As members of the human race, we all share the fact that we have a father and mother. This coming Sunday, Americans remember their fathers on Father’s Day, often with a greeting card or maybe a family picnic. For those whose fathers are deceased or no longer present in our lives, we have only memories and (hopefully) the wisdom that our fathers imparted to us.
In my own family of seven children, my brothers and sisters remember our father by the short pieces of advice that he offered us. Recently when I emailed my sibling to see if they could remember some of the old sayings, now more than 14 years after his death from cancer, I was literally flooded with material:
“A bird in the hand is worth two in the bush”
“Eat your meat and you’ll grow up big and strong like me” OR “. . . you’ll have hair on your chest like me.” (only for the boys!)
“You cut and I’ll choose” (when dividing the last piece of cake or pie fairly)
“Give me two weeks with your kids, and I’ll straighten them out.” (advice of Grandpa)
“When I was a kid, we had to . . . “ (fill in the most difficult task, now made easy with modern technology)
“Fool me once, shame on you; fool me twice, shame on me.”
You get the picture. Our Dad’s advice through these sayings was not always welcome when we were kids, but it formed our family heritage and is an important part of our lives today. Our remembrance near Father’s Day was a fun exercise. You might even try it this Father’s Day with your Dad and/or brothers and sisters.
Our family heritage, just like our talent, education, and financial position, is a gift from God to be nurtured and shared. By sharing some of our wisdom from our fathers, we pass wisdom on to our children and their children.
How does all this relate to stewardship and development? Many fathers hold financial assets that are better suited to direct to charity instead of to children, believe it or not. Specifically two classes of assets are particularly poorly passed on to relatives, but can be very successfully passed to charity:
• U.S. Savings Bonds
• IRA, 401 (k) or 403 (b) savings (“Retirement Saving Accounts” for short).
The reason that these two classes of assets are better passed on to charity rather than to family members is that, as gifts or bequests to family, tax is due on the income that is stored up or imbedded in the Savings Bonds or Retirement Saving Accounts. Except in certain limited circumstances, these classes of assets make much better gifts to charitable organizations because the charities do not have to pay tax on their receipt. Accordingly, if one is charitably inclined, it makes more sense to pass on some portion of these assets to charity and to give other assets to family members, for an overall more tax-efficient outcome.
Many Americans hold Savings Bonds and Retirement Saving Accounts. Savings Bonds were a very popular saving tool in the 1950’s through the 1980’s; many purchasers have never cashed them in. When cashed in during life, the difference between acquisition price and the final proceeds is “interest income” taxable at ordinary income tax rates (not the preferable capital gains rates). Even a gift to charity of a Savings Bond during life generates income tax liability for the donor.
Likewise, in recent decades, Retirement Saving Accounts have been and continue to be particularly popular and advantageous as saving vehicles. When passed on to anyone other than a surviving spouse, however, they often generate a tax liability on their gain. Thus they do not easily lend themselves to tax-wise lifetime transfers to family members; as gifts to charity they pass tax free.
What is the lesson here? When fathers and grandfathers (or mothers or grandmothers, for that matter) are looking for the best assets to pass on as a charitable legacy, they should particularly consider their Savings Bonds and Retirement Saving Accounts. Literally, these assets may be worth more as charitable gifts!
Please check this with your financial or legal adviser. If you have questions, please contact me at 816-756-1858, ext. 529 or firstname.lastname@example.org.
Greg Vranicar is Associate Director of Stewardship and Development for the Diocese of Kansas City – St. Joseph.