CHARITABLE CONTRIBUTIONS
Meet (continue meeting) charitable commitments with stock or other securities, which have appreciated in value. We note that your contributions for ____ were approximately $_____. You estimate current contributions to be near the same amount (larger.) A portion of your charitable gifts was made with (cash/Stock), which is a (excellent/inadequate) vehicle for meeting your charitable commitments. If you have not made your charitable contributions, you should consider giving appreciated stock instead of a cash contribution.
Long term capital gains property (other than tangible personal property), contributed to charity, will result in a tax deduction for the full fair market value of the property, as well as no income taxation on the appreciation in value.
Limitation of Contributions:
Most contributions to public charities (e.g., churches and educational institutions) are deductible up to 50% of adjusted gross income (AGI); however, contributions of appreciated long-term capital gain property are limited to 30% of AGI. Contributions not currently deductible, due to these limitations, may be carried forward for five years.
COMMUNITY FOUNDATION
Donor Advised Fund: This type of fund provides donors with the greatest flexibility to meet their personal philanthropic objectives. The donor is given the right to make grants to any non-profit organization (501c3) in the country from investment income, appreciation and/or the corpus of the fund. Distributions will be made in the fund’s name, and the donor receives quarterly fund statements. Donors also have the right to name advisors to the fund who can make grants in the fund’s name both during the life and after the death of the donors.
Supporting Organization: Through a unique affiliation with Greater Houston Community Foundation, a person can create a supporting organization. Structured as a separate corporation or trust, a supporting organization has its own trustees. A supporting organization is particularly cost effective and is not subject to IRS regulations and restrictions to which private foundations must adhere. Most importantly, it is – for tax purposes – a public charity, thereby entitling its donors the most generous charitable tax deduction available. Supporting organizations can continue to operate in perpetuity.
Private Foundation: A private foundation allows extensive donor control over distributions, board selection and investment management. However, private foundations are highly controlled by the IRS with many special restrictions and regulations, including administrative and reporting burdens, excise taxes and a required minimum payout.
CONSUMER DEBT
Limit (reduce) the utilization of consumer debt. The use of credit cards and charge accounts, on a revolving basis should be avoided. The interest costs, associated with the use of this type of credit are unnecessarily high. If your checking account, depreciation reserve and liquid reserve balances are properly established, the need to use credit for consumer purposes is reduced.
A clear distinction should be made between the use of investment debt and consumer debt. Generally, borrowing should be used for capital goods such as housing, furniture, automobiles, and investment assets. Borrowing for consumable items such as clothing, food, vacations, tax payments, etc. should be avoided.
The use of debt can be one of the most important financial tools. Properly used, it can provide a method to build a great deal of wealth. Improperly used, debt can lead to financial disaster.
Some trouble signs relating to improper use of credit:
1. More than 20% of disposable income used for debt services (not including mortgage)
2. Exact amount of outstanding debt unknown
3. Debt payments being put off or extended for longer periods of time, and
4. Borrowing to pay off debt
Credit has its disadvantages, tying up a portion of future income and enticing one to overspend. It also has its price, in interest payments and annual fees. Remember, loan repayments must be made with after-tax dollars. You may have to earn $1500 to repay $1100.
While credit increases your immediate purchasing power, it is not an increase in income and should not be used to buy what you cannot afford.
We understand that you have repaid your credit card balances from trust assets, along with a personal loan from Chase Bank. This serves to greatly reduce your interest expense and allow you to improve your credit rating. Repaying this loan as agreed will help to establish a good credit rating and a useful borrowing relationship for the future should you wish to apply for a home mortgage. Endeavor to keep your business with Chase bank in order to build a long-term business relationship.
The credit score, common referred to as a FICO score is the measure most commonly used by lenders to determine the risk involved in a loan. Scores range between 350 and 850, with the larger number representing the lowest risk to the lender and the lower number indicating high risk. The calculation is broken into five major categories with varying levels of importance. These categories and their relative weight are as follows:
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Payment History |
35% |
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Amount owed |
30% |
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Length of Credit History |
15% |
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New Credit |
10% |
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Type of Credit Used |
10% |
All of these are taken into account in your FICO score and reveals how well you have met your prior obligations. It also looks for problems in your payment history, such as delinquency. The more problems you have in your history, the lower your credit score will be.
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