Giving Back At Retirement Age

BERLIN – If you’re like most philanthropists, you probably can’t remember a time in your life when you didn’t give back.

“For most Americans, charitable giving isn’t a sudden impulse,” says Stephen Mitchell, Director of Planning and Education for the Merrill Lynch Retirement Group. “It’s a regular part of what you do throughout your life, in some form or other.”

Your philanthropic goals are also likely to change throughout life: Career advances, inheritances, your family situation and ultimately your retirement play into your giving preferences, says David Ratcliffe, Director of the Merrill Lynch Center for Philanthropy & Nonprofit ManagementSM. “While you may give to charitable causes throughout your life, during retirement it is typical to look back and consider your personal, as well as your family’s, potential legacy.”

When starting to define a strategy in partnership with your Financial Advisor and other professional advisors, it’s important to identify how your giving may change in retirement.

Consider the following points about a lifetime giving strategy:

(BULLET)What are your income needs? You likely expect investments to supply the bulk of your income in retirement. Yet, if your wealth includes a substantial amount of appreciated property or stock, you may be subject to capital gains taxes that can chip away at your philanthropic aspirations as well as the added potential risk exposure if there are concentrated, undiversified holdings. In this case, placing these assets in a charitable remainder trust (CRT) lets the trustee of the CRT sell them without incurring immediate capital gains tax liability, and enables the trustee to reallocate the proceeds of that sale in a more diversified portfolio.

(BULLET)Evaluate your wealth-transfer intentions. An outright gift to your children of, say, $5 million would incur a sizable gift tax. Instead, Ratcliffe suggests placing that $5 million in a charitable lead trust (CLT).

(BULLET)Take your time. If you know you want to give but haven’t chosen your causes, you can still put a giving strategy in motion. Mitchell notes that by contributing to a community foundation through a donor-advised fund, you’ll enjoy an immediate tax deduction.

No matter what your philanthropic goal, developing a strategy as early as possible can help keep your philanthropic goals on track through any life changes, both the routine and the unexpected.

(The writer is a Merrill Lynch senior financial advisor. She can be reached at 410-213-9084.)