How Can You Help?

It has been a brutal, exhausting year, and people are hurting. COVID-19 and the racial tension has cast a pall on 2020, and people are living with heavy hearts. As a result of the economic, political, and social turmoil, small charities are in a pinch. Local nonprofits are on the ground in your community doing work few people are willing to do, and they need your assistance. What kind of help do they need? Financial support. These vital organizations rely on donations to keep their doors open, and the recent economic trouble is leaving their coffers empty.

Small nonprofits are the original first responders. Local nonprofits know what they are doing because they have spent years cultivating relationships. In a recent Wall Street Journal article about small charities, they wrote, “The coronavirus pandemic has highlighted the importance and the agility of small community-based charities, especially in a crisis. Often these groups don’t get much attention. They are overshadowed and out-funded by big better-known nonprofits like the American Red Cross and the Salvation Army.” They added, “Local charities also often know who most need help.”[1]

If you decide to give, give only your resources, and leave your opinions at home. Nonprofits don’t need your advice on how to improve their organization. Also, don’t tell the organization how to best spend your donation. If you don’t trust them to handle your gift correctly, give it to someone else.

How can you help? Here are a few ideas on how to donate to nonprofits.

  1. Cash. Cash is easy to give away – quick and efficient. The IRS generally allows you to deduct 50 percent of your adjusted gross income (AGI) for tax purposes. If you give more than 50 percent of your AGI, the IRS allows you to carry your donation forward for up to five years.
  2. Appreciated Securities. If you own stock with a considerable capital gain, consider donating it to your favorite charity. When you gift your shares directly to your charity, you will avoid paying a capital gains tax, and you can deduct the fair market value of your gift. The charity will sell the stock to receive the cash, and they, too, will avoid a capital gains tax.  For example, if you purchased 100 shares of Amazon ten years ago for $110, you have an unrealized gain of $2,582 per share based on a closing price of $2,692. By donating your shares, you avoid the capital gains tax of $51,640 on your gain of $258,200. The charity receives $269,200.
  3. Qualified Charitable Distribution. The IRS allows you to satisfy your required minimum distribution by donating your money directly to a charity from your IRA. You can donate up to $100,000 with a qualified charitable distribution (QCD). You can avoid paying taxes (legally) with a QCD distribution, and it will satisfy your required minimum distribution for the year.
  4. Donor-Advised Fund. If you want to support several charities, but you’re not sure how much to give, or when to give it away, then consider a donor-advised fund (DAF). You can contribute cash or securities to a donor-advised fund, receive a charitable deduction, and then payout your donation over several years. Once you fund your DAF, you can take your time to decide how much money to give to your charities. You can also sell your assets inside the DAF and reinvest the proceeds into a diversified portfolio of stocks, bonds, or funds.
  5. Charitable Remainder Trust. If you own appreciated stock, land, or some other asset, you can transfer it to a Charitable Remainder Trust (CRT) to generate income. After you transfer the investment to your trust, you can sell it to avoid the capital gains tax. You can deduct your donation from your taxes and reinvest the proceeds. The CRT allows you to withdraw 5% to 8% of your account balance each year. At your death, the assets in the trust will transfer to your charitable beneficiary. The CRT is a great way to avoid a capital gains tax, diversify your portfolio, and benefit your favorite charity.  Your gift to a charitable remainder trust is irrevocable.
  6. Charitable Lead Trust. A Charitable Lead Trust (CLT) is the opposite of a Charitable Remainder Trust in that your charity of choice will receive the income from the trust, and your beneficiary will inherit the asset on your death. If you want to transfer assets to your children, the CLT is an excellent choice because it removes the asset and growth from your estate. The CLT is a limited-term trust, and it is irrevocable.
  7. Private Annuity. A private annuity works well with colleges, universities, and nonprofits. You can donate stock, land, or any asset to your charity, and they can establish a private annuity for you so that you can receive income for life. Your charity can sell your asset tax-free and use the proceeds to fund their operations. They will create an annuity for you and your family based on the size of your gift. You will receive a monthly, quarterly, or annual check for ten or fifteen years along with a tax deduction.
  8. Private Foundation. You can establish your own nonprofit to benefit other nonprofits to create perpetual gifts. Donations to your foundations are limited to a 30 percent deduction for cash and 20 percent for appreciated securities. A private foundation is expensive to maintain, and you will need to create a board of directors.

If you don’t have financial resources to give, donate your time. Small nonprofits are in dire need of helping hands to assist them with a variety of tasks. A Google search for nonprofits in your neighborhood will yield plenty of fruit and give you several choices of groups to serve

Our church serving model is FUN: F stands for flexibility, U stands for useful, and N stands for not about you. When you’re ready to give or serve, don’t forget to have some fun!

When someone has been given much, much will be required in return; and when someone has been entrusted with much, even more, will be required. ~ Luke 12:48

June 27, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1], Betsy Morris, June 24, 2020

Are You Maximizing Your Giving?

We are entering the giving season. It’s the time of year when churches and non-profits raise most of their funds because individuals wait until the last minute to give a donation. In other words, most people give from their last fruits, not their first fruits.

Money has a stronghold over people, especially those who have never given any away. In 2017, Americans gave away $410 billion, which sounds like a lot, but it’s only 2% of GDP. Giving has floated around 2% of GDP for the past forty years.[1]  What if giving jumped to 20%? Can you imagine giving away $4.1 trillion? If people let loose of their purse strings, it could happen. According to Ron Blue, “Giving breaks the power of money.”

Maximizing your giving has several benefits. It will benefit the organization, the end user, and you. When you realize your dollar impacts lives, you’ll be motivated to give more.

Are you a cheerful giver? Do you maximize your giving? I was once told to give until it hurts and then give a little more. How can you maximize your giving and become a generous giver? Here are a few suggestions.

Plan. A financial plan will help you identify assets and resources to earmark for giving. It will align your investments to your mission.

Spend. Spending less than you earn will free up money so you can give more of it away. A quick run through your credit card and bank statements will identify several opportunities. Can you find a few items to eliminate or reduce? Your spending habits will also reveal what’s on your heart.

Debt. How much money do you owe others? Can you pay off your mortgage? Student loans? Auto loans?  The less you owe, the more you can give. Big banks and credit card companies don’t need your resources, but local non-profits do.

Stocks. The stock market has soared 290% from March 2009. If you’ve been investing for some time, you may be sitting on substantial capital gains. You can donate your appreciated securities to your favorite organization and avoid (legally) paying a capital gains tax. They’ll receive your shares free of taxation as well. You’ll also be able to write off your donation. The only one that loses in this scenario is the IRS.

Land. Do you own raw land? A vacation home? Rental property? Donating real estate is an excellent way to help non-profits. Some groups will set up a private annuity for you allowing you to receive income for several years because of your gift.

Stuff. Do you have an attic or basement bursting at the seams with stuff you no longer want? If your city is like mine, you probably have a storage facility on every corner. I’m positive the stuff in those units can be put to good use if it were given away.

Not Sure. If you’re ready to give, but you’re not sure who should receive your donation then establish a donor advised fund. It will allow you to make donations, receive a tax deduction, invest the assets, and eventually give the money away. It can be funded with cash or stock.

Time. If you’re tapped out financially, but want to help others, give your time. Organizations welcome volunteers. Can you give your time to your local church, hospital, school, homeless shelter, animal shelter, park, or library? A quick Google search for volunteer will give you numerous opportunities.

Are you ready for your giving test? Identify the amount of money you gave away on line 19 from schedule A of your tax return and divide it by the amount on line 22 from your 1040 form. What was the dollar amount you gave away in 2017? What was the percentage?

Can you maximize your giving this year? I believe you can.

“Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the Lord Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it.” ~ Malachi 3:10


Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.