Giving season: How to teach family to be good financial stewards

Life in 2021 has been full of many changes as we adapt to the environment impacted by COVID-19. Home prices have skyrocketed to historically high values, and the stock market has yielded strong returns. According to CNBC, an increase in real estate values and stocks boosted U.S. wealth by $3.5 trillion and $1.2 trillion, respectively.

Even though mortgage interest rates are historically low, homeownership is unobtainable for many. According to IProperty Management, about 36% of American households rent their homes. And Gallup found that only 56% of Americans this year noted they own stock.

Household debt is also increasing. The Federal Reserve Bank of New York’s Center quarterly report on household debt and credit shows that total household debt increased by $286 billion (1.9%) to $15.24 trillion in the third quarter of 2021. The total debt balance is now $890 billion higher than it was in the third quarter of 2020.

Additionally, inflation has impacted us all.

As you think about the holidays and your new year’s resolutions for 2022, ask yourself ‘what can my family do to help people in need?’ Have you thought about encouraging your family to support local philanthropies by donating assets or time to help those less fortunate?

In some families, giving is the subject of everyday conversations. Parents involve their children in age-appropriate actions, such as helping select gifts for children at Christmas or taking winter coats to a homeless shelter. Teenagers may be expected to research organizations for causes in which they can personally become involved.

As your children become young adults, consider holding family meetings to discuss philanthropic interests and how to implement good stewardship. Giving together as a family can be both unifying and rewarding.

The first thing to consider when planning a family meeting is to identify what you intend to accomplish by gathering together. Are there specific areas of need within your community that you would like to address? Would you like your family members to identify and research specific charities that they would like to support?  Or is your meeting just a periodic check-in to keep everyone in the family abreast of the status of the organizations that you are supporting?

The tips below will help to organize your family meeting, so your discussions about philanthropy are productive:

–Establish a meeting agenda and stay on topic.

–Determine who will facilitate the meeting.

–Identify the total amount to be funded in advance of the meeting and determine how it will be allocated among charities and family members.

–Establish any guidelines the charity must meet to qualify for funding.

–Ask individual family members to advocate on behalf of their favorite philanthropy at the meeting. Inform your family members that during the meeting, they will need to be prepared to present an idea, provide supporting facts, and accept feedback from the group.  Prior to the meeting, they may want to review the Tax Form 990 of the charities that will be introduced at the meeting. The tax forms are available through guidestar.org, providing insight into the nonprofits’ fundraising expenses, officers’ compensations, revenues, and long list of other items.

–Focus on communication and mutual respect. Encourage all family members to speak up and share their reactions. Encourage alignment, compromise, structure, and purpose.

-High net-worth families may use complex strategies such as charitable trusts, private foundations, or Family Limited Partnerships to fund their gifting strategies.

Families with moderate means of wealth who have charitable intentions may want to consider a donor-advised fund. A donor-advised fund is a charitable savings account that allows you to fund the account and capture the charitable deduction without immediately selecting a specific charity.

Donor-advised funds accept cash and non-cash assets such as stocks (highly appreciated are ideal), mutual funds, bonds, and complex assets such as private S- and C-Corp stock.

Donations to a DAF can be made at any time, but when they are made, they are irrevocable. The funds grow tax-free for the sole purpose of funding Internal Revenue Service -qualified public charities. Over time, the donor recommends grants that will be distributed to his or her favorite charities. Additionally, assets in a DAF are not included in the donor’s estate at death.

This year, you are able to deduct up to 60% of adjusted gross income in cash, and up to 30 percent of adjusted gross income (AGI in appreciated assets contributed to a DAF. Donor-advised funds can be established at your local community foundation or through companies such as Fidelity, Charles Schwab, or Vanguard.

If your finances afford you the ability to share your wealth, consider including your family in developing and implementing a gifting strategy to support public charities, schools, or churches that align with your beliefs. Research has revealed that spending money on others makes us happier than spending it on ourselves.

Teri Parker is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at Teri.parker@captrustadvisors.com.