How to Give like a Billionaire

Posted: February 8, 2012 in business, Life, Money

I know what you’re thinking.  For sometime now you’ve been wondering what exactly Mr. and Mrs. Jlcollinsnh have in common with Bill and Melinda Gates.  Here it is:

We both have Charitable Foundations

Now you’re thinking, “I knew it!  jlcollinsnh is a billionaire!”  In this you’d be, sadly I must say, mistaken.  More monk than minister, I’m afraid.

The Gates Foundation Building

Our foundation has no building at all

We talk a lot on this blog about investing and building your own F-you Money stash.  Very little time is spent on, well, spending it.  Since we  personally don’t much care for owning things we’ve not much to say.  We like travel.  We do spend on that.  Sending our daughter to college is money well spent, as she is so thoroughly embracing the experience.

But the money we’ve spent that has provided us with the most pure pleasure is that we’ve been privileged to give away.

In fact, I can specifically pin-point the $1200 that has given us the most satifaction return of all.  I hesitate telling this story as it will be easy to read it as bragging when it’s only meant to illustrate.  Hope you take it in that spirit.

Many years ago we attended a charitable auction held by the Catholic grammar school our daughter then attended.  We had always been impressed with the teachers and the Mother Superior who ran the place.

One of our favorite local restaurants was Parkers.  Parkers had donated for auction a gourmet dinner for ten.  On the spur of the moment we decided to win it and gift it to the school’s teachers.

Bidding was spirited but as the amounts reached the actual cost of dinner for ten at Parkers, the competition dropped off.  At around $1200 we were the winners.

When I gifted it to the Mother Superior I also gave her two obligations.  First, she would have to choose which ten, of the about 15, teachers would get to go.  Second, she herself would have to attend.  See, we know this Mother Superior and needed to head off her selfless ways.

Parker stepped up

When word spread a couple of very interesting things happened.  Parker stepped up and expanded his donation to dinner for 15 so everyone got to go.   Another bidder offered to foot the bill for the wine.

Well, you know what happens when you mix fine food, wine and Catholic school teachers.  Let’s just say, a good time was had by all, and leave it at that….

In addition to personal pleasure, one of the benefits of charitable giving is the tax deduction.  Of course, to gain this benefit you must itemize your deductions on your tax return.  But if you have less than $11,600 (Married and Filing Jointly.  $5600 if Single) in itemized deductions you are better off taking the standard deduction and saving yourself the effort.

Five or six years ago it occurred to me that two life changes were coming down the pike that would affect my personal tax situation.  We were planing to sell the house and I was planning to retire.  Without the house and it’s associated deductible costs we’d no longer be itemizing.  Upon retiring I’d be in a lower tax bracket.  Both these things would be lowering the tax advantage of charitable giving.  The solution:

The JJ Collins Charitable Fund

If you’ve been reading this blog much you already know I’m a big fan of Vanguard.  So it should be no surprise that in setting up our foundation we used The Vanguard Charitable Endowment Program.  Here’s why:

  • You don’t have to be a billionaire.  You can open your own foundation with as little as $25,000.  Fancy building not included.
  • You get the tax deduction in the year you fund your foundation.  So I got to take the tax benefits when they mattered most to me.
  • If you have stocks or mutual funds or other assets that have appreciated in value you can move these directly into your charitable foundation. You get the tax deduction for their full market value and you don’t have to pay any capital gains taxes on the gain.  Double tax win and more $$ for your charities.
  • You can choose a variety of investment options so your donation grows tax free while waiting for you to allocate it.
  • You decide what charities receive your money, how much and when.  You can set this up to happen automatically.
  • You can add more money to your foundation whenever you choose.
  • Because it is run thru Vanguard, expenses are rock bottom.
  • Now I can tell unwanted solicitors, “We only give thru our foundation.  Please send us your written proposal.”  We’ve gotten exactly zero proposals.
  • It keeps our personal names off the lists some charities sell to future solicitors.

In addition to the tax advantages this offers, it also plays into some of my conclusions regarding charitable giving:

  • It is best to concentrate your giving.  We have selected two charities.
  • Giving small donations to many charities might be satisfying to you, but it dilutes the impact and a greater percent of your gift is eaten up in the processing of it.
  • Many small donations also gets you on many mailing lists.
  • Never give to phone solicitors.
  • The more I see a charity advertising, the less likely I am to believe they are focused on delivering my cash to those they claim to serve.
  • You need to do your homework.  In addition to scams, lots of charities simply aren’t very efficient in delivering your dollars to those in need.  You can check them out here: http://www.charitynavigator.org/

 

You don’t need a charity to help

There is also something to be said for giving outside the traditional, and tax deductible, places.  Helping your friends and neighbors directly isn’t deductible, but it has immediate benefits all around.  This is something I’ll be trying to do more of in the coming years:

http://www.jamesaltucher.com/2011/03/how-to-become-a-superhero/

http://www.jamesaltucher.com/2011/04/10-reasons-why-i-would-never-donate-to-a-major-charity-or-how-to-be-a-superhero-part-2/

http://spartanstudent.blogspot.com/2009/01/scholarship_01.html

http://spartanstudent.blogspot.com/2011/05/dispatches-from-peru-beans-bananas-

and.htmlhttp://spartanstudent.blogspot.com/2011/10/this-past-winter-i-created-scholarship.html

Finally, while giving is a fine and pleasant thing, no one has an obligation to do so.  Anyone who tells you differently is trying to sell you something, most likely the idea of giving to them and/or their pet projects.

As individuals we only have one obligation to society: To make sure we, and our children, are not a burden to others.  The rest is our personal choice.  Make your own and make the world a far more interesting place.

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Comments
  1. […] How to Give Like a Billionaire @ Jlcollinsnh […]

  2. […] has power to unleash positivity by performing positive actions to help others. I always try to make an effort to help someone everyday to unleash power of positivity to influx […]

  3. CL says:

    I love this roadmap. It’s definitely something that I’ll use when I have $25000 to give away.

  4. […] How to Give like a Billionaire […]

  5. Thanks for the post. I may be crazy, or it may have something to do with me living in Canada, but I refuse to use charitable donations as a tax-break. It may be different in the US, but in Canada government does a pretty good job providing social assistance to all those in need. Yes, I am sure that there is some abuse, some people are lazy jerks who suck the system, but vast majority (maybe 98% of the money) goes to those in need. And yes, government on occasion does something ridiculous and often wastes money, but I bet that overall, they are more efficient than any non-profit organization could be.

    Secondly, I must say that I disliked Bill Gates for a very long time – as a nerd, some of his moves did slow down the development of the new technology, some great things never took off as his inferior product simply steam-rolled over it… However, what he is doing now, not only with his own money, but also by having other billionaires donate even more – is nothing short of amazing. There are thousands of children in this world that are alive today thanks to his work and contribution.

    • jlcollinsnh says:

      Hey Mr. RS….

      good to see you here and thanks for commenting!

      yeah, I gather Canada throws a wider safety net than we do here in the US. Although a lot of tax dollars are spent on social causes here too.

      The argument I’d make for charities over government in handling these things is that charities have to win you over to get your money. governments just take it. accordingly it seems to me the charities have more motivation to run efficiently.

      that said, I think the even better choice is low key, local help provided to people and situations we can know personally. of course, here in the USA those kind are not deductible. that’s why I funded my foundation during my high tax/valuable deduction years. now, I’m free to do more of the more personal stuff and not worry about the deductions.

      Bill Gates seems to be a person that others have very strong feelings about. As for me, he was just a good foil for this post.

      • I agree about keeping the charity close to home.

        P.S. Forgot to mention in my earlier post – I shared some of your posts with my better half and she says she loves your writing style.

        Thanks for taking time to write – it is kind of you to share your story to help others who are striving for the same result.

        • jlcollinsnh says:

          thanks for letting me know and please give you’re lovely bride my thanks and regards.

          of course now that I know she’s reading I’ll be expecting her to comment. ;)

  6. […] How to Give like a Billionaire […]

  7. […] Compassion has power to unleash positivity by performing positive actions to help others. I always try to make an effort to help someone everyday to unleash power of positivity to influx my mind. Act of compassion acts as an agent of clarity and boundless happiness. […]

  8. Fritz Hahn says:

    Hi Jim-
    Thanks for your informative article. As a social worker I am keenly interested in meaningful gifting – especially when considering current diminished funding in light of increasing demand.
    Some thoughts from the book “Getting to Maybe: How the World is Changed,” by Westley, Zimmerman and Patton: think of the Grameen Bank model for microloans for entreprenurial start ups. Outcomes, accountability and tests of inference are important for established programs, but as a potential (micro) funder for start ups consider: (quoting from “Getting to Maybe…”):
    1) Support learning as a meaningful outcome – and reporting on learning as a form of authentic accountability.
    2)Create and nurture experimentation and learning about social change, especially failed policies and initiatives.
    3) Support small “safe-fail” initiatives to learn what works and doesn’t work before implementing policy changes widely.
    Thank you for your wrtiting and
    thank you to your readers for their responses.
    Fritz Hahn, Taos New Mexico

  9. Cindy says:

    Wonderful article! Doing your homework is an important step to charitable giving. Vanguard Charitable is a great way to give to your favorite 501c3 charities and the homework is done for you! Jim..you did an excellent job relaying all the reasons why a donor-advised fund is a good option for philanthropy. Thanks for being such a great ambassador to giving!

  10. I have to admit I don’t give as much to charity as I’d like, but as my income grows that will probably change. I do have to admit that I sort of think of all the unpaid overtime I work as charity to the homeless (I’m a social worker at a homeless shelter). I love that you won and gave that dinner to the teachers. My mom is a public school teacher and they deserve so much more credit then what they get. They are teaching and shaping tomorrow’s leaders after all.

    • jlcollinsnh says:

      Hi Kari…

      thanks for stopping by, and welcome.

      Giving is, as you know, not just about money. I have a great friend from high school who retired and returned to school to get his masters in social work. It is a tough and often thankless field.

      Each year I work as a volunteer with VITA (volunteer income tax assistance) helping lower income people complete their tax returns. It’s fun for me and I get to meet some interesting and wonderful people. Certainly shatters the common assumptions about the poor.

      My guess is your work with the homeless does the same.

  11. hvaccontrols says:

    Jim, great article. I will be sharing it with my father. He definitely want to do more charitable giving and this sounds like a great plan.

    • jlcollinsnh says:

      thanks Tom…

      Glad you liked and to see you’re still reading this stuff. Please give your dad my regards.

      Mmmm, wonder if I can get this blog classified as a charity….
      ;)

  12. That’s really amazing. I’m nowhere near ready to set up my own foundation, but when I am I’ll know where to go now :) I really like that kid at Duke’s blog…thanks for sharing.

  13. Wow! Sounds like a fantastic way to make a big impact!
    I have dreams of setting up some kind of foundation in my later years and had no idea it was that easy. Or that it could be done without millions of dollars.

    • jlcollinsnh says:

      piece of cake to set up.

      one other thing I forgot to mention. If you have stocks or mutual funds or any assets that have appreciated in value you can move it directly into charitable foundation. You get the tax deduction for its full market value and you don’t have to pay any capital gains taxes on the gain.

      Double tax win and more $$ for your charities.

      think I’ll add this into the post….

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