More Ways to Give Back

August 18, 2021
Woman's hand holding a heart over a laptop keyboard. West Financial Services
By Glenn Guard, CFA®

Most of our clients are at a place in their lives where they are well established financially. Some clients are empty nesters who are wrapping up careers and thinking about what retirement is going to look like. Others are in the thick of it with both young children and older parents — each with their own set of needs.

Some of our clients are already retired, living off of their investments and enjoying the good life. They raised families, had successful careers and managed their financial health wisely by following a financial plan. Many have active social lives filled with friends and family. Other clients have embarked on second, third or fourth careers, and some are pursuing passion projects that are more about the experience than the financial incentive.

Still more clients are at that point in their lives when they are starting to think about giving back. Most of us donate cash and maybe stocks to charities from time to time. Here are some other ways you can make a difference:

  • Donate property
  • Invest directly in an entity that aligns with your beliefs
  • Invest in ETFs or mutual funds that focus on the environmental, social and/or governance (ESG) issues that are important to you

Let’s start with donating property. Property includes any real asset that has monetary value: real estate or a vehicle, for example. You can simply transfer the title of the property to your favorite qualified charity that accepts these types of donations. Once the charity receives the asset, it can then sell the asset tax free, avoiding any capital gains tax altogether. There are other tax benefits as well. Long-term assets (held for one year or more) that are donated qualify for a deduction equal to the fair market value of the property. This deduction is generally limited to 30 percent of your adjusted gross income (AGI) for any given year. You can carry forward any excess donations for up to five years. Tax laws change all the time, so consult with your CPA to make sure you are in compliance with current tax laws and that you are maximizing your tax benefits before you go this route. You could also include language in a trust or will that directs a transfer of title after a certain event. 

Next let’s look at direct investments. Have you ever thought about investing in a solar company? How about a sustainable farm? Perhaps you’d like to make micro-loans to entrepreneurs in third world countries? These are all examples of “Impact Investing” where ESG factors are incorporated into investment decisions. Besides measuring the financial return on investment, you also measure the social return on investment. Impact investing is a large and growing industry. There are many ways to get involved. Examples include private pooled funds, community foundations, social impact bonds and international micro-lenders to name a few. It is important to do your research and make sure you are investing in a way that is legitimate and impactful.

Finally there are ETFs and mutual funds for sustainable investing. There is an ever-expanding list of these investments to choose from, including over $200 billion in ESG ETFs alone! These products come in all shapes and sizes: solar ETFs, water funds, “social” funds that are managed by “activist investors.” For example, ExxonMobil shareholders recently voted to add three activist investors to its board to focus on the company’s carbon footprint.

One important note: As a fiduciary, it is WFS's responsibility to always place the client's interest first at all times. Additionally, it is WFS's philosophy to prioritize maximizing returns while minimizing risk. Any ESG issue related to a company’s security is only a factor in our analysis if it could affect the price directly, or if it is client directed. If you’d like to discuss this topic feel free to reach out.

Meet Glenn Guard, CFA® »

Read the Financial Planning Focus August 2021 »


Sources:
www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
money.usnews.com/investing/funds/slideshows/socially-responsible-etfs-to-buy-now
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