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Boulder Daily Camera
Making Money Matter
Enid Ablowitz
 

January 2004

Unlock Your Charitable Potential

By Enid Ablowitz

The Season of Lights has come and gone. Instead of holiday greetings, our mailboxes are filling with bills and the statements of earnings which we will use to file our income taxes.  April 15 looms.  This is not generally when people think about charitable giving, but maybe it should be.

January is the perfect time to add a new prism through which you look at your finances. Beyond just your earnings and potential tax liability, now is the time to look at your entire financial picture.  Maybe you do this regularly, or maybe only when you apply for a loan or consider estate planning, but I wonder if it is done with charitable giving in mind.  Here is a simple way to do your financial inventory and evaluate your charitable potential.

1. Annual cash flow statement: List all your sources of income for the year (salary, interest, dividends, etc.)  Next, list your fixed expenses (like rent/mortgage payment, car payment, insurance payments, etc.) then your necessary variable expenses (like food, utilities, gas, etc.)  Add your expenses together and subtract from your income. The remainder is your “discretionary income.”   
2. Asset inventory: List all your holdings starting with your liquid assets like checking and savings accounts, money market certificates, treasury notes, savings bonds, stocks, commercial or municipal bonds, and mutual fund shares.  Then list your non-liquid assets like your net equity in real estate (market value less mortgages held), time-share or interval ownership, limited partnerships, collections and other tangible personal property, cash value of insurance, stock options, business ownership or interest, oil, gas or mining rights, copyrights, patents, trademarks, and commercial annuities.  Finally, list your deferred assets like retirement plans, deferred compensation plans, trusts and anticipated inheritances.
3. Analyze your holdings:  What is your total equity? (Market value of assets less debt) Does the asset have special recreational value or sentimental value? Do any of these assets provide needed income for your or for a member a member of your family, now or in the future? Is the asset appreciating, depreciating or stagnant? Will the total of your assets (plus insurance payouts) trigger estate tax?

When considering making a charitable gift, most people look at discretionary income and give accordingly.  Since generosity is proportional to what you perceive you can afford to give, my challenge to you is to look beyond annual cash flow and think about longer term giving from assets. 

To understand your charitable potential, you have to first understand your own sense of security. Assets generally provide for your long term financial future including educating your children, your retirement, and your rainy day fund for medical or other emergencies.  Assets also provide your legacy to the next generation through inheritance and gifting.  However, you may have unused, unneeded and possibly burdensome assets which could be considered discretionary and could be used effectively to begin your legacy now.  Some examples:

1.  Do you have a paid-up insurance policy you don’t really need that you could give outright to a non-profit? 
2. Isn’t it a shame that you aren’t really using that timeshare you bought, and you still have to pay the annual fees?  Is that an asset that could be converted to a charitable gift?  How about donating that vacant land you own and pay taxes on but you know you’ll never use?
3. Vehicles can be given to charities. In fact, there are many organizations that solicit such gifts and simplify the process. Just be sure the valuation is legitimate for deductibility purposes.
4. What about your valuable coin or stamp collection that you “invested” in for so many years?  It was fun then, but you are no longer interested and neither are your kids.  Consider unlocking its value to fund your new interest—philanthropy.
5. In addition to your discretionary income, do you have discretionary equity that could be gifted now or become part of a charitable bequest?

Charitable giving starts with intent and good planning.  Understanding what you have can help you understand what you have to give.  So, when you prepare for tax filing, take the time to do your financial profile and see how you can unlock your charitable potential.

Enid Ablowitz is the Vice President for Advancement at the University of Colorado Foundation, Inc., and Director of Advancement for the Coleman Institute for Cognitive Disabilities.  She has been working as a donor advocate for nearly 15 years and has written a book for donors called Making Money Matter:  Eight Steps to Thoughtful Giving. For information on how to obtain a copy, contact her at enidablowitz@hotmail.com.

You may contact Enid Ablowitz by email at enidablowitz@hotmail.com

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