Gifts To Grandchildren

Gifts given to grandchildren by grandparents can be a great blessing.  Kelly Greene wrote an article in the Wall Street Journal September 14, 2012, titled "Are You Coddling Your Grandkids?"  In her article, Ms. Greene indicates five ways to give to a grandchild something and at the same time not creating a sense of entitlement from a grandchild.
First, Ms. Greene says you must, "Pare your gifts to offset the pain."  In other words, don't give to the extent that you jeopardize your own financial care.
Second, Ms. Greene say you might consider making a gift a loan rather than an outright gift.  If the loan is handled properly, it might be a good way to help the grandchild and at the same time allowing them to make their own way in the world.
Third, Ms. Greene says a grandparent can create teaching moments.  Gifting stock or investments rather than cash can be a way of teaching grandchildren the value of money as an example.
Fourth, Ms. Greene says it is a good idea to delay a grandchild's gratification.  Gifting money at certain dates or events rather than on a regular basis can help grandchildren rely on their own resources first.
Fifth, Ms. Greene counsels to practice equality.  One of the most common reasons for litigation between family members if perceived favoritism. 
As you choose to gift assets, it is wise to take into account the feelings of family members and how said gifts will affect them in the long run.

A New Year's Goal: Charitable Giving

Often charitable giving is associated with the end of the year decision to give to charity in order to lower tax liabilities for income taxes and estate taxes. Charitable giving also is associated with gifting to charities upon death in order to lower an individual's estate taxes.
There are a couple of interesting articles regarding different ways of looking at charitable giving.
One article written by Claudia Buck titled, "Personal Finance: You don't have to be super-rich to give to charity," talks about anyone rich or less rich can leave money to charities upon death.
Another article written by Dan Pollotta of the Wall Street Journal titled, "Why Can't We Sell Charity Like We Sell Perfume?" talks about the idea of allowing non-profit organizations to compete with for-profit organizations to encourage more charitable services to make a profit that then can do even more good for society.
No matter what your circumstances, estate planning can include charitable inclinations and desires.

What About Steve Jobs's Estate Planning?

Now that Steve Jobs has died there is speculation in the news regarding what place in technology ingenuity Apple, Inc. will play in the future. A less public issue of speculation is what will happen to Mr. Jobs's estate. Mr. Jobs during his life has been private regarding his philanthropy endeavors. Laurene Powell Jobs, Steve Jobs's widow, has very quietly been involving herself with education issues, women's issues, and other philanthropic causes. Two organizations founded by Ms. Powell Jobs are College Track and Emerson Collective. Both organizations strive to help individuals help themselves. Most likely, Ms. Powell Jobs will continue using Mr. Jobs's estate to further philanthropic causes important to both Ms. Powell Jobs and her deceased husband, Steve Jobs.

From our perspective as estate planners, the critical point is that Mr. Jobs seems to have done his estate planning right. We can say this because so little is being said (can be said) about it in the news. It seems everything has been done privately, confidentially, and competently. No news in estate planning is good news.

Here is an article with the Wall Street Journal touching on this issue.

Book Review: "Philanthropy Heirs & Values"

"Philanthropy Heirs & Values" written by Roy Williams and Vic Preisser discusses how to help heirs learn money principles during their growing up years so that they can wisely handle their inheritance once parents have died. The book is geared towards more wealthy individuals, but I think the principles they talk about could be used by any family to learn sound money skills and the joy of philanthropy.

Briefly, the authors discuss three general skills children need to learn: values, mission, and accountability. The authors further discuss how these three skills should be taught to children during five developmental periods of a child's life. The five developmental periods are:

Age 5-10 Awakening Years, discovering one's personal influence.
Age 11-15 Exploring Years, discovering self in the midst of change.
Age 16-20 Developing Years, understanding accountability.
Age 21-30 Applying Years, maximizing the value of contributions.
Beyond 30 Mentoring Years, unifying the family through Philanthropy.

You can find "Philanthropy Heirs & Values" here.

The Spirit of Giving Inspired by the Very Young

Here is an inspirational story regarding a nine year old birthday wish, clean water, death, and charitable giving.

Check us out here.

Restricted Gifts Too Restrictive? Ask San Diego and then ask Detroit.

Joan Kroc, the widow of Ray, the founder of McDonald’s, left $1.8 billion to the Salvation Army in 2003. Kroc required the Salvation Army to build 30 community centers around the country.

The gift included an $30 million in construction costs and a $30 million endowment per center. From the beginning the Salvation Army questioned whether this was enough money to fund Kroc's ambition plan. It decided to ask each community to raise $21 million more as a condition to receiving a center. Only a third of raised only about a third of what it thinks is required.

Kroc's $1.5 billion-dollar dream was big and these were to be no ordinary community centers. San Diego's center was completed in 2002 at a cost of $87 million. It has three aquatic pools, an ice skating arena, skate park, and 600-seat theater.

The Kroc center in Salem Oregon will open in September. It cost $40 million. It is a 92,000-sq.ft. facility that has two swimming pools - one deep enough to certify scuba divers, a rock climbing wall, computer labs, a gymnasium, a dance studio, commercial kitchen, and a 300-seat auditorium. Construction is underway for a $129.5 million project being built in Nicetown, Pennsylvania.



But the dream hasn't worked out in other areas. The financial climate since her death has changed considerably; only a few centers have been built. Two others are scheduled to open soon; at least two have been canceled. The endowment fund itself has lost 14% of its value and some of the intended communities have been unable to raise additional funds.

San Francisco Joan Kroc Center (left)

In addition to the financing problems, the plan has created divisions within the Salvation Army itself. There were fears that the organization might prove to be incapable of running such big operations and the centers were moving it away from its real mission "to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination." To date that mission is carried out through youth camps, alcohol rehabilitation, elderly services, and Christmas charity services, to name a few.

Activists in Detroit are angry at the Army for scuttling their project. They claim the center is sorely needed and that the poor economy is more of an excuse. The real problems stem from bad fund-raising and a lack of interest from the Army itself.

Charitygovernance.com thinks the trouble is gifts that are too restrictive. Big donors should be more cautious when making gifts. Kroc was generous and well intentioned, but she had an agenda that she tried to impose on the Salvation Army.

It's one thing to direct your money to promote certain things and provide some guidance, but Kroc's bequest was to complex and detailed a program. She liked the Salvation Army enough to believe they would be good stewards, she should have trusted their judgment. "While we always acknowledge the right of donors to make the gifts, we also have always questioned whether such gifts are wise. Donors are lousy at predicting the future, as we have seen time and again."

Though she couldn't have predicted this economy and maybe overstepped on what the Salvation Army is comfortable with, a lot of good has been done so far. And it's not over yet.

Open:
San Diego, Omaha, Ashland, Oh, Atlanta, Couer D'Alene, Idaho.

In progress:
Grand Rapids, Memphis, Salem, Camden. Other sites are planned for Biloxi, Dayton,
Honolulu, Kerrville, TX Philadelphia, Quincy, IL, Augusta, GA, Boston, Charlotte, Chicago, Green Bay, Greenville, SC, Guayama, Puerto Rico, Long Beach, CA, Louisville, KY, Norfolk, VA, Phoenix, AZ, South Bend, IN, and Staten Island, NY.

Reader Update: Construction has now been started on the Kroc Centers in Biloxi, Mississippi and Kerrville, Texas.

Things we always suspected

Wealthy women give away nearly twice as much as of their wealth as their male counterparts. WSJ's Wealth Report

Depression Charitable Giving

Money woes are stalling the community centers that Joan Kroc wanted to build.

The widow of McDonald's Corp. developer Ray Kroc left $1.8 billion to the Salvation army to build community centers like the one in San Diego, but the recession has made that unlikely. The damage to her bequest and faltering fundraising in many cities stopped all but four from being completed and two will not be built at all.

Vocabulary Lessons

Tax credit: A credit that directly lowers your bill. This is like the dependent child credit. If your tax liability is 2000 and you have one child, it is reduced to $1,000, two children, $500, and so on.

Tax credits can be refundable and nonrefundable. The dependent child credit is nonrefundable, if your tax liability is $2000 and you have five children (a credit of $2500) your taxes are 0 not -$500.

The tax credit is refundable you take the full amount even if it pushes your tax liability into negative numbers. An example is the earned income credit, where the tax payer can receive a refund that is more than the amount withheld.

Tax deductions: Tax deductions reduce your taxable income. Mortgage interest and charitable contributions are the most commonly used. The money or a portion of the money spent on tax deductable items can be used to reduce your adjusted gross income, which can drop you into a lower tax bracket.

Tax incentives: Tax incentives are designed to promote and reward certain economic decisions. Here again we have the mortgage interest deduction, which is supposed to encourage home ownership.

Marginal tax rate A marginal tax rate is a system that taxes certain levels of your income differently as you move up into higher tax brackets. So if your adjusted gross income is 40K this year it is taxed at 15% and your tax bill is $6000. If you get a raise next year and your income goes up to 40K you will be taxed 15% on the first 30K and 25% on the 10K increased earnings, not on the full 50K. So your tax bill will be 40 x 15% = 6000 + 20 x 25% = 2500 = total tax of 8500.

Don't Call, Everything is OK

A disturbing story out of Denver.

A Denver man belonged to an Elk's Club that supported a mental health facility for developmentally disabled children and adults. He walked into the facility last July and left an envelope. On the outside it read, "Wait until you hear from the coroner. Please don't call, everything is OK." Twelve days later Beech took his own life.

Inside the envelope was a check for $100,000 made out to the charity. It was cashed a few days after the man's death.

The family is now suing the facility for the money back because they say the facility could have done something to prevent the death.

Colorado law does not permit a killer to benefit from the estate of the person he murdered, but Beech's death was a suicide.

Utahn #2 on 2008's Most Generous List

Utah's James LeVoy Sorenson comes in 2nd on Slate's list of 2008's most generous people. Sorenson who died last January at 86 has left 4.7 billion dollars for the Sorenson Legacy Foundation which will fund the Sorenson Moelcular Geneaology Foundation to build the world's best collection of genetic and family history information, and Sorenson Geonomics , for genetic genealogy testing services.The foundation also supports arts groups, colleges and universities and more.

First was the late Leona Helmsley who's 5.2 billion foundation will support the care and welfare of dogs.