Paying it forward – Charitable giving & senior housing

As investors get further along into retirement, it is common to reflect on what impact they have made on those around them, their communities, and the world at large. We tend to focus less on what we have accumulated for ourselves, and more on how assets and resources can be deployed for the benefit of others. And, while leaving a legacy to family is often a priority for retirees, remembering individuals and organizations who have cared for us, or our loved ones, can also be worthy of consideration.

Non-profit Communities and Endowments Funds

According to specialty investment bank Ziegler, 78% of the continuing care retirement communities in the US are established as non-profit organizations.1 These are mission-driven communities—many of which have grown out of faith-based roots. While most of them are private-pay communities, they typically have endowments or “benevolent” funds similar to other charities. These funds can be used to support senior residents who may deplete their own financial resources and are often the backstop that allows these communities to fulfill the “care for life” promise they promote.

Planned giving, or identifying how assets are gifted during and after life, may be an important goal of your individual or family financial plan. Residents at these communities are sometimes motivated to provide financial resources to these endowments as a way to support their neighbors and future generations of residents. And children who serve as estate executors may want to leave a gift in memory of a loved one who received care during their retirement. As Wealth Advisors, we help clients to determine your capacity to be charitable after first making sure you are financially independent.

Other Legacy Giving Opportunities

There are also other ways seniors can provide support to their communities and caregivers. Consider that communities often face challenges maintaining and improving facilities, as well as providing career opportunities for caregivers.

Upgraded facilities can help to attract the next generation of retirees—which helps to maintain high occupancy and financial health for current residents. And for those looking for a visible and tangible gift to last for decades, naming rights have become a popular way to support the construction and development of new facilities, such as fitness centers, theaters or dining facilities.

Labor shortages in senior housing have made it difficult to adequately reward and retain good caregivers, who essentially drive these communities. And while many set up holiday gift funds for their staff, there are ways to make a more lasting and meaningful impact on caregivers—like scholarship funds that may help defray the cost or pursuing education in the fields of healthcare, nursing and social work.

Supporting senior care communities is very similar to the way philanthropic retirees might consider supporting an alma mater. It first starts with realization of value derived from the experience (whether that be education or caregiving). From there, the idea of donating toward an endowment, naming a building or providing a scholarship is the next step.

Fulfilling Gifting Goals with Smart Tax Planning

Costs associated with senior communities may already provide tax benefits related to entry fees and monthly fees in the form of itemized medical deductions. Adding charitable giving to a financial plan may add additional tax benefits to further offset current income. Identifying the appropriate assets to gift or strategies to employ can further enhance the tax benefits, while achieving gifting and legacy goals.

We often hear the phrase “cash is king,” but that is often not the case when it comes to charitable giving. For retirees, it might make sense to reduce current taxable income by using qualified charitable distributions (QCDs) from IRA accounts to make gifts with pre-tax dollars. Additionally, we can look at donating concentrated appreciated stocks in order to minimize capital gains taxes. And finally, if we want to control the timing of deductions and distributions, we can utilize donor-advised funds, if appropriate. 

These varying approaches and their effectiveness are dependent on your unique mix of assets and income sources—implementing one or more should be discussed with your Wealth Advisor in conjunction with your accountant.

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