Donor Education and Financial Literacy – The Series

Educated donors who are financially literate understand why they are giving. Education leads to empowerment. Empowerment leads to action. Integrating an effective financial literacy and donor education program into your institution’s goals and objectives is a mandatory component of an overall philanthropic plan.

 

Why Financial Literacy Is Important

Financial literacy adds significant value to donor education because it helps donors make the most of their wealth through giving.  Financial literacy has been defined by The Organization for Economic Co-operation and Development (OECD) as  “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks; and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being” (http://www.oecd.org/dataoecd/0/41/42271820.pdf).

Research suggests, however, that most Americans have extremely low levels of financial literacy, and that their lack of financial literacy has an impact on philanthropic giving.

Analyses show that, regardless of the actual financial resources held by donors, the size of their donations is negatively affected by feelings of retention (a careful approach to money) and inadequacy (worry about their financial situation).

It can be concluded that an understanding of money perceptions is an additional important factor in the understanding of charitable behavior. Since most people do not know how much they can afford to give based on their income, financial literacy can result in higher giving—once donors know the amount that they can afford to give based on their income, they can increase their giving. Given these findings, fundraising professionals should not only select potential donors based on their absolute financial capacities, but also take the potential donor’s own financial perceptions into account when asking for donations. (Wieping and Breeze, 2011, 1)

Next week: Why Effective Donor Education Programs Are Important!


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Women & Money: Dividing Assets Fairly For A Special Needs Child

If you do have a special needs child or a child who is not disabled or on governmental assistance but who has greater needs than the other children, the question of how to divide the assets can be very tricky. Some parents prefer to have all assets held in a special needs trust for the child who needs them, and then at that child’s death have the trust end and the money distributed among the other children.

Other parents do not feel that the special needs child (because of the government programs available) will actually need all that much money and do not feel right denying their other children an inheritance. If need be, they feel, the other children will take care of the special needs child. This approach, of course, comes with risks. It’s possible the other children may predecease the special needs child, spend the money on their own legitimate needs, become disabled or get divorced and need the funds.

For that reason sometimes a special needs trust will be funded with life insurance – and the special needs child will be omitted from the other terms of the estate plan. That way, if the trust is irrevocable (and funded only with life insurance) when the insurance is paid, it will come in free of gift, estate and income taxes. To the extent the special needs child needs it, it is there. To the extent it is not needed, it will eventually be distributed to the other children free of any tax consequence.

One of the most difficult issues for a special needs child is where the child will live if the parents die. Frequently that child cannot live by himself. Yet it is a tremendous burden to a sibling or family member to take in that child. For that reason I have seen an increas­ing trend of parents placing special needs children in group homes during their lifetimes so that a support structure has been put in place and the adjustment that comes with the death of parent (and best friend) does not also mean a change in home.

It is especially important when planning for the future of a special needs child that the assets are coordinated with the plan. All beneficiaries of life insurance policies, pension plans, IRAs, and annuities must be reviewed. If a special needs child is named directly (instead of the trust) or if there is no designation of beneficiary and the asset defaults through your estate, then your plan can quickly unravel and the receipt of those funds by the disabled child will jeopardize his government eligibility.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

 

 

Women And Money: Understanding Estate Industry Terms

Alimony trust: A trust established as part of the divorce agreement, into which cash, investment assets or business assets are transferred before the alimony payments are due. The trust then pays out the required amount of money for the alimony payments.

Annuities: Contracts between a financial institution and you which allow you to invest money that grows on a tax deferred basis. You may make payments at once or over time. The company promises to make payment to you – either for a specific time period or over your lifetime. No state or federal taxes are due as the money accumulates. When the funds are distributed to you they are taxed.

Beneficiary (primary, secondary): A person, trust or organization you designate to receive property at your death. You must name a primary (first taker) beneficiary for any life insurance policy, annuity, retirement plan and bank or investment accounts you hold. The secondary beneficiary you designate is the person, trust or organization you designate to take the assets if the primary beneficiary is not then living.

Clayton Q-Tip trust: A Q-Tip trust in which after one spouse’s death an independent trustee decides how much money passes to the trust for the surviving spouse and how much passes to the children (or to a trust for their benefit).

Convertible option: An opportunity in a life insurance contract to convert term insurance to more permanent life insurance, in many cases without a medical examination.

Disclaimer will: A will in which the assets are left to the surviving spouse and the surviving spouse had nine months after death to decide how much to keep and how much to disclaim for tax reasons and pass to a trust for the children.

Durable power of attorney: A document in which you give another person the authority to handle your financial affairs. The powers remain effective through any disability or incapacity you may have.

Estate:  Your taxable estate includes the total value, usually the fair market value, of all possession property and debts you own at your death. Your probate estate includes any asset that is in your name at your death. It does not include assets you own jointly with a right of survivorship, assets that are already titled in the name of your trust, assets such as a life insurance policy, or annuity or retirement planning asset that pass to beneficiaries by contract. You can have a significant taxable estate and totally avoid probate.

Fiduciary: Anyone responsible for the management of another’s property; including executor, administrator, trustee, guardian or conservator.

Gross estate: The value of your entire taxable estate without taking into account any deductions or credits.

Heir at law: The persons who are entitled by state law to inherit your estate if you do not leave a will.

Irrevocable trust: A trust that cannot be changed, amended, or revoked.

Key man life insurance: A life insurance policy on a key employee that is owned by and payable to the business. The intent is to provide the business with operating funds to hire a replacement for the key employee if he dies while employed.

“Living together” agreement: An agreement, usually between persons who are not married but living together which sets forth their respective rights to assets and income should the relationship terminate.

I hope you found these definitions helpful.  Did I miss one?  Do you have an estate related term that you don’t quite understand?  Please leave the information in the comment section below and I’ll be happy to provide a detailed response.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

 

 

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