How to Give to Charity and Tax Benefits of Charitable Giving with Gary Pratt

[INTRODUCTION]

[00:00:09] Dean Barber: Welcome to The Guided Retirement Show. I’m your host, Dean Barber. Today we are going to be talking with Gary Pratt. He is the Senior Director of Development for Catholic Charities of Northeast Kansas. He specializes in helping people confidently make smart gifts of stock, real estate, retirement accounts, plan gifts, legacy estate gifts. This conversation with Gary took a lot of different directions. We talk about why Catholic Charities? What do they do? How do they do it? How much of the money that you give to Catholic Charities goes there and who do they support? Is it just Catholics or is it everybody? And we take a turn into some real tax benefits for giving and the personal reason for giving. I know you’re going to enjoy this conversation with Gary Pratt here on The Guided Retirement Show

[INTERVIEW]

[00:01:02] Dean Barber: All right, Gary. Let’s start out by understanding Catholic Charities. That’s your passion. That’s where you’re at. And of course, you’ve done a lot of things in your life on charitable giving but specifically today, I want to understand and I want everybody listening to this podcast to understand what is it that Catholic Charities does and why if somebody’s considering giving to charity would Catholic Charities be the place to go?

[00:01:29] Gary Pratt: Well, Catholic Charities there’s a national group and that Catholic Charities USA but at the local level, Catholic Charities is kind of our social arm of the church. It’s how we feed the hungry, clothe the naked, welcome the stranger. We serve people from cradle to grave, from womb to tomb. Our first ministry was adoption. It started over 60 years ago in the area and we’ve grown to include everything from refugee services, immigration, to our programs with our food pantries in eight different locations.

We have services that directly help people that are in need of kind of some help on case management to be able to get out of some of the cycle of poverty that they’re in. So, it gives them financial literacy classes, an opportunity for them to meet them where they are without any questions of their race, religion, where they came from, and how they got there, and really see dignity in every person we meet. One of our mottoes is to be Christ to people and see Christ in people.

[00:02:39] Dean Barber: That’s interesting, Gary. So, I think a lot of people when they think Catholic Charities that Catholic Charities is all about Catholic faith, and that that’s where the money goes. Now, if I were giving to my local church or if I were giving to the Archdiocese, that’s money to the church itself. Now, I know that the church do things for people but talk about how Catholic Charities is different in that respect. And you said without respect to race, religion, right? There’s no discrimination. Catholic Charities supports everybody.

[00:03:14] Gary Pratt: Exactly. It’s not one of the questions that we ask. So, when somebody comes in and needs service, they’re coming to us generally in a situation of crisis. The month was longer than the budget. And so, we’re helping them regardless of whether or not they are Catholic. And many of the people that work for us and volunteer with us are also not Catholic. People give to us their time and their resources directly because of the good work that we do. Parishes partner with us.

They do food drives. They make gifts to the services and the sites that provide these through Catholic Charities but also people individually just connect with Catholic Charities. We’re part of the diocese so our Catholic Charities of Northeast Kansas. It covers 21 counties in Northeast Kansas. That gives us the same geography as the Archdiocese of Kansas City in Kansas. That also means that we cover about 200,000 Catholics and all the souls in Northeast Kansas. So, when we go out to do our services, our goal is to meet everybody who needs help.

[00:04:20] Dean Barber: That’s interesting. That’s fascinating. So, tell me about how the local Catholic Charities that you represent differs from Catholic Charities on a national scale. And if somebody wants to contribute to Catholic Charities that don’t necessarily live in the Kansas City area or that Northeast Kansas area that you’re talking about, how can they give to Catholic Charities to help on a more national basis? Is that something that, I guess, I don’t understand the difference.

[00:04:48] Gary Pratt: Sure. Catholic Charities USA is an umbrella but from a local standpoint, most people give local. They want to help their neighbor and to help the people in their community. They see poverty or they see homelessness or they see people that are in crisis or need help and they want to help that person. And they know that that person’s not going to knock on their door. They’re not necessarily going to come to their parish and say, “Hey, listen, can we use some help?” So, being able to come together regionally to be able to serve the people in our community allows us to lower our costs and reach more people with better services.

[00:05:27] Dean Barber: So, this podcast reaches all across the country and we get downloads and new subscribers on a weekly basis from all over the country. So, if somebody’s listening and they say, “Gosh, I am charity-inclined,” I want to make sure that the money that I’m giving goes for a good cause that there’s not a lot of overhead. They can find Catholic Charities in their backyard.

[00:05:49] Gary Pratt: There’s no geography in the US that isn’t covered by a Catholic charity just like there are no geographies not covered by a diocese or a bishop. So, wherever you are, Google it. Say Catholic Charities of Raleigh, North Carolina and you’re going to find somebody and be able to connect with that. And there’s online resources. We’re so fortunate to live in a time where people can connect immediately and get answers to their questions.

We had some people who said, “I want to support the immigrant situation or refugees,” and they started looking around at which Catholic Charities had different programs. And there’s only a limited number of actual refugee sites. And so, some people from around the country had given to the Kansas City location, specifically because of the good work that we were doing here.

[00:06:32] Dean Barber: So, let’s talk about you brought some data with you on who Catholic Charities serves, what they do. But before we get to that, one of the things I think that when people talk about, “Well, I’m going to give to charity,” and then there’s been maybe some negative publicity around charitable giving where not all the money that is given to a charity actually gets to the actual cause, therefore, there’s bureaucracy at the top.

There’s a lot of money that goes for people that are working for the charity and those types of things and maybe you’re getting 75 or 80 cents on the dollar or some cases maybe even worse of what is actually given to charity actually gets to the charitable causes. Tell me how Catholic Charities is different. And what percentage of what is given actually gets to the people in need?

[00:07:26] Gary Pratt: I’m glad you asked that because it is really important for people to understand that what they’re doing, what they’re trying to do to help is actually getting to people. At Catholic Charities in Northeast Kansas, 91 cents on the dollar of donations goes directly to the programs that serve people. That’s not to salaries and that’s not overhead. That’s not our CEO or somebody. It’s directly to the people we serve.

And that allows us to feel very confident saying, “Hey, listen, you should support this because it’s really doing the most good.” Now, one of the questions you asked there was can that money go to something else? Is there a chance that there’s a lawsuit somewhere or a way for that money to get siphoned off based on some sort of negative publicity?” There’s definitely things that we hear about that don’t paint the best light for the human nature of the church. But we’re fortunate that every one of these is a local entity, and because that they’re separated.

And the money that’s donated to those organizations or Catholic Charities here stays right here and does that good work. The reason we’re able to put 91 cents on the dollar directly into the program so I want to really make a shout out here to our volunteers, we have 1,700 volunteers a month, 1,700 people.

[00:08:43] Dean Barber: Several of those are my clients.

[00:08:45] Gary Pratt: Yeah. And that’s the thing, it takes a village. We have so many people who are given two hours here, four hours there, driving a truck to pick up food, rescue from a grocery store or we’re sorting clothes over at our TurnStyles Thrift store. We can’t do it without them. And that’s what makes it possible for us to put so much of the money that we raise directly to people.

[00:09:06] Dean Barber: Gary, do you have any idea when you say 91 cents on the dollar is going directly to the people in need or the causes that Catholic Charities are supporting, how does that compare to other charities? Are you familiar with what they do and how that works?

[00:09:21] Gary Pratt: Absolutely. And I would encourage people to look this up. There’s a couple of sites that you can look up. One of them is Charity Navigator. Another one would be GuideStar, where you can go up and look at a charity and see how much overhead they have. You can even Google and I had fun with this the other day. I looked up worst charities in America and best charities in America. And what you found was that there are some organizations that sound a lot like your favorite charities that most of the money is going to overhead or fundraisers. It doesn’t actually go to the cause. So, look that up. Educate yourself. Learn about those things.

[00:09:55] Dean Barber: Say those websites again.

[00:09:57] Gary Pratt: Sure. Charity Navigator and GuideStar. Here in Kansas City, you can find GuideStar through the Greater Kansas Community Foundation website and you can just say, “Look up charity,” and as soon as you type it in, it’ll give you a list of charities that are sure. I put in Catholic just to figure out which ones fit that description and immediately got a list.

[00:10:18] Dean Barber: Interesting. All right. That’s fascinating. So, let’s talk about and we don’t want to get too deep into tax benefits of charitable giving, the new Tax Reform Act, the new SECURE Act that came in, and ‘18 and ‘19 changed a lot of the ways that people are able to deduct their charitable gifts. You got the higher standard deductions and so people really have to be aware of what the tax benefits are, when you’re giving.

It used to be a lot simpler, I think, before some of the legislation that passed in ‘18 and ‘19 but definitely, I think one of the reasons why some people give is just I want to give. And if there happened to be a tax benefit, then wonderful but that wasn’t the main reason. Then there are others who say, “I want a tax benefit and I also want to benefit a charity.” So, they look for that tax benefit.

How has the Catholic Charities organization as a whole adapted to these changes? And do you have educational materials that help people understand from a tax perspective how that works?

[00:11:30] Gary Pratt: Absolutely. We put out information periodically throughout the year of the giving strategies that are most common, where there’s a tax benefit. Some of them are ones that people immediately understand and that would be where you have a tax deduction and you hit that threshold. But I’ve heard statistics that say that close to 90% of Americans no longer qualified itemized. Maybe even a little bit more. And so, that means most of the people who are not able to take advantage of a tax deduction because of the high standard deduction but actually, we’ve found that incredibly refreshing. Nobody wants to talk about taxes as the reason for giving. And frankly, most of the people are giving because they love the cause. They say, “I want to help make the world better,” and I think you’re part of that.

[00:12:21] Dean Barber: I’ve been fortunate. I have something that I want to share.

[00:12:24] Gary Pratt: Right. Absolutely. We’re a very charitable country. In fact, Kansas City in this area is above average in charitable giving in a big way. People say that when they come to Kansas City, they say, “Wow. You have a really incredible charitable community. The philanthropic community is incredible.” And that’s not just Catholic Charities. We work together with different charities around the area and there’s a lot of partnership.

[00:12:45] Dean Barber: Now, people also talk about how nice people are from Kansas City too. People from the coast have come here. I’ll meet people somewhere else, like I traveled to Kansas City. Everybody was really so nice and it’s refreshing. Alright. So, how do the people that are giving to Catholic Charities know what’s happening with the money? You guys publish stuff and say here’s what we did, here’s what we took in, here’s who we gave to. How do they know?

[00:13:12] Gary Pratt: That information is completely public and we do put it out on a monthly through our e-newsletter and we do have another thing that on a regular basis we put out information online about this is directly how it’s helping. We have it on social media and in an email that if we have your email on file that you’ll get a monthly newsletter. We have two print things that come out every year, Our Breaking Bread, that really covers a more comprehensive this is what’s going on right now.

And when you make a gift, you also get a kind of a breakdown that covers a few of those types of things. And we try to give an opportunity to say, “Hey, if you gave in this way in the past, you might be considering whether or not your company has a match or if you could give an appreciated asset, like from stock to get an additional tax benefit when you make your give,” if that’s something that works for you.

Or for those of us that are, I say us, those that are over 70-and-a-half that also qualify to get through an IRA through these qualified charitable distributions, even though you can’t itemize, that’s a great way that a lot more people are giving and still getting a tax benefit.

[00:14:27] Dean Barber: Yeah, definitely the people that are over 70, the QCD, especially after the new tax laws that went into place that raised the standard deduction for so many people. Those that are over 70-and-a-half, I mean, we’re almost exclusively saying, “Hey, if you’re going to give to charity at all and you’re over 70-and-a-half, give through the QCD.” Give out of your IRA directly to the charity. You still get the tax benefit just like before. In fact, it’s even better because a lot of tax reasons around that. You can listen to The Guided Retirement Show episodes that I do with our in-house CPA where we go into a lot of detail about tax strategies and those types of things.

Yeah, that’s pretty cool. So, let’s say that somebody is listening here and they’re going, “Alright. I’m a charitable person. I want to understand more about Catholic Charities.” You mentioned social media. You mentioned an e-newsletter. So, give it to us really simple as how would a person start to do some research and understand more about what Catholic Charities is doing on a regular basis? If they’re not ready to say, “Well, I want to give some money to Catholic Charities now but let me understand more. Let me see a few weeks or a few months’ worth of what are they doing,” and let them do that research. How do we get there?

[00:15:38] Gary Pratt: There’s a couple of ways that people can engage in that and the easiest one is to go online and look at our programs on our website. That’s free. You can do it in the privacy of your own home, and at your own pace. You can kick around on there. Another thing that a person can do is take one of our bus tours. We do a free bus tour every two months about a couple several times throughout the year. We paused for the winter months but we started again in February. That’s an opportunity for people to go out and see the different sites where we do our service.

[00:16:09] Dean Barber: Actually, get to see the impact that the charity is making.

[00:16:12] Gary Pratt: Right. And it’s a guided tour. So, you’re going to get to see what TurnStyles looks like, which is our thrift store. You’re going to get to see where the hospice community group is. You’re going to get to see our food pantry and you’re going to get to see our warehouse where we do distribution that goes out to all eight different locations that provide these services.

So, you also get a chance to go out and see something called our new roots farm which is a refugee farm that allows people who are here from another country but may have a background in farming that wants to have a large garden that they can sell produce and they’re connected to a lot of different services to be able to sell those both in grocery stores and the CSAs out to our community through our parishes, and at farmer’s markets, all kinds of stuff. It’s really a great way to see real boots on the ground, how this is getting done and where.

[00:17:11] Dean Barber: Interesting. All right. So, give the URL for your website and then we’ll make sure to put a link to that website in the show notes here.

[00:17:19] Gary Pratt: It’s CatholicCharitiesKS.org and that’s the fastest way to get there. If you want to start getting our newsletter, then there’s a place to sign up there. If you want to ask about the bus tour, there’s a place to do that. And if you have any questions about individual programs, you can directly tie to the people who are running those and managing the volunteers that help out.

[00:17:42] Dean Barber: Alright. CatholicCharitiesKC.org.

[00:17:45] Gary Pratt: KS. Yes. CatholicCharitiesKS.org.

[00:17:47] Dean Barber: KS.org. And so, we’ll put a link to that there in the show notes so it’d be easy for you to just get right to the website. Okay. Let’s take a quick break. This is The Guided Retirement Show. I’m Dean Barber. We’ll be right back.

[ANNOUNCEMENT]

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[00:19:19] Gary Pratt: So, when somebody comes in and needs service, they’re coming to us generally in a situation of crisis. The month was longer than the budget. And so, we’re helping them regardless of whether or not they are Catholic. And many of the people that work for us and volunteer with us are also not Catholic.

[INTERVIEW]

[00:19:54] Dean Barber: Welcome back to our program. I’m Dean Barber. All right. So, give us some statistical data. You got something here that says fiscal year 2019. What do you guys do?

[00:20:03] Gary Pratt: Awesome. Well, I’m going to read a little bit here. So, there’s the spectacles. So, last year, we served about half a million people in need of more than 20 programs across our 21 counties.

[00:20:15] Dean Barber: And that’s just in Northeast Kansas.

[00:20:16] Gary Pratt: That’s just in Northeast Kansas. Absolutely. Over a quarter of a million people receive food assistance. The housing and utility assistance to help people stay in their homes or secure housing is 7,500 people, 171,000 personal hygiene items that were passed out. We fed at 31 different locations. 12,000 times we served our Summer Food Program for kids this last year. Our resource bus which I didn’t touch on is actually because we have eight locations most of them are in the population center.

So, we’ve got one in Olathe, Overland Park, Kansas City, Kansas, Leavenworth, Lawrence and Atchison, and Topeka, those are our actual individual sites but that doesn’t cover the whole 21 counties. So, we send a resource bus every other week to the north side of our diocese area and then again to the south side so we alternate those to provide services out into the more rural areas.

We also had 1,700 volunteers that helped out with what we did, provided case management, which is helping people with that fiscal stuff and to be able to help them get back on their feet, help them with getting jobs and job skills and address some of the other things. And we should touch on some of the financial programs here in a little bit. Case Management 14,000 times and we serve 394 people through hospice last year.

[00:21:52] Dean Barber: Wow. That’s impressive.

[00:21:55] Gary Pratt: I’m just really incredibly grateful to be this close to that much good being done because clearly, I didn’t do it. It takes a lot of people to make that happen.

[00:22:04] Dean Barber: Well, that’s the key. To me, it’s so great to see that what Catholic Charities is doing is really helping the people that need help, right? And it’s trying to help them even grow. Maybe we just need a hand for a month or two months and we need some assistance and this is going to get us to the next step, right?

[00:22:28] Gary Pratt: Absolutely. I was in the Olathe pantry the other day and a fellow walked in with his wife, and they asked if he’d been there before. And the question was, it’s kind of loaded, because we get that question, do the people we serve just keep coming back? Are they kind of systemically needing assistance? And his answer really resonated with me. He says, “Yeah, I’ve been here but it’s been a while.” And so, they looked him up, because you have to show your ID and because you can only receive food services once every month, every 30 days. And so, they looked him up. He hadn’t been there in six years but he knew that he’d be seen with dignity, he’d be able to get some help.

And his comment was just, “I got to the end of the budget before I got to the end of the month,” and that’s where a lot of people find themselves. I love wearing my name tag or something out in town because people will say, “I got helped once. My family was helped or my sister was.” And there’s a lot of people who have been affected just a few times over their life but it was meaningful and those connections really make a huge difference.

[00:23:31] Dean Barber: Well, the people that I know and my wife does a lot in volunteering for Catholic Charities, I wish I had more time to do the same. A lot of my clients that are retired and it’s weekly, they’re doing something for Catholic Charities and they love it. Their reward is I think exactly what you’re saying. You get to see the difference that you’re making for people.

[00:23:57] Gary Pratt: One of my favorite things to do is go out and meet the volunteers and I asked him, “How long you’ve been doing this?” And you hear a lot of times, “14 years. When did this open up again? It was before it was even called that. 19 years ago,” or, “You know what, this is my first day,” and some of those are deep, deep friendships. They’ve been working the same shift, a morning shift at TurnStyles for a decade or more or sorting food or picking up driving a truck to pick up food from one of our grocery stores that we do food rescue from.

Those people connect at a time where they’re saying, “I just want to help a little bit,” and it is so rewarding that they just keep coming back. The joy on their faces, the friendships that they make, it’s really an incredible thing to witness and, frankly, that gratitude is why they do it. They say, “I’ve been blessed and I want to do something that bless others.”

[00:24:49] Dean Barber: I’m smiling because you talk about the food truck, the guys that drive the trucks, go get food from the grocery store. I just had an instance where one of my clients he actually does that and apparently the person that drove the truck before forgot to fill it up with gas.

[00:25:05] Gary Pratt: Oh my.

[00:25:06] Dean Barber: So, he had a little help. I had somebody bring some fuel to get to him.

[00:25:11] Gary Pratt: I’m sure there’s a lot of that and trucks break down and stuff happens. It’s a human institution with all the logistics that goes along with that. It takes a lot of different moving parts to make this happen.

[00:25:23] Dean Barber: So, how do people give? Do you have people that are giving monthly, people that give once a year, people that are leaving dollars behind part of their estate is going to come to Catholic Charities? What’s the most popular way to give?

[00:25:40] Gary Pratt: Well, we get funding from a couple of different sources and one of the biggest things that everybody knows us in this area for is something called our Snow Ball. Our Snow Ball is the largest local fundraiser in the metro and for the last three years, we’ve raised $3 million from our Snow Ball, which is a big event in January. That is about maybe half of the individual donations that come from people but people give in a lot of different ways. They can give monthly and we do see that. More and more people are finding it really convenient to give an automated monthly gift. I love when I hear people say, “You know, I actually get points or travel points when I give because I use my credit card,” and it’s a way for them to share their gifts.

[00:26:27] Dean Barber: I’m glad you said that because I was going to ask because, yeah, I mean people do like to get those points to maybe get an airline ticket here or there, hotel points or something.

[00:26:36] Gary Pratt: A little benefit. We want people to give in a way that makes the most sense for them. So, our monthly donors can either give a direct gift from their checking account or online through a credit card. People also give as a response in an envelope to our year-end appeal or our spring appeal or the envelopes with the different mailings we do.

But we also have a significant number of people who are given through their IRA directly or a donor-advised fund because they’re managing their philanthropy through a donor-advised fund in order to take advantage of some of that clumping that we’re seeing people who were trying to squeeze a few years where they’re giving into one gift to be able to itemize and then give it out over time. Or because they’re selling a business or they have a big tax event one year, they throw an outsized amount of giving into a donor-advised and then share it or spread it out over time.

[00:27:32] Dean Barber: Some people might not know what you’re talking about there. So, let’s spend a couple of minutes on that. So, the donor-advised fund essentially is an account where someone can put money into. There’s no limit on how much you could put in. Once you put the money in there, then it is ultimately going to go to the charity of your choice. From that donor-advised fund, the individual that donated the money to that fund and it can be an individual stock or something that’s highly appreciated that they give to a donor-advised fund.

It can be cash but they give that donor-advised fund and then whatever the amount of that gift is, is a tax-deductible gift that year. So, what you were saying is if somebody doesn’t get to itemize because their standard deduction is so high, let’s give maybe we give, say $50,000 in one year to a donor-advised fund. Well, guess what, get that now we’re going to itemize, right? Now, we’re going to itemize and that doesn’t mean that you have to give the whole $50,000 to charity that year.

What you’re saying is now let’s set up that donor-advised fund and maybe can give $10,000 a year to charity or $5,000 a year for the next 10 years, something like that, but you did get the tax benefit and now the charity of your choice receives that over time. And obviously, we hope the charity of choice is Catholic Charities because we know that you guys do so much good but that’s the donor-advised fund. Donor-advised funds are pretty easy to establish.

But just remember, once you’ve given the money to a donor-advised fund, it is not your money anymore. You control it, how it’s invested, etcetera, and you control when it goes out and how much of it goes out. So, really, it’s a great thing. And again, with the new tax laws that took place in the late ’18 and ’19, those donor-advised funds have become significantly more popular.

[00:29:18] Gary Pratt: They’re exploding. And frankly, it’s the largest area of growth in philanthropy which there’s a pro and a con there. The donor-advised fund doesn’t help the poor. There’s no direct service to the needy through a donor-advised fund so there’s a question of is this money getting to charities? But on the flip side of that, it gives you, the person who’s putting the money in there, a lot of control and flexibility on when they make those gifts and who they make those to. Another benefit of a donor-advised fund is anonymity. If you want to make a gift but you don’t want to get on the list so that you’re soliciting every year, it’s a way of making a gift and supporting the causes that you care about without getting on a lot more…

[00:29:58] Dean Barber: Yeah. “Hey, Gary. You gave this much last year. How do you like to increase that a little bit?”

[00:30:03] Gary Pratt: And it also allows you to spread it out over time. I always think about the person who has a windfall and they make a big charitable gift. And what happens the charity comes back the next year and says, “Hey, buddy, we’re good friends now,” and you say, “No, no, I sold the business. That was the event. I had a big tax event that year. And because of that, that’s why we did so much charitable giving.” So, some people are using it as a way to spread out their philanthropy over time.

[00:30:25] Dean Barber: Yeah. And I’ve seen that happen with a lot of people saying, “You know what, I’m going to give 10% and just so happens that I inherited this money. Well, that’s money that I didn’t have before. I’m going to give 10% of that inheritance,” or, “I had some stock options that vested and I had to cash out, and so I’m going to give 10%,” but those aren’t recurring things that are going to happen frequently. So, the donor-advised fund can work well in that environment. Plus, you get that big tax deduction in the year where you have the big tax event.

[00:30:55] Gary Pratt: But it’s important to know because it was 100% tax-deductible, that means whatever you’re giving it to has to also be 100% tax-deductible. So, you get tickets to the gala. You can’t get a golf tournament or something. If there’s something that you’re receiving in return, a meal, or whatever, then that can’t be used. The donor-advised fund can’t be used for that purpose. And so, we do get that a little bit, “Hey, I’d like to be a sponsor of this event. Is it a 100% tax-deductible gift?” And so, it’s really more of the patron gift or the non-event side.

[00:31:30] Dean Barber: I’m assuming that you have some details on how the donor-advised funds work on that website we talked about earlier.

[00:31:37] Gary Pratt: You know what, we do and we lean heavily on the local providers of our donor-advised funds. The Catholic Foundation of Northeast Kansas provides donor-advised funds so does the Greater Kansas Community Foundation. You’ll see them at Fidelity, Vanguard, Schwab. Most advisors have a preferred place that they go for.

[00:32:02] Dean Barber: Yeah. We use the Greater Kansas City Community Foundation.

[00:32:04] Gary Pratt: They’re a great organization.

[00:32:05] Dean Barber: Yeah. They do a lot of great good. Alright. So, let’s talk about giving after you’re gone.

[00:32:16] Gary Pratt: Near and dear to my heart. I did get to spend the last 11 years at the Archdiocese as the plan-giving officer. And so, in that role, it gave me an opportunity to get pretty deep into the estate gifts, the legacy giving strategies, and work with a lot of people who are trying to leave, we call them the ultimate gift. And the person says, “Well, I’d love to make a gift like that but I need this to live on.” But when I’m done with it, I would really like to make an impact it’s felt for a long time. So, those ultimate gifts are something that I really get excited about.

[00:32:50] Dean Barber: Well, here’s the way that I look at it. So, depending upon the size of a person’s estate, they’re going to have a choice. They’re either going to have Uncle Sam be their charity or they can actually choose a charity of their choice, right?

[00:33:07] Gary Pratt: Absolutely.

[00:33:08] Dean Barber: And specifically, the SECURE Act that was passed in December of 2019 has made, I think, the decisions on how we pass our IRA money. Those decisions are changing very, very rapidly as more people begin to understand this and let me just give you my thoughts on this. So, let’s say that somebody has an IRA or a 401(k), which most people do, and they pass away. Well, before the SECURE Act, they could actually have their children, their non-spouse beneficiaries inherit that IRA, continue the tax deferral with a new small required minimum distribution that has to come out to that beneficiary on a yearly basis but they could basically stretch it over their entire life.

[00:33:56] Gary Pratt: Absolutely. Famously known as the stretch IRA.

[00:33:58] Dean Barber: The stretch IRA. Well, with the SECURE Act, it essentially killed the stretch IRA. They’re saying that whatever money you have in that IRA, guess what? It all has to come out within 10 years. Now, there’s no cycle or no set amount each year but all the money has to be out of that IRA in 10 years. Gary, this is what I consider to be one of the biggest money grabs that I’ve ever seen from Congress.

[00:34:26] Gary Pratt: Oh, absolutely. They basically said, “That’s our money. We want it.”

[00:34:29] Dean Barber: Exactly. And here’s the problem. You think about who are the beneficiaries of those IRAs. They’re people in their 50s and even their 60s, right, that are likely in their peak earning years. So, now they’re already in a super high tax bracket because they’re in their peak earning years, now they’re going to have to be forced to take these IRA dollars out which could throw them into a higher tax bracket and wind up paying more tax on those IRA dollars than was ever saved in the deduction portion when people were contributing to the 401(k) or the IRAs. Unbelievable. So, I look at this and I say, all right, if I’ve got a choice of forcing my children, I’ll just put myself in this scenario.

[00:35:12] Gary Pratt: Sure.

[00:35:13] Dean Barber: I pass away. Let’s just say I’ve got a million dollars in my IRA and now my kids are going to be forced to take it out. Let’s think about that. Why wouldn’t I go out and buy a $1 million life insurance policy? That money can pass to my beneficiaries 100% tax-free. Now, I can leave my IRA, in this example, to Catholic Charities. And how much does Uncle Sam get?

[00:35:42] Gary Pratt: When it goes directly to a charity, zero.

[00:35:44] Dean Barber: Zero, right?

[00:35:35] Gary Pratt: You effectively changed the beneficiary designation to the charity of your choice.

[00:35:50] Dean Barber: So, what I do, my kids got a million dollars tax-free. Catholic Charities got a million dollars. Uncle Sam got nothing. I bypassed the SECURE Act.

[00:36:00] Gary Pratt: It’s definitely a strategy that more people need to take a look at.

[00:36:03] Dean Barber: Especially, think about we talked earlier about the required minimum distributions, right? So, the requirement of distributions, for those of you who don’t know, occur when you reach age 72 now. It used to be 70 ½. You have to start taking money out of that IRA. We talked about the qualified charitable distribution or the QCD that you can give directly to charity from the IRA. But what would happen? So, you know what, let me give a portion of that required minimum distribution to charity now in the form of a QCD. Let me take the other portion of that required minimum distribution assuming I don’t need it to live on and buy a life insurance policy with that.

[00:36:41] Gary Pratt: Exactly.

[00:36:42] Dean Barber: So, now, what can I do? Now, I can leave a big chunk of the IRA to charity. I can leave life insurance to my surviving spouse, to my children, to my grandchildren. They’re getting tax-free money. The charitable organizations I know do a lot better with the money than the government does and it’s really going to go to where it needs to go. So, I think that people really need to understand this and the fact that you spent 11 years in that plan giving role, there’s a lot of passion behind in my world around that I know and yours. Let’s talk a little bit more about how people should start thinking about that.

[00:37:22] Gary Pratt: I think to that point, Dean, the thing I love is that we are on the same side of the table as our clients. We work with people to help them accomplish their goals in the smartest possible way. We’re not on the other side of the table. We’re working with them to serve their interest. And so, from our standpoint, we’re looking at what’s the best way for you to do what you’re trying to accomplish. If you’re trying to be charitable, if you want to help feed the hungry, clothe the naked, then let’s figure out what does that.

We talked about looking through and understanding which charities do that the best but also the smartest way for me to make my gifts. So, if I can’t itemize, I’m no longer using itemized deductions but I can find a way to stretch how much I give, then that is a way for us to help the donor either give more because that was their intent or to save more so that they can give more to their family. Either of those, great for both the donor and for the charity. So, it’s really a win-win.

[00:38:23] Dean Barber: Yeah. That’s awesome. So, I think that what people really need to do that are charitably inclined and, of course, not everybody is but there are a lot and you mentioned that you see it, especially here in the Kansas City area, Northeast Kansas, where we live. So, what I would do is just encourage everybody that’s listening to this, share this with your friends, and understand that the Catholic Charities are here to help everybody. Yes, it’s a Catholic organization but the Catholic organization has been famous ever since their founding for helping everyone, right? All-inclusive. So, check out the website. The link is in the show notes. And if you have questions, they can pick up the phone and call somebody there. They can ask a question online.

[00:39:20] Gary Pratt: And you don’t have to be a donor. If you’re calling up and you just you say, “Hey, I saw you on the show and I want to understand how this works,” and you trust us, we’d be happy to answer questions on IRA QCD giving or on donor-advised funds or stock gifts or gifts of real estate. I get a lot of people who say, “Well, my appreciated assets are this weird thing.” Great. Tell me about it. I’d be happy to kind of walk you through that. It’s possible that at that point, you may want to make a gift to Catholic Charities but either way, I’m happy that you’re considering being charitable. Like I said, we partner with a lot of charities in the area and everybody is coming together to meet the needs of our community.

[00:40:04] Dean Barber: I’m glad you brought that out because one of the things that we as financial planners see, and of course, in our organization or Modern Wealth Management, not only we have financial planners, we’ve got estate planning attorneys and we’ve got CPAs. So, we’re looking at the great big picture, everything that has to do. And a lot of times in our discovery process where we’re talking to people about what they want the rest of life to look like, what’s valuable to them, what’s important to them, and charity comes up, one of those common themes that we hear, Gary, is that, “I don’t know how much I can safely give. What can I give but still not sacrifice what I want for myself and for my family?”

And so, having the ability to create a financial plan, have the CPA look from a tax perspective as far as what’s this going to do and what’s the net benefit going to be to you, how’s it going to benefit the charity, and then from the estate planning perspective, how are we doing this, you know what, it can become really, really crystal clear. And a lot of times we’ll see that people will say, “Gosh, I didn’t realize that I could still give that much and be able to do everything that I wanted to do. That’s very rewarding.”

[00:41:16] Gary Pratt: I’ve worked with a couple of financial advisors that use the term, enough, so that when a person’s approaching retirement, they say, “Well, what’s enough? How do you know what enough is?” And generally speaking, the highest number is as they enter retirement. Because they don’t know how long they’re going to live. They don’t know what their health situation is going to be or the family situation. They don’t know all of these things. But after they established that high watermark of, well, based on what I have, this is what enough looks like. Over time, they’ve reduced that enough number and that allows them it’s done from the perspective of how much could I give away and still be okay? How much can I help others right now during my life and see the good work that it’s doing in gratitude…

[00:42:00] Dean Barber: And still be okay.

[00:42:01] Gary Pratt: And still be okay? But that is a question that I encourage everybody to kind of pray about and think about and say, “My goal isn’t to get to the end and have the most toys. My goal is to have the biggest pile possible so that I can set my kids up for life. My goal is to live a meaningful life,” and really have that purpose make sense.

[00:42:23] Dean Barber: It’s really interesting because being in the financial business for over three decades, I know that what Wall Street teaches is they want you to die rich, right? A good financial planner is going to want you to live rich. Live the life that you want. Think about all the things that could potentially go right. Think about all the things that could potentially go wrong. Include your charities and really lay it all out there and there is an absolute art form to good solid financial planning that you’ll never get on a do-it-yourself spreadsheet or an online calculator.

Those things don’t take into consideration all of the what-ifs that could be on a person’s mind. And quite honestly, the way that I think about and the reason why we call this The Guided Retirement Show is because a lot of times, this is the first time people are going into this type of scenario. And you would never dream of doing something, for example, like I did with my boys here a while back. I took him down to the Amazon River and we went giant peacock bass fishing.

[00:43:34] Gary Pratt: Awesome.

[00:43:35] Dean Barber: Well, so here I am in the middle of Brazil on the Amazon River, you think I’d do that without a guide?

[00:43:42] Gary Pratt: No way.

[00:43:43] Dean Barber: No. No way. Yet some people think, “Well, I’ll go do my retirement stuff on my own. I’ll do my own tax planning. I’ll figure this charity thing out on my own.” You don’t need to because you’ve got guides, people that have been there before and done it for thousands and thousands of families and that’s what Catholic Charities all about. That’s what we’re all about here. So, yeah, get the help and understand because there is that thing that we call clarity, confidence, and control. If I’m clear about what I can do, that means I have confidence in my own personal financial situation and I’m the one in control.

[00:44:14] Gary Pratt: And you can do it with joy that way. It’s always frustrating when you see people who are giving from a scarcity mentality. They’re thinking, “Well, I don’t know if there’s enough,” or you feel like you’re talking amount of money. No charity wants to be in that position. No financial advisor wants to be in an adversarial role with their clients, with the people they work with. You want to be in a partnership.

And so, when a person comes to you and says, “I want to donate my time but I’m afraid I’ll get over-committed or I’ll over-promise and then I won’t be able to make good on the time that I said I could help out.” Well, great. What can you do? You tell me what works for you. You tell me how this is a good fit for you. And you find that at first, there’s a little resistance or concern but afterwards, it’s like, “Well, maybe I can give you one more hour. Let me invite a friend of mine.” And suddenly, nobody’s talking to anybody out of anything. It really is truly people just doing what they can when they can for as long as they can.

[00:45:14] Dean Barber: Well, I’m glad you brought that up because it’s not just a gift of money. It’s also a gift of time.

[00:45:20] Gary Pratt: Absolutely. 1,700 volunteering a month doesn’t just happen. There’s a lot of people who are retiring right now and they get up in the morning and they say, “What am I doing this week?” And my favorite thing to do when I talk to somebody is they say, “So, what’s your week look like?” I deal with a lot of retirees and they’ll say, “Well, I’ve got a pretty busy week. I have one doctor’s appointment on Wednesday.”

Like that’s the whole thing that they got and they’re stressed out about the one calendar item but they do want to have something that gets them up in the morning. If you don’t have a reason to get up in the morning, you might not get up in the morning. I would love to see people come out, volunteer once. Just come out and sort at our TurnStyle’s location. I was just there yesterday and the pile is as big as a house. It’s really huge. But we need help to sort through it so that we can get it on the floor so we can get it to the people who need it. And that makes a huge difference.

I did a survey with my scout troop and at the end of the thing, they said, “You sorted this many pounds? That equates to this much money towards helping the organization, the families we serve,” and it was a bunch of kids and their dads and we sorted $5,700 worth of stuff and that translated to 880 families getting fed this month.

[00:46:37] Dean Barber: That’s amazing.

[00:46:37] Gary Pratt: That’s huge and it was kids. It was nine-year-olds, ten-year-olds, and it was awesome. It was a great experience.

[00:46:42] Dean Barber: Rewarding for everybody. Gary, thanks for coming on here to The Guided Retirement Show and sharing all about Catholic Charities. Hopefully, there’s a lot of people that listen to this that have a much better understanding of who Catholic Charities is, what they do. Check out the link to the website here in the show notes. Let’s hope this results in a lot more help for the people that need it.

[00:47:05] Gary Pratt: Absolutely. If you ever have any questions, call us. We’d love to help you out. Even if you’re not helping us today, we want to demystify some of this stuff that sounds a little complex.

[00:47:14] Dean Barber: Awesome. Thank you.

[00:47:15] Gary Pratt: Thank you.

[CLOSING]

[00:47:17] Dean Barber: All right. Gary Pratt, what a great guy. Obviously, a lot of passion when it comes to giving. I think everybody that listened to this unless you were super involved with Catholic Charities beforehand has learned something. And that is that Catholic Charities helps every single person in need. You don’t have to be Catholic, you don’t have to be Catholic to give to Catholic Charities, and you don’t have to be Catholic to receive from Catholic Charities.

I encourage you, check out the website. The website link is in the show notes and share this podcast with your friends. Make sure if you’re watching us on YouTube, that you subscribe and give the thumbs up and a little heart, everything, so that you get notifications when this comes out. Hope you enjoyed this episode of The Guided Retirement Show and I’m looking forward to having you join me for more.

[END]

Investment advisory service is offered through Modern Wealth Management, an SEC-registered investment advisor.