A new year brings an opportunity to review your financial and estate plans. A part of this review may include planned giving funds. Rebalancing your philanthropic portfolio in 2022 could help you make the most of your charitable investments.

2021 year-end investment balances are likely to be at or near all-time highs. Since many people designate either a percentage of their estate or specific assets like an IRA or other retirement plan accounts to charity, the charitable gifts established a few years ago have increased dramatically in size. Seeing these funds grow has brought immense satisfaction to those who never dreamed that they could make such substantial gifts.

Couple reviewing and rebalancing their philanthropic portfolio with their financial advisor.

On the other hand, a market downturn erodes the value of our intended bequests. Monitoring those balances will allow you to make decisions on whether to include other assets in your estate for charity to maintain the level of charitable gift you wish to make.

The Impact of Required Minimum Distributions

Required minimum distributions also impact retirement fund balances. Every year, the IRS releases updated tables that are used to determine how much a person must take from their retirement accounts, assuming they have met the criteria that requires such distributions.

Based on the latest table, in 2022, a person aged 72 will be required to withdraw 3.65% of the fund balance as of December 31 of the previous year. As a person gets older, the withdrawal percentage increases slightly each year. At age 80, the distribution percentage is 4.95% and at age 90, it is 8.2%.

During times when market returns are robust, the effect of the required minimum distribution is overshadowed by the overall growth of the fund balances. However, in market downturns, investors are likely to see their account balances decrease significantly, and the required minimum distributions add to the decline.

Consider Rebalancing Your Philanthropic Portfolio

One way to protect the amount ultimately going to charity is to reinvest the required minimum distributions in an account outside of your retirement plan and name your chosen charity as the beneficiary of that account as well. Rebalancing you philanthropic portfolio allows the intended charitable bequest to sustain its impact.

Philanthropic Portfolio Growth 2022

Give Us A Call

Start the Charitable Giving Conversation

We invite you to call Planned Giving Director, Randal Daugherty, at (214) 648-3069 to discuss charitable giving options.

The Benefit of a Philanthropic Portfolio Review

Maintaining your charitable bequests through up and down markets is the goal of a philanthropic portfolio review. Rebalancing and setting aside required minimum distributions to supplement your retirement plan accounts is a great way to protect your charitable legacy.

A year-end review is also an ideal time to meet with your financial and legal advisors to review your family and charitable priorities. Have the needs of your family changed? Are your named charities still those where you feel you can have the most impact? Have you given these charities gifts proportional to your interests?

Finally, a review will entail asking if your estate plans could be more tax efficient. Even if your estate is not subject to estate tax, income tax will be owed on some assets, like retirement plan assets. These assets are better left to charity since no income tax will be owed by the recipient charities. 

Giving the right assets in the right amounts to the charities that have impacted your life and for whom you want to make an impact through your wealth is the goal of a philanthropic portfolio review. It is through these efforts and planned giving reviews that help organizations like Southwestern Medical Foundation make the most out of the donations they receive. Learn more about planned giving.


About the Author

Since 2000, Randy has served as Director of Planned Giving for Southwestern Medical Foundation and UT Southwestern Medical Center. He works with donors to suggest bequest language to share with attorneys, establish charitable gift annuities and charitable remainder trusts, utilize beneficiary designations for retirement plan accounts and explore gifts of other non-cash assets like real estate and life insurance. After receiving a Masters of Divinity degree from Vanderbilt University, Randy began a career in development, working in higher education, the arts and in academic medicine. He received the Chartered Advisor in Philanthropy designation (CAP) through the American College of Financial Services.

To contact Randy Daugherty, please call (214) 648-3069 or email him at randal.daugherty@utsouthwestern.edu.

This information is not intended as tax, legal or financial advice.  Consult your financial advisor for information specific to your situation.