Oftentimes, when a person receives a windfall, such as an inheritance, he suddenly discovers many long-lost relatives, and various “old friends” who crawl out of the woodwork after years of silence. All of them come knocking on his door, either asking him for money “because I am in a desperate situation,” or they may tell him about an amazing investment opportunity that is “perfect” for him.
When he tries to say no, they may pressure him with, “You can’t let your poor aunt starve,” or “I can’t let such a dear friend pass up this great opportunity.”
Such negative “giving” often spells disaster, but is easily preventable. Simply tell such “friends” and “loving relatives” that you will run their proposal by your financial advisor. See how many of them will even stick around to hear the answer. Hopefully your advisor will be objective and knowledgeable and be able to tell you whether the request or proposal is genuine, and, even more importantly, whether it fits into the design of your financial plan.
Whenever lending money to friends or relatives, consider what would happen if, despite their best intentions, they couldn’t repay. Would you and your financial plan be able to turn the loan into a gift? If not, think twice about lending funds.
There is a difference between gifting money and charitable giving. If you receive a windfall, consider giving some of it to charity. Charity can be considered “positive giving” because, if you do your due diligence about the non-profit organization, the money definitely goes to a good cause. InIsrael(and in many other countries), you can get a taxbenefit from donating to a recognized charity, which makes your donation stretch even farther. Furthermore, if you really want to make sure that your donation will be used for the charitable cause for which it is intended, employ the services of a family office to find out how the organization uses its resources.
If you learn the art of giving to the right causes, you and your fortune should go a long way.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published June 5, 2012.