If you've done everything outlined in the last nine chapters -- reduced your taxes, maximized your annual tax deferred account contributions, invested wisely, utilized debt strategically, protected your assets with insurance, and saved for your retirement, then you can spend your money on the things and people you want.
Think about how you support the employees of car dealers, shopping malls, gas stations, grocery stores, airlines, and everywhere else that you spend your money. You are helping them through your purchases.
After all of your expenses, don't forget to save a little for friends, family, and your favorite charities. You can utilize charitable giving to provide current tax savings, minimize or avoid estate taxes, and carry out asset transfers to family members and charitable organizations. These benefits are useful. And using your money to benefit others -- whether it's your parents, children, grandchildren, friends, neighbors, church, synagogue, mosque, school, or service organizations -- your money is usually happily received.
Everyone is a philanthropist…including you. Now is the time to start giving your money away. The benefit of giving it away while you're alive is that you are able to see the joy and help that you are providing. Consider some of the great givers:
1. John D. Rockefeller, Jr.
2. Andrew Carnegie
3. Bill Gates
Rockefeller
Rockefeller lived the last 40 years of his 97 in retirement. His fortune was mainly used to create the modern process of targeted giving with foundations that had a big impact on education, medicine, and scientific research.
Some say his foundations invented the development of medical research and were fundamental in the elimination of hookworm and yellow fever. He is also the founder of the University of Chicago and Rockefeller University.
Carnegie
Similarly, Carnegie spent the last 20 of his 83 years as a philanthropist. From 1901 until 1919, his attention turned from the business acumen that had enabled him to accumulate a fortune to the public-focused way of utilizing that fortune. He had written about his views in the 1800s, and then he focused his life on providing money for purposes of public, social, educational advancement.
He established public libraries throughout the United States, the United Kingdom, and other English-speaking countries. In total Carnegie funded some 3,000 libraries. He also donated £50,000 to help set up the University of Birmingham in 1899.
During his life, he had given away over $350 million (approximately $4.3 billion, adjusted to 2005 figures) of his wealth. At his death, his last $30 million was given to foundations, charities, and to pensioners.
Gates
Gates studied the work of Andrew Carnegie and John D. Rockefeller, and, with his wife, combined their family foundations into the Bill & Melinda Gates Foundation, which is the largest transparently operated charitable foundation in the world. They have modeled their giving in part on those global problems that are ignored by governments and other organizations. As of 2007, Bill and Melinda Gates were the second most generous philanthropists in America, having given over $28 billion to charity. Warren Buffett is first, having given $41 billion, most of which went to the Gates foundation.
You
Perhaps after hearing about what Rockefeller, Carnegie, and Gates have done, you will have some ideas about what you will do with your wealth. Here are some prudent examples of ways to give your money away (of course, only after following the steps outlined in the first 9 chapters):
1. Give $13 thousand per year to family, friends and other people you love. You may make an unlimited number of $13 thousand gifts of cash or other property each year, completely tax-free. Each recipient can receive $13 thousand or less from you each calendar year. If you left the same gifts at your death and your assets were subject to the estate tax, the recipients would see their gifts shrink by around 50%.
2. Open a joint account with those to whom you wish to give your money. Retain the checkbook, debit cards, and other access points to retain as much control as possible. This joint account allows you to retain access and control of your money, but you get the joy of giving the gift. Additionally, the account can avoid probate when you die. You can also list their name first on the account, and they will pay the taxes on any earnings from the account. There are disadvantages however, and these include:
- If the other joint owner has access to the money, they can take it all at any point.
- You share liability for bounced checks by the joint owner and the assets are subject to creditors of any joint owner.
- The entire account is subject to estate tax at the 1st owner's death.
3. Utilize charitable giving. This type of giving may provide current tax savings and minimize or avoid estate taxes. The money you donate is an investment in your community, the nation, and the world. Of course, it's wise to be cautious when donating. Research the organizations to which you wish to donate, and be sure that your money will be used in the way that you desire.
Charity Giving Precautions:
Consider a few warnings to increase the probability that your donation dollars benefit the people and organizations you want to help.
- Be cautious of charities that spring up overnight in connection with current events or natural disasters. They may make a compelling case for your money, but they most likely don't have the infrastructure to get your donations to the affected areas or people.
- Call the charity. Ask if the organization is aware of the solicitation and has approved it. If not, the solicitation may be a scam.
- Check with local recipients. If giving to local organizations is important to you, call the organization to verify they will benefit from your generosity.
- Verify the contribution is "tax deductible." Your contribution may not be tax deductible. If a tax deduction is important to you, ask for a receipt showing the amount of your contribution and stating that it is tax deductible.
- Trust your instincts - and check their records if you have any concern about contributing. Callers may try to trick you by thanking you for a pledge you didn't make. If you don't remember making the donation or don't have a record of your pledge, resist the pressure to give.
- Ignore high-pressure sales. Legitimate fundraisers generally don't push you to give on the spot.
- Be wary of charities offering to send a courier or overnight delivery service to collect your donation immediately.
- Consider the costs. When buying merchandise or tickets for special events, or when receiving "free" goods in exchange for giving, remember that these items cost money and generally are paid for out of your contribution. Although this can be an effective fundraising tool, less money may be available for the charity.
- Be wary of promises of sweepstakes winnings in exchange for a contribution. Under U.S. law, you don't have to donate to be eligible to win a sweepstakes.
- Do not send or give cash. Cash can be lost or stolen. For security and tax record purposes, it's best to pay by credit card or check - made payable to the charity, not the solicitor.
Checking Up
Before giving, check out the charity you're considering with these organizations:
As with all financial decisions, make sure you have thought through the when, how, why and where of charitable giving. This is an important part of your investment strategy, so make sure you give it the necessary time and thought. Not only will others be rewarded by your generosity, but you will receive rewards as well.
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Closing Up
The VALUE of Tax Deferred Investing
2009 Numbers
