Castle Rock Financial Planning
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Thanks to review specialist Expertise for ranking Castle Rock as one of the Best Financial Advisors in St. Paul for the second year in a row! Expertise reviewed more than 80 financial advisors serving the St. Paul area. Castle Rock is thrilled to have made the shortlist of the Top 16 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.
Making an investment in a charity or nonprofit, no matter the size, can feel daunting. There are so many organizations doing worthy work—how can you know where your donation will have the most impact? On top of that, nonprofits and charities occasionally run into the same issues as any other sector—mismanagement, fraud, and poor judgement. How can you be sure your dollars are doing what you intend?
Luckily, the growth of the digital age means a huge amount of information on charities and nonprofits is available online. With a few common sense guidelines and a few technical tools, you can do your due diligence easily and quickly.
Before we jump in, let’s take a minute to define some of the most common types of nonprofits and see how they relate to each other.
Nonprofit: A blanket term, “nonprofit” is a type of corporate designation, which indicates that the corporation’s net profit won’t go to benefit an individual, but will benefit the organization as a whole. This blanket covers dozens of organization types.
Charity: Charities are nonprofits whose purpose benefits the general public. So, not all nonprofits are charities, but all charities are nonprofits. Some people use the term “charitable organization” or “charitable nonprofit”—they’re all interchangeable with charity. These organizations tend to rely heavily on individual gifts to operate.
Foundation: A type of nonprofit corporation that makes grants to other organizations, institutions, or individuals for charitable purposes. While many do accept individual gifts, more often they have a large endowment that provides the bulk of their funds.
Now that who and what we’re talking about is a bit clearer, here are three easy tips to make the most of your charitable donations.
When you’re thinking about donating to a charity, there’s no one right answer. But you can prepare to do some thinking about how the charity meets your goals by keeping in mind a few key questions.
TRANSPARENCY: Is the organization open about its finances and financial health, with easy access to annual reports, statements and forms? Look for a copy of the organization’s annual report and/or 990 on its website. Check out the information they’ve chosen to disclose on Candid or Charity Navigator. Call their offices and ask for a copy of their audit or financial review. A nonprofit’s practices and willingness to share information about their finances will tell you just as much, if not more, than the actual content. It should never be hard to get a nonprofit’s basic financials. Be wary of any organization that hesitates to share them.
MISSION FIT: Does the charity on programs that fulfill the work you care about? This one is highly subjective, but arguably the most important—does the charity’s work matter to you? Annual reports, blog posts, and communications can tell you what kind of programming nonprofits are doing and how it relates to your passions.
TYPE OF NONPROFIT: Are donations to the organization tax-deductible? Not all types of nonprofits qualify for the tax-deduction status. You can check the Internal Revenue Service to find out. Generally, 501c3 donations will be tax deductible.
It’s tempting when there’s an emergency to donate to the first charitable organization that contacts you. It is more important to give money where needed than to who asks first.
If you are donating in an emergency, the Federal Trade Commission has a handy checklist that will help you avoid scams as you’re searching on the internet, responding to phone solicitations, or following up on a friend’s charity recommendation.
Websites like Guidestar by Candid invite nonprofits to increase their transparency through self-reporting. Check if your charitable nonprofit has a seal of transparency, or other similar accreditation.
Here in Minnesota, charitable nonprofits can undergo an even more in-depth self-reporting process with the Charities Review Council. Nonprofits can elect to start the process by reporting on more than 90 benchmarks that involve best practices and policies around governance, fundraising, financials, and more. Charities Review Council then reviews the information to ensure the organization adheres to best practices for the nonprofit sector. The Charities Review Council website lists organizations that have successfully completed the process, undergone review, and received accreditation.
Being confident in your personal philanthropy doesn’t have to be complicated. By keeping these resources handy, you can start growing your impact—whether you’ve got a nonprofit already in mind, or you’re reacting to a disaster. Thanks to the wealth of resources online, it’s easier than ever to start investing in changing the world.
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.
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!
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.
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:
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.