The Giving Season

Thanksgiving marks the beginning of the giving season.  Charities and non-profits will receive much-needed dollars to fund their good works, and the money they receive in the next few weeks will be the bulk of their annual budget because Individuals typically wait until the end of the year to give. Some people give from their wallets, and others from their hearts.  

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 donate money to charities, and  I’m happy to report most people are generous, but not all. I once worked with a young pilot who didn’t believe in giving money away while living, and he planned to donate 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. 

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

  1. Appreciated Securities. The stock market has produced stellar results this year, and you may own several companies that have performed well. When you donate appreciated securities, you get a deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased Dicks Sporting Goods in January at $56, and today it’s selling for $129 for an unrealized gain of $73 or 130%. You can gift your shares directly to your charity and avoid paying taxes on your profit. The charity can sell the stock and receive the cash, and they, too, will avoid the capital gains tax. To qualify for a tax deduction, donate your securities to a 501c3 organization. 
  2. Qualified Charitable Distribution. The IRS lets you satisfy your required minimum distribution by donating your money directly to a charity from your IRA. This distribution is called a qualified charitable distribution (QCD), and you’re allowed to give up to $100,000. One advantage of the QCD is that you avoid paying income taxes on your gift.
  3. Donor-Advised Fund. If you don’t know which organizations to support but want to make a charitable contribution, consider establishing a donor-advised fund (DAF). You can fund your DAF today and donate to charities at a later date. You will receive the deduction for this calendar year, even though you can defer your payouts. You can also manage and invest the money inside your DAF.
  4. Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give $15,000 per person per year without paying taxes on your gift, nor will your recipients, but you won’t receive a tax deduction. For example, if you have four children and ten grandchildren, you can give $210,000 per year.

There is always a right time to help others, and the end of the year is a wonderful time to give money to those in need. However, to improve your giving, consider a charitable giving strategy. A 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.

November 9, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management 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.

Are you rich?

Are you rich? It depends, of course, on where you live. In Malawi, the per capita income is $357, Uganda $631, Haiti $766, United States $59,939, and Luxembourg $105,280.

According to the Pew Research Center, 70% of the world’s population, about 5 billion people, live on less than $10 per day.[1] What can you buy for $10? A few low-budget items on Amazon are Super Glue, Uno, Frisbee, and a jumbo muffin pan. If you lived on $10 per day, would you buy a jumbo muffin pan?

How can you help the less fortunate? How can you assist the 70%? Here are a few ideas on how to give.

  • Develop a philanthropic plan. It will focus your charitable efforts on causes and groups you support. It will assist you in determining the most efficient way to distribute your assets. To maximize your giving strategy, incorporate it inside your financial plan.
  • Open a Donor Advised Fund (DAF). A DAF allows you to contribute significant dollars today and distribute the funds to your charities over time. In addition, you can manage the assets inside your DAF to grow the assets and potentially give more money away.
  • Use the Qualified Charitable Deduction (QCD). If you’re 70 or older, the IRS allows you to send up to $100,000 to charities you support from your IRA. The QCD satisfies your required minimum distribution, but you don’t have to report it as income.
  • Donate appreciated assets. If you own taxable assets with unrealized gains, consider donating them to nonprofit organizations. The organization receives your gift, and they can sell it without any tax consequences while you receive the deduction and avoid a capital gains tax.
  • Cash is earning nothing, so you might as well donate it to others. It will benefit your charities, and you will receive a tax deduction.
  • Give as a family. If you have children, involve them in the giving process. Give your children a seat at the table so they can experience the joy of helping others.

I must warn you, however, once you start giving, you won’t be able to stop. You can’t calculate the ROI on your philanthropic activity, but donating money to others will pay huge dividends.

The best definition of wealth I heard was from a fraternity brother.  He said, “I’m a rich man. I’m not rich monetarily but rich with friends, family, and faith.”

We are approaching the giving season, so examine your balance sheet to see how you can best help those in need.

“And the King will say, ‘I tell you the truth, when you did it to one of the least of these my brothers and sisters, you were doing it to me!’ ~ Matthew 25:40

October 19, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management 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] https://www.pewresearch.org/fact-tank/2015/09/23/seven-in-ten-people-globally-live-on-10-or-less-per-day/

Giving It Away

My family donates money through tithes and offerings, so I incorporated the practice into my business model when I started my investment firm. Giving is not a budget item because contributions come from the top – 10% of our firm revenue. At the end of each quarter, my wife and I sit down to pray over our offerings before giving any money away. It’s a joyful time, and it’s the best part of my job.

  • Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7

Our charitable giving spans the globe from Austin to Africa. We help local groups like Partners in Hope, Candlelight Ranch, The Heart of Texas Pregnancy Resource Center, and International organizations like Arise Africa, Eagle’s Nest International, and the Nicaragua Resource Network. We also support organizations we met through serving and our travels, like Galveston Urban Ministries, Mission Waco, Wellspring Church, and Wind River Ranch. Giving is part of our DNA. It’s what we do, and I can’t imagine a time where we’re not helping others with our resources.

  • 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

It was easy to commit to a giving program when we had no revenue, but our firm is growing, and so are our donations. My goal is to manage a billion dollars in assets to give more than $500,000 per year. At our current growth rate, we expect to reach this milestone in fourteen years. God willing.

  • Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts.But a poor widow came and put in two very small copper coins, worth only a few cents. Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.” ~ Mark 12:41-44

To be clear, we do not give to get. We’re not looking for quid-pro-quo relationships. Rather, we strive to be humble servants through giving, and it forces us to be sage stewards of our capital. When I launched my firm, industry experts and consultants panned my business model, saying my fees were too low and I can’t give away 10% of our revenue. They foreshadowed doom and gloom. However, five years later, we’re thriving, and we recently moved to the Securities and Exchange Commission (SEC) for regulation – a big deal for a small firm.

  • Give, and it will be given to you. Good measure, pressed down, shaken together, running over, will be put into your lap. For with the measure you use it will be measured back to you.” ~ Luke 6:38

Our giving has increased each year, but I’m not alone, thankfully. Americans gave $449 billion in 2019, and corporations added $21 billion – record amounts.[1] As stocks climb to new highs and real estate prices soar, I expect the amount people donate to charitable organizations will increase substantially this year. The wealth effect is in full force.

  • Do not neglect to do good and to share what you have, for such sacrifices are pleasing to God. ~ Hebrews 13:16

If you’re curious, here is a list of organizations we supported through the years.

https://www.parrottwealth.com/community

Give early, give often, and be well.

June 15, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management 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] https://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/

The Giving Season

November is 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 mission. For several organizations, the money they receive in the next few weeks will subsidize most of their annual budget. Individuals typically wait until the end of the year before they give because they don’t have a giving or philanthropic plan.

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

During my financial planning meetings, I ask people if they have a charitable giving strategy or if they donate money regularly; thankfully, most people are generous. I once worked with an individual who didn’t believe in giving money away while he was living. He was going to donate his money at his death through his estate. He was missing an opportunity to see his gifts 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.

Most individuals don’t have a coordinated giving plan, and as a result, they wait until the last minute to make donations. Without a strategy, you may be missing valuable deductions, so here are a few ideas to help you with your charitable contributions.

Appreciated Securities.  The stock market has done well, so you probably have stocks with unrealized capital gains. When you donate 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 YETI Holdings in January at $14.84, and today it’s selling for $31.90 for an unrealized gain of $17.06 or 115%. You can gift your shares directly to your charity and avoid paying taxes on the appreciation. The charity will sell the shares on the open market to receive the cash, and they, too, will avoid a capital gains tax. You must donate your securities to a 501c3 organization to receive a deduction

Qualified Charitable Distribution.  The IRS allows you to satisfy your required minimum distribution by giving your money directly to a charity from your IRA. It’s called a qualified charitable distribution (QCD), and you’re allowed to donate up to $100,000 per year. The QCD will enable you to avoid paying taxes on the distribution, and it will satisfy your required minimum distribution.

Donor-Advised Fund (DAF). A Donor Advised Fund allows you to transfer appreciated shares to the fund. Once inside the DAF, you can sell your shares and purchase new investments without realizing a capital gain. You can deduct the contribution from your taxes, and it occurs in the year of your gift, not in the year of distribution. You don’t have to distribute the proceeds immediately, so if you’re not sure which charities to support, you can defer the payment until you identify the organizations. For example,  you can transfer $100,000 worth of ABC Inc. stock to your Donor Advised Fund, sell it, reinvest the proceeds, and then send a portion of the funds to your favorite charity. The funds that remain inside your DAF will grow tax-free.

Charitable Remainder Trust (CRT). This trust allows you to transfer your shares to a Charitable Remainder Trust, sell your holdings, diversify your assets, and receive income from the proceeds. At your death, your charity will receive the remainder of the trust assets. The stock, once transferred, can be sold free of taxation and the proceeds reinvested into a diversified portfolio of stocks, bonds or funds. Your contribution to the trust qualifies for a charitable deduction. The amount of income you can receive from the trust is between 5% and 8% of the portfolio value. You will pay ordinary income tax on the income you receive.

Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give away $15,000 per person per year without having to pay taxes. However, you won’t receive a tax deduction, but you’ll be able to help the next generation. For example, if you have four children and ten grandchildren, you can give away $210,000 this year. You can also give $15,000 to friends and strangers if you want.

The end of the year is a great time to give money to those in need, and it’s always the right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A 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.

November 5, 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. 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.

 

 

 

 

Capitalism Wins

Henry Ford is credited with revolutionizing the auto industry and was on the forefront of innovation by creating the assembly line. He paid his employees $5 per day so they could purchase the cars they were manufacturing. He once said, “If I had asked people what they wanted, they would have said faster horses.” Mr. Ford’s net worth was about $200 billion. Capitalism allowed him to create great wealth.

Billionaires and the uber-wealthy are under attack by Elizabeth Warren, Bernie Sanders, and Alexandria Ocasio-Cortez.  Ms. Warren is calling for a tax of 2% on wealth from $50 million to $1 billion and 1% above $1 billion.  Ms. Ocasio-Cortez is suggesting a top tax rate of 70%.  Mr. Sanders wants an estate tax of 77% for estates north of $1 billion. He’s also proposing a 45% tax for estates with assets more than $3.5 million. When fisherman cast a wide net, they catch big and small fish.

Apple, Amazon, Ford, Facebook, Google, McDonalds, Microsoft, Nike, Starbucks, and Walmart were all founded by one or two people. These ten companies started with an idea from their founding fathers who weren’t billionaires at the time. Today these ten companies employ 3.7 million people.

Let’s do a deeper dive into these 3.7 million people. I’m assuming 75% of them are married and half the couples have two children. I arrive at 10.1 million people with my math. I’m also going to assume half of this population works and earns $100,000 per year. So, as a group, they’ll earn $506 billion per year. The average tax rate for this cohort is 22%. At 22%, they’ll pay $111 billion in taxes! Over the course of a decade they’ll pay more than $1 trillion in taxes. I’m not sure how many people Ms. Warren employs, but I’m positive they don’t pay $111 billion in taxes.

Furthermore, these 10.1 million people need services. They need teachers, doctors, real estate agents, insurance agents, bankers, grocers, plumbers, gardeners, bus drivers, electricians, painters, roofers, veterinarians, nurses, dentists, lawyers, accountants, dry cleaners, mechanics, architects, builders, engineers, librarians, florists, morticians, police officers, fire fighters, ambulance drivers, paramedics, military personnel, pilots, travel agents, butchers, bakers, and candlestick makers.

These billionaire’s employ thousandaire’s. On a recent Mad Money episode with Jim Cramer, Ms. Warren called for billionaires to “Stop being freeloaders.” Bill Gates doesn’t fit the description of a freeloader to me, but I could be wrong.

I’m not opposed to paying taxes and I believe everybody should pay their fair share. In fact, so does Jesus. Mark 12:17 says, “Give to Caesar what is Caesar’s and to God what is God’s.”

The individuals who founded these ten companies are also philanthropically oriented and they’ve established the following organizations: Bill and Melinda Gates Foundation, Bezos Family Foundation, The Brin Wojcicki Foundation, Carl Victor Page Memorial Foundation, Chan Zuckerberg Initiative, Emerson Collective, Ford Foundation, The Joan B. Kroc Foundation, Knight Foundation, Schultz Family Foundation and the Walton Family Foundation. These charitable organizations are armed with billions of dollars to make our world better by focusing on education, healthcare, the environment, and several more causes. They also employ thousands of people.

Our capitalist structure gives everybody an opportunity to succeed. People living in Afghanistan, Haiti, and Venezuela will never have this experience.  Socialists suck resources out of their citizen’s pockets. Margaret Thatcher said, “The trouble with Socialism is that eventually you run out of other people’s money.”

Animals are hypersensitive to danger and activate their fight or flight response often. The gazelle knows when the cheetah is lurking.  Billionaires and other wealthy individuals will defend their wealth by moving money overseas, changing residences, or creating trusts. On paper, they’ll look like paupers. They won’t wait around to be eaten by the government if the attack on their wealth begins. When the wealthy move and take their business with them what will be left? Venezuela? Ayn Rand captures this sentiment in her best-selling novel Atlas Shrugged.

If you want to protect your wealth or help others, here are a few strategies you can employ.

  • Charitable Remainder Trust (CRT)
  • Annual Gift Exclusion
  • Charitable Lead Trust
  • Donor Advised Fund
  • Family Limited Partnership
  • Grantor Retained Annuity Trust (GRAT)
  • Life Insurance Trust (ILIT)
  • Private Annuity
  • Revocable Family Trust

My great-grandparents migrated to Los Angeles from Mexico in the early 1900s. My grandfather told me repeatedly they didn’t have a pot to piss in, they were poorer than poor. He came of age during the Great Depression. He was a good student and wanted to attend Stanford, but his family couldn’t afford it, so he went to work instead. When he was 50 years old, he started his own business and was financially successful. If you’ve ever eaten at a fast food restaurant or enjoyed a bag of chips, you’ve benefited from his handywork. At his death, he gave his wealth to two colleges in Southern California for perpetual scholarships. His gift allows students without resources to obtain a college degree, one of the few things missing from his resume.  Capitalism allowed my grandfather to create great wealth.

Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler. ~ Proverbs 6:5

February 1, 2019

Bill Parrott 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.