The opinions expressed in the podcast. Are for general informational purposes only, and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.