Becoming a Giving Family

Becoming a Giving Family

In my work with clients, one thing I’ve observed is that they almost all hope to teach their children financial responsibility (I also feel this as a parent myself!) And part of that principle, I believe, is the goal of teaching children to see money in a purposeful way-to appreciate it, value it, and spend it wisely.

Interestingly, I’ve found that families who prioritize charitable giving - giving money away - consequently do a good job instilling financial responsibility in their next generation. It’s counter-intuitive, but a child that doesn’t have that “gimme” attitude about money may be more likely to make better financial decisions.

These families are not forcing their children to be charitable, by the way. They lead by example, they talk to their children about the who, what, how and why of their own charitable endeavors and create opportunities for the family to get involved. Financial literacy isn’t the primary objective of these endeavors, and yet, it is a very rewarding byproduct.

I make it a point to help my clients learn more about philanthropy and planned giving opportunities as a way to introduce their family into the conversation. And I’m finding it’s a conversation they have been wanting to have! Many of these clients are already charitably inclined, and when they see how giving can also help better connect them to their children and grandchildren, our work gets really exciting.

Let me share an example. John and Anna were considering making a charitable gift with some of their appreciated securities. Instead of making an outright gift, we established a Donor Advised Fund (DAF) in their name (think “John and Anna Smith Family Foundation”) which is a vehicle that allows you to make donations, invest those dollars in a given objective (e.g., income, long-term growth) and then distribute grants to your selected charities over a period of time. Many donors take an endowment approach, whereby they seek to grow their account values over time, and also grant out a fixed percentage (such as 5%) each year.

I won’t get totally into the weeds on the DAF here, but you can typically start one with gifts of $10,000 or more (typically cash and/or securities) through your advisor or brokerage company, or your local community foundation. John and Anna funded theirs using appreciated stock and now they have a mini family endowment fund which is a celebrated topic at family gatherings. The grandchildren get to weigh in on the causes they are interested in (animals, the environment, the arts) while unknowingly picking up some philanthropic and financial literacy. John and Anna have also named each of their three daughters as successor advisors to the fund, so that the tradition can continue on after they are gone.

By incorporating your family into your charitable giving, you can do much more than support your favorite causes and organizations. You can help raise a giving family.

This is a hypothetical example for illustration purpose only and does not represent an actual investment. Opinions expressed are not necessarily those of RJFS or Raymond James. Information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Past performance may not be indicative of future results. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.