Philanthropic Client Wanting to Make A Difference

Background

Kevin* recently lost his wife after a long battle with Alzheimer’s disease. Confident he has more than enough money to take care of himself, he wishes to make a donation to the local university where Alzheimer’s research is being conducted.

Issues and Challenges

This was a very emotional time for Kevin, so we first needed to assist him with determining an appropriate amount to gift. Next, we needed to review his assets to determine the tax impact of donating one asset versus another.

Our Solution

We recommended Kevin donate highly appreciated stock directly to the university for credit to the Alzheimer’s research fund in which he was most interested. We also recommended he use the tax deduction resulting from this gift to generate tax-free income for his family in the future by converting from his traditional IRA to a Roth IRA an amount commensurate to his current gift.

Results

Kevin normally viewed charitable gifts as a means to reducing his current taxes, not as a way to generate tax-free income. In this case, Kevin built a substantial Roth IRA which our financial plan suggested he would not need to support his lifestyle, regardless of how long he lived. At the end of his life the account will flow tax-free to his children and grandchildren.

*Kevin is not an actual client, but his story is based upon actual client experience.