Your Charitable Gift Can Solve Problems
Charities ask a never-ending question: “Where are we going to get our next charitable gift?”
They would do better to ask a different question, “How can we help people understand that a charitable gift to their church or other charity can also solve other financial problems?”
Taking this approach could result in a steady flow of charitable gifts while also helping seniors increase their retirement income.
I realize this sounds self-serving. But I find it difficult to believe most people would turn their backs on an opportunity to solve their financial problems while also making a charitable gift that will help others.
From the perspective of a fundraiser for a church or charity, why wouldn’t you employ a strategy to secure a charitable gift while also solving a financial problem for the giver?
This approach involves three steps. First, fundraisers need to know the kinds of problems people can resolve with a charitable gift. Second, they must be able to decide which problem(s) can be solved for the specific donor. This requires asking insightful questions and listening carefully for the answers.Third, they need to be able to explain, in a way the donor will understand, how making a charitable gift will benefit them.
Using this approach requires that fundraisers educate themselves and their donor base about the benefits of making a charitable gift that can generate additional income and possibly solve other financial problems for a senior citizen.
Consider this brief example.
Libby is retired and lives on a fixed income. Recent economic troubles have made her financial situation more challenging. Some of the money she needs for living expenses comes from interest paid on a $50,000 CD at her bank.
Libby would like to solve three problems:
1. The CD is only paying 4.5%. This spins off $2,250 interest per year.
2. All of the CD’s interest is taxable. In Libby’s tax bracket, the net interest only translates into $1,900 a year of spendable income.
3. Libby’s bank, Washington Mutual, went bankrupt recently. JP Morgan Chase now holds her CD account. Chase is another big bank. Libby is terrified that Chase will also go under and she will lose her money. She is not sleeping well.
Libby’s problems could all be solved with a charitable gift if a good fundraiser offered this simple solution.
1. Move her money to an institution, which eliminates her worry and gives her a feeling of safety and confidence.
2. Increase the interest she is receiving to 7.1%.
3. Increase her interest income to $3,500 per year.
4. $2,460 or 70% of her interest income is protected from taxation.
5. Increase the effective amount of income she receives from her money from 4.5% to 8.49% per year.
6. Create an income tax deduction of $20,047. In Libby’s tax bracket and financial situation, she will be overjoyed to learn that this tax deduction is large enough so she likely will not owe any federal taxes for the next six years.
I am inclined to think Libby would be more than happy to enjoy all of these benefits of her charitable gift. I think the church or other charitable organization would also be thrilled to know they will have a large charitable gift when Libby dies.
Robert D. Cavanaugh, CLU is a 39-year veteran of the life insurance and financial and estate planning industry. He publishes The Smart Giver, a charitable gift educational program which advances techniques to increase income, lower taxes while simultaneously helping churches and other non-profits. More information about charitable giving can be found at his blog.
Related posts: