The Money | 06.14

portrait of a young man with a gift against a black background

Giving And Receiving

Charitable giving is as much a part of financial planning as planning for retirement is.

BY GRANT GOCHIN

 The LGBTQ community has long been held to unequal standards by society; we have felt the yoke of oppression and know what it means to be a minority. As such, we are likely more sensitized to the needs of others, to deprivation and discrimination, and it’s likely that there is more philanthropic activity from the GLBTQ community than from many other communities.

Philanthropy involves volunteering and giving — often monetary giving. But is the gifting of cash the same as the gifting of something of similar value? The answer is, as usual, “it depends.”

STOCK VERSUS CASH

Assume that someone in the highest tax bracket in California purchased a share of Google stock on the first date it was issued. He or she would have paid $50 per share, and it is now worth about $550 per share. Assume that they give $550 in cash to a charity. It would cost them $550, but what if they give that share of Google instead?

After accounting for the 35% in capital gains tax, Medicare and state taxes, and, assuming, $5 in transaction costs, the net value of the Google share for the owner would only be $370.

If we gave that share of Google to the charity instead of cash, the charity would still receive the same $550 value, the donor would still receive a tax deduction of the same $550, but the donated share would in fact only be worth $370 to the donor! What a win! Donating can in fact be quite profitable at times, and for those with philanthropic intentions, why not do good for yourself while doing good for others?

Charitable giving is as much a part of financial planning as planning for retirement is. Seek advice before donating!


Many of us receive gifts from our aging parents, but what is the current value of that gift versus what its value would be if they left it to us in their will?

 

LEARNING OPPORTUNITY

Similarly, we often give gifts to one another. But what should we give, and to whom?

That same Google stock example, where one share is worth $550 in the market but only worth $370 to us, can be used when giving a gift to, say, a niece or nephew. Instead of writing a check, you can give them a gift of stock. It’s likely that the child is in a low tax bracket, so a $370 net cost for you could be a higher value gift to them, and what a learning opportunity at the same time! What a great way for you to increase the value of your gifts. Therefore, gift giving is often a process of financial planning as well. We would, however, have to check what their “kiddie tax” rate might be in order to be sure of the actual value of our gift.

DEFERRED PLEASURE

Many of us receive gifts from our aging parents, but what is the current value of that gift versus what its value would be if they left it to us in their will? Deferred pleasure can sometimes sweeten the experience.

If your parents give you that share of Google, you would still have to pay taxes on those gains, but if they leave it to you in their will, you would likely receive it at its value of $550. The timing of the gift is crucial.

At every point in time, we give gifts, receive gifts, and make charitable donations. These are good things, but by looking at the gifts in the context of our broader financial picture, we are able to increase the value and magnitude of our gifts, and increase the pleasure we derive from doing the right thing.


Grant Gochin is a Wealth Advisor and CERTIFIED FINANCIAL PLANNER™ professional at 16200 Ventura Blvd # 415, Encino, CA 91436 Ph: (818) 827-3410. Grant is married (to a man) and he and his husband have one son. Questions and suggestions for future articles should be sent to him at grant.gochin@raymondjames.com.


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