Episode 45: Charitable Contributions and Gift Planning
Oct 16, 2023
On this episode of Wright Money Tips, Isaac Wright, CFP®, ChFC® and Stacey Jones, Founder and Executive Director of Mercy Mall of Virginia, discuss charitable contributions and gift planning from an IRA or retirement account.
Here are just a handful of the things that we'll discuss:
- Charitable contribution and gift planning strategies
- Potential tax benefits
- How to make gift planning part of your financial or legacy plan
- How charitable contributions and gift planning can impact your favorite nonprofits
Isaac Wright: Welcome back to Wright Money Tips. You know, we’re going into the end of the year. And today, I want to tease a little bit about what’s called charitable giving, especially for those that like to gift to their nonprofit organizations. And I actually wanted to take this opportunity to reintroduce one of the organizations that we’ve supported now for quite some time, Mercy Mall of Virginia. Stacey, good to have you in.
Stacey Jones: Thank you so much for having me back, Isaac.
Isaac Wright: Stacey is the executive director and founder of Mercy Mall, which really helps a tremendous number of families in crisis situations in Chesterfield County and I believe now, Henrico County. So, you all have started to really expand your services and maybe before we get into the charitable giving aspect of today’s show, why don’t we talk a little bit about what Mercy Mall has been up to since I’ve had you in last because there’s been a lot of momentum.
Stacey Jones, Yeah, so I remember one of the things I said last time when we spoke is that we were really wanting a box truck. So that we could not only pick up donations, large amounts of donations, but we could also distribute into other areas that are underserved. And since then, we now have a box truck named Annie, and she is very busy on the roads.
And so that’s one way we’ve expanded, but we’ve also opened up a couple storage units in Henrico County so that we can be closer to the immigrant population and those that are in Eastern Henrico. To be able to not only collect donations, but also to prepack and to serve them out there.
Isaac Wright: So, I will say this because this is from experience of giving to Mercy Mall and the fact of what really can accumulate to be a substantial amount of goods for people that are in need.
You know, going into a situation like a charitable gift, and we’ll talk about one specific strategy here in a second. So, for all of you, pay attention on this because it really impacts the amount of people you can help. Why don’t we stop just for a second and at least talk about the fact that you know, a charitable gift, what kind of things can it do?
And I’m not, you know, not talking about multi thousands of dollars. But, you know, if a big contribution comes in, talk a little bit about just what is out there in terms of what you all are able to accomplish.
Stacey Jones: Okay. So, first of all, we’re overcoming the obstacles to stability for families that are coming out of homelessness. Usually, about 70 percent are coming in through referrals from case managers, 30 percent through self-referrals.
And so, when we’re giving away clothing, household items, toiletries, baby gear, that expense adds up. And so, when we get, well, let me just go back and tell you the only reason that we are where we are today is because of what we’re talking about today. We got a $100,000 gift in year one, in our building currently. And in year two, we got $100,000.
So that kind of links back to what we’re getting ready to talk about, so that money is now being invested in sustainability through FDAA, through the services you all provide here. And so, in the future, the only way we’re going to be able to expand is to bring in that kind of high dollar gifts so that we can just serve more people.
We can continue our mission, bring in extra donors so that we can just be able to meet the need that’s out there. The families that are in crisis, just to give you an idea, we might only serve somebody one time and we’re still serving almost 200 individuals and families a month.
Isaac Wright: And I don’t think people really realize, because the majority of the people that watch the program and the show, or listen to it, are local. And I don’t think people realize the amount of need in Chesterfield County, that’s out there. And of course, I know, again, you all have expanded into Henrico, but the overall amount of people. One of the most impactful stories for me was when people leave jail and they don’t have anything other than the orange jumpsuit. And you guys immediately took on a role of putting together a suitcase full of goods, and including an outfit change, so it makes that person feel like they’re back into the public and not continuing to serve time maybe for a previous situation.
And I think that those, each one was like $100, $200. So, in the grand scheme of doing something like that, we’re not talking huge amounts of money, but if a big charitable gift comes in, multiply those times many, many people that could use that type of service. And so, you know, I want to jump in and just talk a little bit about this because when it comes to Mercy Mall and what they’re doing in the community, year-in giving a lot of times, this may be you, so listen in. You may be at a point where a lot of people push their charitable gifts to the end of the year.
And I teased this a little bit at the beginning, but if you’re over 70 and a half, you’re eligible to contribute up to $100,000 from an IRA over directly to a qualified charity, and I think, you know, Stacey when somebody looks at maybe making a gift, do you find that people are giving or have given that kind of money from an IRA or not? Or maybe talk a little bit about what you’ve seen.
Stacey Jones: Okay, so it was funny because I didn’t know anything about this until just last year. Because you know, when you’re running the operation and then money’s coming in, you’re trying to track it back to a donor.
Sometimes it takes 15 minutes to find out who’s the donor or they’re anonymous, or it came from a third-party source. But is this a soft credit or a hard credit towards the donor? And so, we’ll sometimes get a check in, and if we’re not told who it’s from, we don’t know necessarily that it came from an IRA. And so, what we are trying to also tell people is, please let us know it’s coming.
And then we see that it’s coming in from a financial company. And then it’s traced back to an IRA. So yes, we have gotten large gifts before, and it is a beautiful thing when that check comes in and we’re like, because it costs our ministry $35 just to serve one person. But if you think about the quantity of items that they’re getting to restart a life, that’s not a lot.
Mercy Mall is actually a $2 million organization. When you take into effect the 80 volunteers that are unpaid, that’s our staff, and the amount of items that are coming in through our hosted drive program. If you were to add that all up, we are managing a $2 million organization and that’s to serve around 10,000 people a year. And so financial gifts coming in is going to exponentially allow us to serve the population that is not being served.
Isaac Wright: Yeah. And, glad to hear because the reason we’re covering this today is a lot of people are unaware that they can gift money directly from an IRA to a charity and it bypasses taxes.
You want to say anything related to this, like some other benefits that you have seen or you know of when it comes to a qualified distribution like this that could be helpful for somebody that’s making the contribution?
Stacey Jones: Well, I know that it reduces their taxable income. Right? And it also increases their Social Security benefits. Is that right? So, you know, there are benefits to making that kind of large donation and we want that for them, but we also get the benefit as well. And so, people that have a million, 2 million and on sitting in an IRA, I don’t think a lot of people know that they can give these kinds of contributions. They’re not even going to feel it, but the impact on us, like I said, is exponential.
Isaac Wright: Yeah, and let me say this because for a lot of you listening, whether it’s a six or seven figure IRA, a minimum distribution could be very substantial. It could be a few thousand, it could be maybe in the five figures as far as money that if you don’t need to live on and you’re charitably inclined, it can reduce your taxes to give it to a qualified charity.
That also means based on your tax bracket, you may pay less for your Medicare premiums and like Stacey said, it may obviously add money to your Social Security and your overall income because you’re paying less what?
Stace Jones: You’re paying less taxes.
Isaac Wright: But you know, sometimes putting those things together makes it a great win-win for somebody that wants to do something good for the community. And again, one of the reasons we started sponsoring and being a part of Mercy Mall is the local aspect of knowing that you’re making a direct impact in the community. So, Stacey, I think that’s extremely important.
Now, whether somebody wants to or not, I want to say this as well. They could make a contribution of up to $100,000 from their IRA. But by no means, I believe they don’t have to put all of their IRA.
Stacey Jones: No, no, no, because we just got a $3,000 check. The donor said it’s coming. It came in through another company, but I’m glad they said it was coming. So, we knew to look for it and trace it back to them, be able to give them that credit. So yeah, we get $1,000, $10,000, $12,000. But honestly, I think it’s an untapped resource for us. And that’s why I’m so glad that you’re doing this podcast because people don’t realize this. Thinking back to that original donor and because of her faith in what we do and her knowledge and knowing what she could do, that’s why Mercy Mall is still here.
And so, you know, I know that you’re getting ready to go down this road with the legacy and being able to like, that something was done in your name and when you pass on from this world, there, you made a huge impact, you know? And I think, again, it just comes down to having that conversation.
Isaac Wright: So, as we sit here and we’re talking about year-end charitable gifts, if you’re 70 and a half or older, that’s a great strategy. A lot of you may be listening, and if you’re not 70 and a half, maybe you have a parent that’s taking IRAs or has money, again, most people do have money in a retirement account. It’s important to at least understand that this is an option.
One of the things, Stacey, I want to say is, as far as year-end gifting goes, a couple things to keep in mind because depending on whether you itemize your taxes or you take a standard deduction, you may want to make a contribution charitably at the end of this year or wait until the first of next year and double those contributions.
So, I know we’re talking about an IRA and the benefits of making a contribution at the end of the year, maybe if you’re 70 and a half or older. But there’s many other ways to make direct contributions to charities. Mercy Mall is a phenomenal charity to be able to add a little bit of money to be able to help support with all, I mean, just all of the endeavors.
You know, the box truck that you mentioned earlier, I know that was such a huge project, but obviously that is now allowing you all to expand your services. So, you know, small hinges swing larger doors is what I always tell people.
Stacey Jones: I love that.
Isaac Wright: Anything you want to talk a little bit more about? When it comes to you know, the fact of people that are uncertain of how to make charitable gifts and there’s many ways to make contributions to a charity other than an IRA, we’re just teasing that today. But what have you found?
Stacey Jones: Well, first of all, I want to say that almost every charity that I know of their biggest season for fundraising is at the end of the year. And how we like to say it like when we take people on tours is that that’s the time where people are, they’re certain of how their finances have gone over the year and they have a little extra to give.
It’s, you know, they want to. At the beginning of the year, they’re not sure somewhat of how the year’s going to go. And by the end of the year, that’s when we get our biggest checks. And so, this year, our goal is $100,000. I know that that is so astronomical and you know, it seems so lofty, but I really believe that that can kind of propel us into the next year. Because Annie, the box truck, is just one of our fleet, our future fleet. Just like Uber and Lyft, you know, they’re going out and they’re delivering.
There’s a whole different model out there. The biggest obstacle for some of our clients is just transportation. And so, if we can meet them halfway, if we can be, you know, at a pickup site where they can pick up their items and just get a little bit closer. They may not have transportation.
Isaac Wright: They may not have a car or something.
Stacey Jones: Exactly. So, you know, that’s one of the things in the future for us. But I would say this, being the executive director, I want to build relationships with those who are interested in investing in our organization and in our ministry. And so, I think the best thing that, the best tip I could give is not only to work with a financial advisor or a financial professional, is to just build a relationship with that executive director and then talk to them about the best way to give.
And, and let them know that it’s coming. Let them know, because when it comes anonymously, I feel like there’s just like this feeling in my spirit like I don’t get to thank them, you know, I don’t I don’t get to know them. I want to know their heart. I want to know why they gave to us. And so, I think that. But between working with a financial professional and building a relationship with the organization, that would be what I would hope for.
Isaac Wright: Awesome. Well, ladies and gentlemen, I hope everybody enjoyed today’s podcast and reintroducing Mercy Mall. More importantly for all of you is understanding that there are many ways to do charitable gifts. One of the least known or at least one of the least used strategies that I’ve seen outside of our office has been qualified charitable distributions, which if you’re over 70 and a half, you can give up to $100,000 a year from an IRA.
We have many in our office that take advantage of at least a portion of that every year, but many people are unaware of that. There are also other charitable gifting strategies as well. We’re not going to have time to cover it all today, but just know impacting great local charities like Mercy Mall would go a long way with what we’ve covered today.
Stacey, I think we’ve had a great show today.
Stacey Jones: Yes, thank you so much. It was fun.
Isaac Wright: So, from all of us here, Wright Money Tips. We’ll talk soon.
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