Transcript: 

Voiceover: [00:00:00] Welcome to Retirement Unlocked with Larry Heller, your life Your Way, unlimited possibilities. Join us as we explore how tailored financial planning and investments can help you navigate life transitions with confidence. Let’s dive into this week’s episode.

Matt Halloran: Hello and welcome to another Retirement Unlocked podcast with your host Larry Heller.

Today we’re gonna be talking about charitable giving and retirement with our guest, who is Josh Chadajo. He’s the founder and CEO of JEC, philanthropy, with over 25 years of nonprofit leadership and experience he has. Held executive roles served on multiple boards and actually led efforts into really giving a hundred million in charitable donations, which is absolutely fantastic.

So he is the person we want to talk to about this now. He brings deep experience in fundraising, strategy, finance and operations, and more importantly, relationship building. Alright, Larry, take it away.

Larry Heller: Thanks, Matt. [00:01:00] Thanks Joshua, for joining us today. And like Matt said, we’re gonna get into talking about charity and ways to save taxes, especially in retirement.

So Josh, just before we kind of talk about some details, why don’t you give our audience a little bit background about yourself and what actually you do.

Joshua Chadajo: Thanks Larry. Uh, it’s a pleasure to be here. I’ve worked in the nonprofit sector for 25 years. Uh, early on I realized people worked in the nonprofit sector largely because they were passionate about the organization, but it didn’t mean they necessarily had the skills to run it like a business.

So I went. Got an MBA came back and started running a nonprofit connected to a school based in Israel. It’s the United States operation. And really worked with donors throughout that time to help them figure out, uh, where they wanted to give and how they could make an impact. And I realized that a certain point.

That if you don’t have a professionally staffed charitable [00:02:00] foundation, you’re largely on your own. Uh, and that’s why I decided to found JEC Philanthropy, to help provide donors that guidance and expertise and help them get excited about the philanthropic opportunities that are out there and not view it as either overwhelming or as a burden.

Awesome.

Larry Heller: So let, let’s kind of talk about some specifics. Why don’t we start kind of, I guess one thing that we do, and some people may be aware of it, some may say, some people may not, but, and that is a donor-advised fund. You know, what, what is a donor advised fund and why should I consider opening up either now or in retire?

Joshua Chadajo: A donor advised fund is basically a parking lot to put money before you send it to the charity that you wanna support. And so a lot of times people wanna be charitable and there might be either a deadline, they want to get the money in there for tax reasons. It’s important to say you get the tax [00:03:00] write off as soon as you put the money in the donor-advised fund.

In addition, maybe you’re selling a business. Maybe you’re getting a big bonus and so you have a lump sum and you want to take advantage of sending it to a charity and take the tax advantage now, but you don’t know where you wanna give it. You’re not exactly sure where you want the money to go. So first you put it in there and you buy some time, so to speak.

But there are also a number of other reasons why this is helpful. First of all, if you have securities that have appreciated. Instead of selling the securities, paying capital gains tax and then donating the remaining funds to a charity, you can send the shares right to the donor advise fund, and you get the full tax write off.

You pay no capital gains. So just to make it concrete, if the shares were a hundred dollars a share. And they’ve appreciated to [00:04:00] $150 a share. If you send those shares right to the donor advise fund, you get the $150 a share write off. You don’t have to pay any tax on the difference between the 150 and the a hundred dollars.

So that’s another, uh, good reason. Right. So just back up a second. So some people

Larry Heller: may not know about that. So they’ll sell that stock, pay the taxes on it, and then send the money to charity, and then that now they have to pay. Taxes on that. And so they’re either gonna spend some taxes and possibly give the charity less.

So it’s basically a win-win situation than by doing it that way.

Joshua Chadajo: Right. And, and that’s really important what you said there, both your paying less taxes and the organization is getting more. So it’s really, really a win-win in that case. Uh, other advantages include the convenience factor. You only have to go to one site to make all of the gifts you wanna make.

Uh, and in addition, you don’t have to track down a receipt. [00:05:00] From every organization that you’ve supported, the only real receipt that you need is from the donor advised fund.

Larry Heller: Lemme just back up a second, just to make it really clear to our, our audience there. So somebody wants to do a donor advised fund.

They’re not just looking up. And creating their own donor-advised fund. These funds are, are available in different, different organizations, custodians. So let’s say we use Schwab. You can go to Schwab, and Schwab will basically help you set up a donor-advised fund. And so you’re setting it up at Schwab, you’re making a contribution to this fund.

Let’s say $10,000. $10,000 goes into this fund. You give that information to your account, your account now files the tax return. You get a $10,000 deduction. Mm-hmm. You haven’t yet. Given any money to a charity yet you’ve just, like you said, just parked [00:06:00] it there, so I just wanted to make it really clear.

And then you can give the money in that that same year, but a lot of times you may want to wait and figure out who you’re gonna give it to and give it over time.

Joshua Chadajo: Right, exactly. It’s almost like opening up a bank account. It’s very simple. You mentioned that you don’t have to give that money that year.

That’s an important distinction from say, a foundation where you’re acquired to give 5% minimum of the proceeds that you’ve donated into the, in this case, a donor-advised fund. In that case, a foundation, at least right now, you don’t have to donate anything. Now the point is to actually get the money out there working.

Uh, one of the things, uh, I see now is that people open up a donor advised fund, put a lot of money in there to save. The taxes, but because there’s no philanthropic intent, they’re not really sure what to do with it after that. And that’s where, you know, some outside help could be beneficial really, to get that money working toward whatever cause, uh, you think is important.

But as you said, you put that [00:07:00] $10,000 in Schwab sends you the receipt. That’s it. So you don’t have to track that down. Some organizations are good about sending the receipts, others aren’t. Some gets lost in the mail, the email goes dis, you don’t have to worry about it anymore. Uh, so that’s really helpful.

Another advantage is that you can make gifts anonymously, uh, and that’s important. Sometimes people want the name to be known. Other times they don’t want to be bothered, they just want to send it in. They don’t necessarily want to hear from the charity. And with a donor advised fund, it’s very easy to do that.

Larry Heller: We started by talking about what’s important. Why should someone open up a donor advice fund in retirement versus before retirement?

Joshua Chadajo: It’s always a good time to do that in retirement if you have shares that have appreciated in particular, and you don’t want that income. Uh, when you sell that to kick you into another tax bracket or to have that tax liability, that could be a particularly good time, uh, to do that.

Especially as people are starting to think [00:08:00] about giving perhaps more or in a different way in retirement than they have, uh, earlier in their career. Maybe they’ve built up enough resources, uh, to feel like they can start giving at, at a different level, and, and that makes the donor-advised fund an even more important tool, uh, at that point.

Right.

Larry Heller: So let’s switch gears. Let’s talk about some other ideas and some things, especially now maybe you’re in retirement now and, and you’re no longer working and you no longer now itemize your deductions on your taxes. Can you still take advantage of giving money to charity if you don’t itemize?

Joshua Chadajo: Right.

So we wouldn’t want someone who’s been giving at a steady level to now because they’re not itemizing, not be as generous as they once were. And I’m sure the person wouldn’t want that either. And so one way to take advantage of the charitable tax deduction, even if you’re giving less than the itemization amount, is to bunch your donations.

And what I mean by that is, let’s [00:09:00] suppose you’re married. And the threshold is, uh, for itemizing is 31,500. And let’s suppose you are giving $20,000 to charity each year. If you give 20,000 this year and 20,000 next year, you’re gonna be below the threshold both years, right? So instead, if you give $40,000 this year.

And nothing next year, it’s the same total amount. Or you could reverse that. You could give zero this year and you could give $40,000 the second year. Either way, you are above the threshold now and you’re able to take full advantage of that tax deduction in terms of actually giving the money out. There are two different approaches.

One is you could give it all to the charity in the first year or the second year, whichever year you make the gift and you let the charity know. You tell them, look, I’m giving you twice as much this year. [00:10:00] You’re not getting anything next year, so you should, you know, budget that accordingly, or this also.

Ties in nicely to the donor advise fund, uh, that we talked about, you know, a few minutes ago. If you wanna put all the money in this year, get the tax write off this year. So you put the full $40,000 in the donor advise fund, you give out the same $20,000 that you are planning to, to begin with, leaving the other $20,000 for next year.

So you’ve satisfied sort of all their requirements. You get to itemize. So you get the full tax break. You fund the charities this year like you normally do, and you don’t have to worry about necessarily giving them the extra gift this year and hoping they remember next year, hoping they don’t come back to you for another gift.

Next year, it’s in the parking lot, it’s still in the donor advised fund, and so then you give those gifts next year. Awesome. So,

Larry Heller: you know, speaking of retirement, as you get to the point and you have to do a requirement, [00:11:00] minimum distribution, 73, now 75, if you’re born in 1960 or later, there are some other things that maybe you can try to do at that particular point to also minimize taxes and help charity.

You wanna kind of go through what I’m, what I’m talking about?

Joshua Chadajo: Right. So if you have an IRA, then you can take a qualified, uh, charitable distribution, and that really is the, the distribution that you have to take. You don’t have it come to you, you have it go right to the charity. And that’s an important point, right?

You can’t have it come to you and then send it to the charity. It goes directly to the charity. And that satisfies the requirement, uh, the distribution that you need to take. Uh, but it doesn’t count as income to you. And that’s important if you’re trying to save money, uh, on taxes. And also, uh, in the same way that when you sent the shares to the donor advised fund.[00:12:00]

You’re making sure the organization gets the maximum amount of money that you are looking to give them, and you’re paying the least amount in taxes that, that you’re able to.

Larry Heller: Yeah. So let’s unpack that a little bit. So, you know, a lot of people don’t realize it. We look at tax returns and we see the charit, they’re making charitable deductions in cash, and then when they see their required minimum distribution, and they have.

A $50,000 require minimum distribution, and they’re, they, one is not talking to the other. The accountants, aren’t they? They’re doing it after the fact. They’re not trying to talk to ’em about that. So a lot of people are lucky enough that they still want to be childly inclined. They may or may not need the money.

They require minimum distribution, so you can use. All, all of your requirement distribution, so you don’t have any taxable income, you can use part of it. So it is real important when you get to that point in life where you’re taking a required minimum distribution and you are charitably inclined again, li [00:13:00] like you just said, you can, um, reduce your taxes more and give more to the, more to the charity by doing that.

And I’m just so amazed that so many people are unaware of that. So hopefully. By this podcast, we’re getting the word out there for those that are taking requirement distribution and charitable deductions to realize that.

Joshua Chadajo: And, and, and I think also the this point that the advisors aren’t necessarily talking to one another.

And that’s why, you know, having you quarterback this for your clients and make sure that they’re not doing things that are really, uh, self-defeating. That you can still accomplish the same, in this case, charitable goal or goals and, and not pay as much. Although I have to say, in neither case, is it as bad as, uh, I heard someone was putting $50,000 in charitable gifts on the credit card.

So that, I would say is probably not the way to go. Everybody loves getting miles or points, but, uh, you know, there’s a, there’s a better way to do this. [00:14:00]

Larry Heller: Okay, so if you’re not giving any, any money away while you’re still alive, is, is that the best strategy? I know we’re talking about retirement and after death, but is that always the best strategy?

Joshua Chadajo: I would suggest that that’s not the best strategy. There are different vehicles. That you can use, that will provide some income to you if that’s what you’re looking for, and defer some of those taxes and that will end up giving the charity of your choice some proceeds at the end. But I, but I wanna go to a bigger point, uh, and, and maybe we can spend, uh, a few minutes on this and that is.

Waiting till the end, I think deprive the person who’s giving the money of one, the opportunity to really make a difference while they’re still here and really get the benefit, uh, and, and seeing how their money is making a difference in the world, in [00:15:00] whatever way it is that they wanna make a difference.

And that is something that, it’s a real shame. People to me, when people wait, uh, and, and they don’t get to, uh, see that, then you, you make, you know,

Larry Heller: you make a point that’s going back to the donor-advised fund. Um, you know, we have some clients that do these donor-advised funds and they do it with their children.

So it’s a, it’s a great way of contributing some money. And then they have a. Family meeting and the kids could get involved in selecting what the charities they are. So it’s very rewarding to the parents, but it’s also getting the children started in thinking about that, how it works, seeing where their money come and have and have a say in where that charity is is going.

So I love that.

Joshua Chadajo: You’re absolutely right. And, and this goes to deeper issues like family values, right? What does, what does a family want their legacy to be? And also [00:16:00] you have a clear record of where the money goes, because these days it’s very easy. I’m gonna. Send a check. I’m gonna put it on the credit card.

Oh, I’m going to use Venmo. I’m gonna, you know, there are lots of different ways you’re, you’re going to send money. Some of it’s tax deductible, some of it’s not tax deductible here Anyway, you have a clear record of what’s gone to which organizations, and it also helps you see the priorities at that point in time, which is a great basis.

For future giving, but I think there’s another reason why it makes sense to give while you’re still alive, and that is you wanna see how the organization uses the money. You wanna see how they treat you, right? Are they paying attention to you in the way that’s respectful? Uh, not, I’m not talking about anything where you’re an egomaniac and you want them to call you every day.

I’m just saying, you know, the, the, there’s a certain amount of respect that comes with receiving [00:17:00] money. Is the organization staying true to its mission? Over time, organizations can change, and if you’re thinking about making a gift to a large gift to an organization when you’re no longer here, you probably wanna monitor that organization and get a sense of whether their activities are changing over time to a great extent or maybe to a reasonable extent based on current circumstances.

In addition, you can also think about what kind of gift. Do you wanna make? Right? Do you wanna make a gift where it’s anonymous or do you wanna make a gift where your name is on the building? Do you wanna make a gift that is just to the general budget, or do you wanna make a programmatic gift, you know?

Or do you wanna make a capital gift? Like I just mentioned, people don’t necessarily stop and think about the different ways you can support the same cause. So if you take, if you think about hospitals, right, you could make a gift that would help. [00:18:00] Current patients, people who are already in the hospital right now.

Uh, you can make a gift for future patients, right? Where you wanna add another wing to the hospital or you can make a gift. So there are no patients at all, and you could do research or something along those lines. And these are things, and these might change over time. Uh, and so if you, if, if you. Start to do that while you’re alive.

You’ll get a really good sense of what you find fulfilling and what you find meaningful. And ultimately that’s gonna lead you to, to not only enjoy your philanthropy more, which I think is really important, but you’re also gonna end up giving more. You mentioned early on one,

Larry Heller: one item, and I just wanna talk about a little bit more that if you’re, you know, able to do larger amounts and, uh, there there’s pros and cons to what I’m talking about and that’s foundations a lot of people, we’ve had clients and especially.

Athletes and they want us, they wanna do this foundation and they have all [00:19:00] great intentions. Um, um, so why don’t you talk about, you know, where, what level giving would you think foundations make sense versus using such as donor advised funds and maybe some of the pros and the cons?

Joshua Chadajo: Right. So with, with the caveat that the particulars really matter.

Right. Uh, and so, uh, each individual person should consult, uh, you know, the appropriate advisors. But I think once you start talking about a foundation, you wanna be looking at putting in probably at least a million dollars to, to do that. There’s a cost to setting it up. There is a cost to keeping it going.

You do have to send that 5% out the door each year in addition. It depends what kind of expenses you want to use in addition to the actual gift. So if you want to say. If you’re funding some things overseas and you wanna go overseas and and see firsthand [00:20:00] what your gift is doing expenses like that, you might be able to cover through the foundation.

Whereas with the donor advised fund, you’re not going to be able. To do that. So it’s not as sort of automatic as it is with a donor-advised fund where the infrastructure is really already there. Again, you’re opening up that sort of bank account to use that analogy again. Uh, and, and the costs are minimal.

The time involved is minimal, uh, but for larger amounts, and also if you want this foundation to last for. 2, 3, 4 generations. You know, donor-advised fund typically doesn’t extend that long. That’s really where it makes more sense to start looking at a foundation setup. Right.

Larry Heller: Awesome.

Joshua Chadajo: So these

Larry Heller: are all great ideas, great strategies.

There are others I’m not even touching upon that we can go into e even, even further. So, uh, so Jo, this Josh, last, last question. When is the best time to get started in giving. [00:21:00]

Joshua Chadajo: I think the best started, best time to get started is right now. Right now, make a gift. In fact, you know, after you finish this, go make a gift.

Make a gift somewhere in some amount. See how it feels and, and, and build on that. And you’ll feel better about yourself. You’ll be making a difference, uh, to what every area is meaningful for you. And, and we’ll all be better off for it,

Larry Heller: right? That, that’s great. Somehow I knew that answer. If, if someone wants to reach out to you, Josh, where’s the best place to get ahold of you?

Joshua Chadajo: The best place to, to reach me, my email, joshua@jecphilanthropy.com, my phone number, (646) 331-5674, and my website, jec philanthropy.com. Any of those ways, they’re good. And, and I’d be delighted to have a conversation with anyone, even if they just have a couple questions and, and wanna get pointed in the right direction.

I’m, I’m always happy to talk about anything philanthropy related.

Larry Heller: Yeah. Great. This has been really helpful. I think it’s some great ideas [00:22:00] for, for clients, both, you know, charity wise, giving wise importance of it, but also some ways of maybe some saving, some taxes as well. Great.

Joshua Chadajo: It’s been a real pleasure.

Larry Heller: A real pleasure.

Right. So thank you so much for, uh, for joining us today, Josh. Thank you, Larry.

Matt Halloran: We will make sure that we have all of those links in the show notes, just in case you want to get ahold of Josh or if you want to get ahold of Larry. Uh, Larry, if anybody wants to know more about what you’re doing at Heller Wealth Management, where should they go?

Larry Heller: Yeah, so they can reach us at our website hellerwealthmanagement.com, or they can feel free to give the office a call at (631) 248-3600.

Matt Halloran: And thanks for tuning into this Retirement Unlocked podcast. If you found this episode helpful, please like, subscribe and share it with somebody who might benefit. If you want to take the next step in this episode description, you’ll find a link to Heller Wealth Management’s website so that you can not only get some good resources, but a complimentary 20 minute call with the team at Heller Wealth Management.

Your ideal retirement starts with a conversation, and let’s get started. We’ll see you next time on [00:23:00] Retirement Unlocked.