Author Topic: Philanthropy: Decumulating by Giving while Living  (Read 1107 times)

blueberrybushes

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Philanthropy: Decumulating by Giving while Living
« on: December 14, 2023, 05:38:02 PM »
Not the typical case Study:

At the beginning of the pandemic, DW and I increased our charitable donations significantly, but still only 1% of our net worth.  We embrace the "Giving while Living" concept with the goal to donate $1.5MM (approx 55% of our net worth) over the next 10 years.  Curious if any readers are doing something similar.

Our details:

Personal:
DW and I - 70
No Kids nor relatives to leave money to
Good health & exercise daily although both sets of parents had cancer.  No parents lived past 83.

Assets ($3.2MM):
$610K - After tax joint (AA - 50/50)
$1.6MM - Roth (AA - 75/25)
$450K - Traditional IRAs (AA - 35/65)
$550K - home equity

Income ($97K):
$58K - SS
$4K - pension
$11K - side hustle than probably ends in 3-4 years.
$24K - Investment interest & dividends
$50K - AGI (Oregon does not tax SS benefits)

Expenses:
$85K - essential and discretionary.  $250K mortgage at 2.75% through 2035 included in expenses

Tax Liability:
$0 - Donations adjusted to match AGI

Withdrawal Plan:
- $15K/yr - Donation of appreciated stock from the after tax account to our DAF (or an organization) and incurs no tax liability (this is the IRS max based on AGI)
- $50-100K/yr from the traditional IRAs ($200K/yr max across two trad IRAs per IRS rules).  These will be QCD so, again, no tax liability
- $35 - 85K/yr from Roth and after tax

This amounts to a 5.5% drawdown rate.  Given a 5-6% LT average return on a 60/40 AA, our net worth will be the same in 10 years as today.  This is ok since who knows what medical issues will pop up.  Worse unknown is one of us dying well before 80 and losing the SS benefit.

Estate plan has everything goes to charity - including house (if we are still in it).  All accounts already have beneficiaries listed.  The house will be a Transfer upon Death to a charitable organization.  Almost the entire estate will bypass probate except for about $75K (personal property and a small checking account).  So, no Oregon estate tax, etc.. Of course, there will be legal fees.  Burial expense has been set-up and paid for already through a couple of funeral homes.

As mentioned, if any readers have or are doing something like this, I would like to hear from you.  The internet info only references billionaires.

Thanks for thoughts and comments.

PW








Louise

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Re: Philanthropy: Decumulating by Giving while Living
« Reply #1 on: December 16, 2023, 07:22:54 AM »
We don't plan on donating quite as much because we have heirs and would like to leave a legacy (our own offspring, lots of nieces/nephews and hopefully grandkids). However, I do donate to charity and am interested in setting up a DAF sometime in the future. Perhaps when I'm a little older (in my early 50s now) and college is paid for and a lot of the what ifs are out of the way.

I do like the concept of giving money away while I'm still alive though. It sounds like you are in a great position to do this.

blueberrybushes

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Re: Philanthropy: Decumulating by Giving while Living
« Reply #2 on: December 19, 2023, 11:07:52 AM »
Louise,

I agree with your assessment that the early 50s is a bit early to be as aggressive as my DW and I.  We are past most of the factors influencing our income streamline and the end of the tunnel is almost in sight.  It makes it much easier to set a plan in action.

If we had heirs, we might not do it any different except give them money each year and less to charities.  This helps bring down the estate value, so we don't incur an estate or inheritance tax - depending on the state we finally end up in.  Oregon has a very low estate tax threshold - $1MM and the tax on any amounts above that is 10%.

Good luck with your plan and hope it works out.

paul