Purposeful Engagement and Community Involvement
Upon assessing financial readiness for retirement, consider utilizing your skills, knowledge, and energy beyond the workplace. Embracing community service activities akin to social entrepreneurship can offer you many new and fulfilling opportunities. Whether intensifying involvement in existing organizations or channeling expertise into new projects aligning with your personal passions, retirement can be a phase of meaningful contribution.
Legacy through Charitable Endeavors
For those anticipating significant retirement assets from business sales or shares, anticipating potential tax obligations can prompt the exploration of establishing a family foundation or a donor advised fund. A donor advised fund, managed by registered charitable public foundations, offers you and your family the financial and personal gratification of creating a personal family charitable foundation at reduced cost and complexity.
Functioning of a Donor Advised Fund
Donating cash or shares to a donor advised fund can facilitate the avoidance of some of the tax liabilities associated with capital gains accrual. While most funds impose a minimum donation amount (typically around $25,000), contributions generate tax deductions in the year of the donation. These funds maintain separate accounts invested according to your wishes with a requirement that a certain percentage of the portfolio be in low-risk assets. The fund requires an annual disbursement of at least 5% to charitable organizations of your choosing. You and your family can change these organizations to receive funds whenever you wish.
Enduring Impact and Flexibility
Establishing a donor advised fund can cement a lasting legacy. Well-funded and prudently managed, these funds can potentially last for generations, offering sustained support to charitable causes. This may be an ideal way to involve young adult children in charitable giving, thus contributing to your family's legacy. The 5% disbursement requirement is only a minimum requirement. If you do not choose to make the fund last for several years, a larger donation may be made in any given year.
Tax Advantages and Philanthropic Flexibility
Beyond establishing a legacy, donor advised funds offer tax deductions during periods of high-earned income. The fund can also receive ongoing donations in the future which may provide additional tax relief to any family member making the donation. They allow flexibility in disbursing gifts to multiple charitable organizations over time, ensuring continued alignment with personal values and your family aspirations throughout retirement and beyond.