Too Rich, Too Soon?

March 25, 2013

The lottery, an inheritance, or a brilliant business idea – coming into great wealth quickly can happen at a moment’s notice.  In some cases, it starts with elation; in all cases, it ends with the need for responsible planning. And in this economy, knowing how to handle wealth is not just smart – it is necessary.

The Wall Street Journal recently tackled the issue of “sudden wealth” and recommended several steps to protect that wealth – important among them, philanthropy.

The first step for many individuals who come into sudden wealth is to seek the professional guidance of a financial advisor or a lawyer to create the necessary wills, trusts, and other legal documentation. For those with charitable impulses, an important next step is to get smart about philanthropic giving.

Becoming a philanthropist can seem intimidating. We think of Bill Gates or Warren Buffet and multi-million dollar foundations. And between the paperwork and compliance issues – for philanthropists of all types – it’s no surprise that the ‘too rich too soon’ crowd shy away from this method of stewarding their wealth.

Yet, becoming a benefactor is not as complicated as it may seem – and, in fact, the personal, financial benefits are significant.

Community foundations that offer donor advised funds are ideally suited to help those with new wealth manage the part of the money they wish to contribute in a careful, deliberate, and cost effective way.

Community foundations allow donors to place a percentage of their funds in an account, receive an immediate tax benefit, and then take their time to distribute the funds and in accordance with carefully thought-out guidelines. By placing money in a donor advised fund, aspiring benefactors are able to cut through burdensome procedures, give at their own pace, and effectively link their giving with their tax planning.

Philanthropy is, after all, a form of investment – only, in return, one seeks improvements in the community or his or her own well-being rather than profit. As the Journal points out, philanthropy has been closely linked to social status, reputation, and character – all ancillary but important points to consider when managing new wealth.

The Community Foundation of New Jersey is pleased to work with those of new wealth, old wealth, or just some wealth to help achieve their philanthropic goals. Because, in the end, one’s assets are only as effective as one’s willingness to learn and eagerness to help.