Lauri Salverda, CFA, CFP®, AIF®, Author at Castle Rock Financial Planning

How Meaningful Donations Can Save You Money

October 4, 2019 By Lauri Salverda, CFA, CFP®, AIF®

photo of yellow, bell-shaped flowers in front of a blue sky with mountains in the background

After the 2017 Tax Cuts and Jobs Act went into effect in 2018, standard deductions went up—but other deductions also disappeared. As a result, many donors no longer have a tax incentive to be philanthropic, and charities have been hit hard.

The changes to deductions are technical, but well worth understanding.

In 2018, the standard deduction was raised for single filers from $6,500 in 2017 to $12,000 in 2018 and $12,200 in 2019. Similarly, standard deduction for married filing joint filers went from $13,000 in 2017 to $24,000 in 2018 and $24,400 in 2019.
Although this appeared to be a good thing, it was combined with the limitation of State, Local and property taxes to $10,000 and the reduction of mortgage interest deduction to the primary residence (not cabins or second homes) and no home equity loans except those used for actual renovations completed on the main home.
Additionally, miscellaneous deductions were eliminated, which included tax preparation and investment management fees. These changes made it much more difficult for individuals to accrue enough deductions to itemize rather than take standard deductions.

Still, charitable donations can be a bright spot in itemizing deductions. Here are some tips to have donations make a bigger impact on your taxes:

1. Donate Appreciated Assets

Gift appreciated assets instead of selling stock or funds to give a cash donation. Most charities have the ability to accept stocks and mutual funds, especially if you give them a little notice. By donating the appreciated asset, you can claim the appreciated value as the donation value and the capital gains are not reported on your taxes.

2. Qualified Charitable Donations

If you are over the age of 70 ½ and must take required minimum distributions out of your pre-tax retirement account, those can be donated directly to a charitable entity. If you have all or any part of your required minimum distribution sent directly to a qualifying charitable organization, that withdrawal is not considered income to you. It will not affect your Adjusted Gross Income or be considered in the taxability of Social Security.

3. Combining Annual Donations into Every Other Year

If you were to combine 2 years of charitable contributions into one year rather than the same contribution every year, this can potentially increase deductions and save on tax payments.

Here is an example: Sam and Donna are married and are filing joint taxes. Their charitable donations are $10,000 per year. Their additional deductions for state and property taxes are $10,000 and mortgage interest is $4,500. Here is what their deductions look like in both scenarios:

Annual Deduction
Tax Year	2018	2019
Charitable Deductions	10,000	10,000
Other Deductions	14,500	14,500
Total Itemized Deductions	24,500	24,500
Deduction Filing	Itemized Deduction	Itemized Deduction
Deduction Amount	24,500	24,500
Total 2-year Deductions		49,000

Concentrated Giving
Tax Year	2018	2019
Charitable Deductions	0	20,000
Other Deductions	14,500	14,500
Total Itemized Deductions	14,500	34,500
Deduction Filing	Standard Deduction	Itemized Deduction
Deduction Amount	24,400	34,500
Total 2-year Deductions		58,900

This second scenario allows for an additional $9,900 of tax deductions over 2 years.

4. Combine Option #1 and/or #3 with a Donor Advised Fund

A Donor Advised Fund is an account funded by one or more individuals and is used to make charitable donations. Donors take a tax deduction in the year they put money or appreciated assets into the account and can then disburse the funds to charities over multiple years. This helps the donor make the most of their deduction, while supporting charities that may have a difficult time accepting a large donation one year and then nothing the following year. Additionally, you can still donate appreciated assets to a charitable organization if they are not able to accept stocks or mutual funds.

There are many options of places to set up donor advised funds. Local community foundations, such as the St. Paul Foundation, Minnesota Foundation, or Minneapolis Foundation, have a lot of knowledge of the good work charities are doing. If you know what kind of impact you want to make, but don’t have a charity in mind, setting up a donor advised fund at a community foundation can give you access to a wealth of information and charities that have been reviewed by experienced philanthropic experts.

A Donor Advised Fund is a great opportunity to educate our next generation of charitable givers. An example would be to let each family member choose a charity to which they would like to donate. Have them research what the charity does and discuss why it is important to them. If they are able to make a strong enough case, write the check and allow them to take it to the charity.

Another opportunity to educate our next generation of money managers!

Castle Rock Named one of St. Paul’s Top 15 Financial Advisors by Expertise

August 15, 2019 By Lauri Salverda, CFA, CFP®, AIF®

laurels surrounding an award reading "best financial advisors in St. Paul 2019"

Thanks to review specialist Expertise for ranking Castle Rock as one of 2019’s Best Financial Advisors in St. Paul! Expertise reviewed dozens of financial advisors serving the St. Paul area. Castle Rock is thrilled to have made the shortlist of the Top 15 Financial Advisors in St. Paul! Thanks to the team at Expertise for their research, focus on quality, and commitment to ensuring all consumers can make confident decisions in the experts they select.

The Greatest Gift to Leave Your Children & Free End of Life Checklist

July 5, 2019 By Lauri Salverda, CFA, CFP®, AIF®

I have seen it over and over: a beloved parent dies and the adult children do not know where to start. The first question is always, “What do you think they would have wanted?”

Once the question is out, then the arguments begin. All relatives have opinions informed by their own experiences, and they rarely agree. “She told me this.” “She supported this.” “She would never have done that.” It causes strife during a time when people could be focused on grieving and carrying out their loved one’s wishes.

The sad part is it does not end there. Beyond the practices for mourning and celebrating their loved one’s life, adult children are responsible for details and logistics too. “Do you know what her passwords were?” “No. What about their financial accounts, do you know who we should call?” “What about insurance, did she have insurance?” Finding passwords, locating and inventorying accounts, managing insurance policies, and determining who needs to be contacted—the list goes on.

Unfortunately, too many times this crucial information—where everything is, what their wishes are and who to contact—dies with the person. The greatest gift you can leave your children is clear, organized information. It is so important to provide this information so when the time does come when they have to say goodbye, they have time to grieve and celebrate your life, rather than being put under the pressure of wondering what your wishes were or where to find everything.

Some of the items that are often forgotten and forever lost include:

End of life wishes;
Retirement or Pension Plans at old employers;
Stock purchased through the company;
Burial plots or policies purchased;
Intellectual property;
Electronic property;
Relatives unknown to children; and
Valuables that the children were not aware were valuable.

There are a number of ways you can share this information. One option, which many people find overwhelming, is to sit down and have an end of life discussion with your loved ones. This also has the potential drawback of people misremembering or forgetting details when the time arrives. Another option is to fill out an end of life checklist and to alert your family members to its existence. Filling out an end of life checklist may be difficult, but no one wants to leave surviving loved ones with arguments, fights, or lawsuits that last lifetimes.

Because I’ve seen how critical this is for the well-being of families, I’ve created a free end of life checklist that you can download by signing up for our e-mail list. You can also contact your own financial advisor for a list. Most people would gladly give up their inheritance to know what their parent would have wanted. Take the time to do it now—start today, this week. It’s hard emotional work, but it is a gift that can only come from you.

Financial Literacy Month

March 13, 2019 By Lauri Salverda, CFA, CFP®, AIF®

April is Financial Literacy month! What a great opportunity to talk to our children and young adults to find out what they know and how to improve on it.

a hand holds a pencil to a blank page, ready to write

High school students do most of their learning about money and finances from parents. But many parents do not feel equipped to teach their children about financial issues. In 2018, the research group Brookings Institute published a large-scale review of youth financial literacy, which showed a continued failure of U.S. high school students to pass simple financial literacy tests. In fact, in a 2008 literacy test by Jump$tart, high school seniors averaged 48.3%—more than 10 points lower than a passing grade. We need to do better for the sake of our children. And we can start both at home, but also in supporting our schools.

Talk to your children’s teachers and school administrators and discover what they provide in financial literacy. In 2011, Minnesota passed the Minnesota K-12 Social Studies Standards that went into effect in the 2013-2014 school year. The goal of these Standards was to provide Minnesota students with some training in economics. Of the 34 economic education benchmarks for students 1-12 grade, 5 are related to personal finance.

While most schools do not have the funding to add programs, there is support available for schools. BestPrep is a Minnesota based non-profit organization that provides educational programs to students in grades 4-12. They have developed many programs which are available at no cost to schools. One such program is Money Matters. They provide volunteers from the financial industry who go into schools and teach classes about personal finance. They have financial experts volunteering to develop presentations that not only address the Social Studies Standards, but go beyond. They work with students on understanding money basics like budgeting, credit vs. debit, and credit scores. Additionally, BestPrep provides volunteers e-mentors for classrooms as they discuss financial topics. The students can e-mail questions to their e-mentors who respond not only with answers, but with new ways to look at their personal finances.

Another way you could be involved is to volunteer with a group of students and participate in the Stock Market Game. You do not need to be a financial expert to run this game. BestPrep provides training and on-going support. The curriculum not only provides students with an education in business, economics, and financial literacy, but also gives students a richer understanding of the U.S. economic system, current events, and teamwork. To see all that BestPrep has to offer go to www.BestPrep.org.

There are many organizations that not only work with students, but provide individual guidance for any adult interested in helping youth achieve financial literacy. Check out some of the great resources listed below to learn more about what you can do!

Share Save Spend – www.sharesavespend.com

The Financial Educators Council – www.financialeducatorscouncil.org

The Mint.org – www.TheMint.org

Budgeting for Philanthropy

July 1, 2018 By Lauri Salverda, CFA, CFP®, AIF®

When things get tight, many people get insular. That is, they cut ties and obligations with anything that doesn’t protect themselves, and their own. However, this is when charitable giving is needed the most. Don’t look at budgeting for philanthropy as an either-or situation. It’s not either I help myself and my family or I have money for charitable giving. It’s about getting smart in how to do both.

Make it a family value.

Charitable giving isn’t all about having a big budget. It’s about making an impact. You can incorporate volunteer work into your family’s set of values. Budgeting time is just as important; create a regular schedule of events that the whole family can participate in.

Be a transparent advocate.

Talk to people about their philanthropic giving. Ask about how they make charitable giving choices, when they give, how much they give (if you have that level of trust). These conversations connect you with causes you might not have heard about any other way. If you’re a transparent advocate for giving, even if you’re not able to give as much as others, you’ll be doing good for the world. Your word of mouth support of your causes (and even just giving as a way of life) may help someone you know prioritize it in their budget.

Work with percentages.

As you earn more income, ensure your charitable giving grows too. Think critically about how you can be generous; if your income decreases, can you donate time? Statistically, wealthier people actually tend to give a smaller percentage of their income to charity. This trend leaves the people who most benefit from the services that charities provide shouldering more of the burden. Those who have been or are currently in need know first-hand the benefits charities can provide. If you’re not currently or haven’t ever been on the receiving end, be extra generous.

Do the math.

The biggest change with the current tax laws is that the benefit for giving has been greatly reduced, except for those who donate a large amount. There are a few simple ways to work this system, if you can’t donate enough to qualify for the tax break every year. Save what you would be donating one year, and add it to the next year’s donations, bringing your total up to the threshold, just every other year. Or, better yet, set up a donor-advised fund which you can contribute to every year, or every other year, while still supporting you and your family’s causes annually.

Your giving is creating the world you want to see, the one you hope your children will grow up in! It teaches many beautiful things about the value of humanity. It’s definitely worth including in your budget.

Are you ready to prioritize charitable giving? We can help you stay philanthropic and reduce your tax liability through donor-advised funds. Contact us today to start the conversation.