Monday, 19 October 2020

Accumulating personal wealth affords a unique opportunity when it comes to doing good for others.

Facebook founder and CEO Mark Zuckerberg is a prime example. Less than a year ago, he announced that he'd be giving away 99 percent of his Facebook shares, valued at roughly $45 billion. In keeping with the giving spirit, Airbnb founders Brian Chesky, Joe Gebbia, and Nathan Blecharczyk said earlier this year that they planned to donate the bulk of their collective $10 billion fortune to charity.

While having a string of zeroes in your net worth certainly doesn't hurt when it comes to giving, it's possible to carry out your own personal philanthropic efforts on a smaller scale. Establishing a private foundation is one option. Making individual donations to specific charities is another.

Donette Stubblefield, BBVA Houston wealth market executive and former chief fiduciary officer, recommends that families enlist the help of trusted and well-qualified advisors — your attorney, CPA, and personal banker — to determine the best path.

"Drawing on the collective knowledge and experience of a multi-faceted team can help a family safely navigate the area of charitable giving," she says.

Here are some other helpful tips for creating a lasting legacy of helping others.

Identify your mission

One of the most important elements of a charitable giving plan is a clearly defined purpose. With that in mind, think carefully about what it is you hope to achieve. Which causes are most important to you? What kind of impact are you hoping to have on the lives of others? Which charities are most aligned with your values? Answering those questions gives you a foundation for setting some specific, measurable goals for moving forward.

Keep in mind that the entire family needs to take part in this discussion, Stubblefield says.

"Different family members may have very diverse ideas and causes. Only by spending the time and effort to discern areas of common ground can the family ultimately come together in its charitable vision and focus," she says.

Stubblefield says she is seeing more families trying to meaningfully include younger generations in decisions about charitable giving.

"We think families realized that early involvement is best for maintaining interest and we believe this is a very positive trend," she says.

Consider your assets and time frame

Once you have a mission in place, you can move on to the mapping out the finer points of your giving plan. First, you'll need to determine how much of your wealth you want to donate and what assets you plan to tap. Donating appreciated assets or investments, for example, is generally a more tax-efficient strategy than donating cash.

Next, think about your time horizon. Do you want to make gifts once per year or spread donations out? Would you rather make a larger one-time gift when you pass away or set aside enough money so that your heirs can continue the tradition of giving through future generations? Then, ask yourself whether your gifting strategy is sustainable based on the amount of assets you plan to give away.

Decide how you want to give

The next step is deciding how to go about making gifts. As mentioned earlier, setting up a charitable foundation is one option for giving back in your community.

For example, you could establish a foundation that grants scholarships to deserving students or provides funding to charities that offer health care or education services to low-income families. The one potential drawback to keep in mind, however, is that establishing and operating a private foundation can be time-consuming.

Making direct donations to charities may be more appealing if you want to give back but you're not able to commit as much of your time. For instance, Vermont janitor Ronald Read made headlines recently after bequeathing most of his $8 million fortune to his local library and hospital. Read ensured that his memory will live on through his gift to these facilities and in turn, the people who use them.

Do your research

Donating to a charitable cause is an investment of sorts and like any other investment, it's important to do your homework beforehand. When evaluating a charity, take a close look at its financials, including its expenses, income, and assets if that information is available. Consider which programs are most in need of support and what the organization's biggest financial challenges are. Understanding what the charity's primary source of funding is and where the shortfalls are can help you tailor your giving strategy so it has the strongest impact possible.

Stay connected

If you're going to be giving away part of your wealth for a good cause, it's natural to want to see some measurable results. Cultivating relationships with the charities you're donating to allows you to see how those donations are being put to use and who it is you're helping. Even more importantly, staying clued in to what's happening with your favorite charities makes it easier to spot new opportunities for giving in the future.

The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or financial advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.

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