Morehouse College

The graduating class of Morehouse College received an unexpected gift from their commencement speaker.  Mr. Robert F. Smith offered to forgive all the student loans for the class of 2019. Mr. Smith is a billionaire, philanthropist, investor, and fellow Austinite who announced his generous offer to the students this past Sunday. He said, “My family is going to create a grant to eliminate your student loans!”

The announced figure was $40 million. There are about 400 men graduating from Morehouse College so the average debt per student is $100,000. Quite an offer.

The beauty of his gift is that he can watch these young men bear fruit. He will witness firsthand how it will multiply many times over for generations to come. He added, “Now, I know my class will make sure they pay this forward.”

Individuals often wait until they die to give their money away for fear of it running out while they’re still living. Is one strategy better than the other? It’s a personal choice, of course, but giving your money away while you’re alive will allow you to observe the joy of helping others.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:27.

Are you blessed with financial resources? If so, here are a few ways you can help others.

Loan Forgiveness. You might not have $40 million sitting in your bank account but if someone owes you money, you can forgive their debt. A generous offer to those in debt, for sure. However, let them know it will likely be reported as taxable income. For example, if someone owes you $100,000 and you forgive their note, they’ll owe taxes on this amount.

At the end of every seven years you must cancel debts.” ~ Deuteronomy 15:1-2.

Private Annuity. Do you want to help your alma mater in other ways besides paying off the entire debt for this year’s graduating class? A private annuity may be an option. It will allow you to donate appreciated property like real estate or equities in exchange for an income stream. Let’s say you own a $500,000 piece of property with a low-cost basis. If you donate the land to the school, they will send you monthly income for a certain period. In addition to the fixed income, you’ll receive a tax deduction for the fair market value of your land.

Charitable Remainder Trust. This trust, like the private annuity, works well with appreciated assets. When you transfer assets to the trust, you’ll be able to sell them and diversify your holdings while avoiding a capital gains tax. Let’s assume you own $1 million worth of Amazon stock – your only investment. After the shares are transferred to the trust, you’ll be able to sell the stock, buy new investments, receive monthly income, avoid the capital gains tax and get a tax deduction. The charity will receive your assets after you die, thus the term “remainder.”

Donor Advised Fund. Establishing a Donor Advised Fund (DAF) will allow you to contribute cash or securities to your account and then distribute your donations over time and as you see fit. If you’re not sure who should receive your gifts, this is an excellent vehicle because you can bunch, or consolidate, your donations to receive a tax deduction and defer your distributions. The contributions are irrevocable, but you’ll be able to invest the assets inside the fund allowing you to control your investments and distributions.

Direct Gift. If you know the who, what, when and why for your donation, then a direct gift makes sense. If you want to give $100,000 to your favorite charity, you can create a direct link to the institution and bypass setting up a new account, trust or foundation. You’ll be able to deduct the fair market value of your donation.

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

Mr. Smith’s gift is breathtaking and monumental. It will allow these young men to hit the ground running unencumbered by debt with an opportunity to make an impact from day one. Morehouse College has some notable alumni like Martin Luther King, Jr., Edwin Moses, Spike Lee, Samuel L. Jackson and Herman Cain. Who knows, maybe a few men from the class of ’19 will join these legendary graduates as a result of their good deeds and works.

Et Facta Est Lux (And there was light) ~ Morehouse College Motto

May 20, 2019

Bill Parrott, CFP®, CKA® 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.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than 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.

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

10/10/18

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.

 

 

 

[1] https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42

Handbreadth.

A handbreadth is a unit of measure about the width of your palm, or 4 inches.  It’s also a measure of time as referenced in the Bible –  You have made my days a mere handbreadth; the span of my years is as nothing before you ~ Psalm 39:5. Meaning our time here on earth is short.

The Dash is an amazing poem written by Linda Ellis.[1]  She writes about how we live our lives between our birth and death dates which is represented by the dash.  Have you ever paid attention to tombstones? If you have, you’ve probably noticed that the dashes are all the same size – short.

My church recently held their annual men’s retreat and I asked my group if they could name their great-grandparents, most couldn’t.  So not only will we be gone but we’ll also be forgotten.

Knowing your time is limited, what can you do today to create a legacy?   Here are a few ideas:

  • A financial plan can help you define your legacy by aligning your investments to your goals.
  • Establishing a Donor Advised Fund (DAF) will allow you to contribute cash or assets to your account and then distribute your donations as you see fit. You’ll be able to deduct your contributions from your taxes.  The deposit is irrevocable, but you’ll be able to invest the assets inside the fund and you can control your distributions.
  • Create a private foundation to fund causes you support. You’ll need to establish a 501c3 organization which may be expensive and time consuming, but it may be worth the effort especially if you have the financial resources.   Some of the larger private foundations are the Bill & Melinda Gates Foundation, Ford Foundation and The Robert Wood Johnson Foundation.
  • Donate directly to your favorite organization such as your alma mater, museum, library, zoo or hospital. Your contribution, depending on the size, may also get your name on a building.
  • Legacies go beyond monetary gifts, of course, so donating your time might be a better option for you and your family. A good friend of mine has volunteered his time to read the Bible to a group of tenth grade boys. He’s been meeting with them ever since they were in the sixth grade.  He’s creating a legacy by giving these young men a solid foundation.
  • Using your professional talents to help others may pay dividends. Young people who are starting their career can benefit from a strong mentor. A good place to start is to take an inventory of your strengths to find out where you can serve best.
  • Procrastination is the enemy of wealth creation so start saving your money today. An investor who invests $1,000 monthly will see their money grow to $1.2 million after 30 years.  If he waited ten years to start, his account value would be worth $520,000, a difference of $680,000![2]  The sooner you start investing the more money you’ll have to fund your philanthropic efforts.

A popular Chinese proverb says that the best time to plant a tree was 20 years ago.  The second-best time is now.   If you’ve been waiting to start (fill in the blank) __________, I’d encourage you to do it today.  After all, were just a mere handbreadth.

“Goodbye Hobbes. Thanks…for everything…” ~ Calvin 

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

3/6/2018

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog and investments aren’t guaranteed.

 

 

 

[1] https://www.linda-ellis.com/the-dash-the-dash-poem-by-linda-ellis-.html

[2] $1,000 per month at 7%, before taxes and fees.

Give.

Thanksgiving marks the beginning of the giving season.  From now until the end of the year charities and non-profits will receive much needed dollars to help fund their good works.   For several organizations the money they receive in the next few weeks will be the bulk of their annual budget.  Individuals typically wait until the end of the year to give because they want to know what their tax situation will be before they donate their money.  Some people give from their wallet, but most give from their heart.

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During the financial planning discovery phase I ask people if they have a charitable gift giving strategy or if they donate money to charities on a regular basis.  I’m happy to report most people are charitable.  I once worked with a young pilot from Fed-Ex who didn’t believe in giving money away while he was living.  He wanted to donate all his money at his death through his estate.   I told him part of the joy of giving money away while you’re living is you get to see your gift bear fruit.  I didn’t tell him that people who don’t give today won’t give tomorrow.

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Here are few ideas and strategies to help you with your charitable donations.

  1. Appreciated Securities. The stock market has produced stellar results in 2017 so you may have a stock or two that has performed well.  When you give appreciated securities to a charity, you get the deduction, avoid a capital gains tax, and your charity receives the money.   Let’s say you purchased Maui, Land & Pineapple in January at $7.15 and today it’s selling for $17.40 for an unrealized gain of $10.25 or 143%.    You can gift your shares directly to your charity and avoid paying taxes on the $10.25 gain.  The charity will sell the stock on the open market to receive the cash and they, too, will avoid the capital gains tax.  You must donate your securities to a 501c3 organization to receive a deduction.  It would be nice to donate your appreciated stock to your Aunt Martha, but the IRS says no go to that idea.
  2. Qualified Charitable Distribution. The IRS will let you satisfy your required minimum distribution by donating your money directly to a charity from your IRA.   This distribution is referred to as a qualified charitable distribution and you’re allowed to give up to $100,000.   The advantage to the QCD is you get to avoid paying taxes on your IRA distribution and it will satisfy your required minimum distribution for the year so consider a QCD over an RMD.
  3. Donor Advised Fund. If you have too much money, too many charities, but not enough time, consider establishing a donor advised fund.   You can establish a DAF by year end to receive your charitable deduction.   Once your DAF is funded you can spend time on deciding how much money to give to your charities and when they should receive your gift.  One attraction of the DAF is you get the deduction for this calendar year, but you don’t have to give the money away until later years.  The money in your DAF can be distributed over several years to numerous charities.  You can also manage and invest the money inside your DAF.
  4. Cash. Cash is king and it’s easy to give away.  An envelope of cash is a welcomed gift to many.   The IRS allows you to give a way $14,000 per person, per year without having to pay taxes on your gift.   However, you won’t receive a tax deduction.  For example, if you have four children and ten grand-children, you can give away $196,000.  You can also give $14,000 to non-relatives and random strangers.   The IRS allows you to deduct up to 50% of your adjusted gross income for tax purposes if you donate your money to a recognized charity.  If you give more than 50%, the IRS lets you carry your donation forward for up to five years.

The end of the year is a great time to give money to those in need and there’s always a right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A strong charitable and philanthropic plan can pay huge dividends to you and those you support.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

 

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

November 26, 2017

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog.

 

 

 

Don’t Read If You’re Under 50!

Turning 50 is a huge milestone and an exciting time.  Age 50 is considered the gateway to the golden years with much to look forward to especially with a projected life expectancy of 31 years.  The pressure to look and act cool also wanes as you grow older.  If you want to wear sweaters with shorts or sandals with socks, go for it.   If you want to eat dinner at 4:00 and be in bed by 8:00, knock yourself out.  If you want to wear a big floppy hat, wraparound sunglasses, long sleeve shirts and cover yourself in zinc oxide before heading off to the beach, who’s going to stop you?

Age 50 is also the year when most individuals get serious about retirement planning.  A person who is 49 years, 11 months, and 29 days old has little interest in retirement planning.  When they turn 50 they freak out because retirement is now on the horizon.  Age 65 is still the preferred retirement age for many workers so turning 50 means there are only 15 years until they ride off into the sunset.  Fifteen years isn’t a long time and this is what makes individuals nervous.

By age 50 you should have 5 times your annual salary saved according to a report by CNBC.[1]  If your annual income is $100,000 you should have $500,000 in savings.  Congratulations to you if you’ve achieved this savings milestone.  If your current asset level falls short, have no fear because you still have time to salvage a comfortable retirement.

Once you turn 50 you can contribute more money to your retirement accounts.  The government allows you to invest an extra $1,000 to your IRA and $6,000 to your 401(k).  The additional savings will help you make up for lost time.

As you march through the golden years, here are a few things to consider.

  • Health is wealth. It pays to take care of yourself.   As you age, time and gravity are working against you so focus on eating well and working out.   Eating fruits, vegetables and anything that swims or flies will be good for the ticker.   Hit the gym and put a few miles on the road to get some quality exercise.  According to the American Academy of Family Physicians exercise prevents chronic disease and improves your mood.[2]
  • Help others. A benefit of aging is you’re able to help others spiritually, emotionally and financially.  It’s time to put your wisdom and resources to work.
  • Give. A philanthropic plan will pay dividends for you and others. A thoughtful giving plan will help others for many years while giving you income and estate tax benefits.
  • Pursue your dreams. Do you want to start a business?  Explore distant lands?  Try a new hobby?  The golden years are a perfect time for you to start checking off items on your bucket list.
  • Own stocks. Stocks will allow to grow your wealth and generate more income.  Stocks will also help you offset the force of inflation.   You need to own assets that will grow over time so your purchasing power grows or stays constant.  A 3% inflation rate will lower your purchasing power by 59%.  A dollar today will be worth 41 cents in 30 years.

Aging is a benefit not afforded to many so enjoy the ride.  Attack your golden years with spunk and gusto.  Live your life to the fullest so you have no regrets when Gabriel blows his horn.

How old would you be if you didn’t know how old you were?  ~ Satchel Paige.

Bill Parrott is the President and CEO of Parrott Wealth Management.  For more information on financial planning and investment management, please visit www.parrottwealth.com.

May 21, 2017

[1] http://www.cnbc.com/2017/02/22/heres-how-much-money-you-should-have-saved-at-every-age.html, Kathleen Elkins, 2/22/2017.

[2] https://www.agingcare.com/articles/exercise-benefits-for-the-elderly-95383.htm, Marlo Sollitto, website accessed May 20, 2017.