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Balancing act: Got it made? Now, give it away

Last week in this space, we met the "Millionaire Next Door."

Fred and his wife are in their mid-40s and financially secure, according to the e-mail he sent to me. Their house is paid for. They have income-producing real estate. They give to their church and children. They have enough money to retire in comfort.

The question is, Fred wrote, what do they do next?

Roger Smedley and Sharla Jessop of Salt Lake-based Smedley Financial Services said Fred and his family first must make sure they are as financially secure as they think.

Once they pass that test, they should find a cause they are passionate about and decide what they can do to help the situation.

One way to do that is by giving money away, Roger and Sharla say, but giving is not always as easy as it seems.

"Sometimes people have a desire to give, but they're not really financially independent yet," Sharla says. "They have a lot of money, but when you run all the numbers, it's barely enough to support them through retirement.

"You want to give what you can afford to give, but not more than you can afford to give."

Roger says one common — and effective — way to distribute wealth is through a family foundation.

"Just call time out and say, 'What do I really want to do with the rest of my life?'" Roger says. "When you have money left over, that's when you consider a foundation."

There are several different kinds of foundations, Roger says. Private operating foundations are those that help support museums, libraries and similar organizations. In a pass-through foundation, any money that flows in to the foundation must be disbursed back out.

But the most common kind, Roger says, is the private endowment foundation. Many of the famous political and money families of the East Coast have been setting up such foundations for years.

In a private endowment foundation, the person who sets it up can take a salary from it. At the same time, he receives a tax benefit and establishes a pool of money he can give to charities.

A private citizen probably will require help from an attorney and accountant to set up such a foundation, Roger says. To get started, he recommends visiting the Web site of the National Center for Family Philanthropy, www.ncfp.org.

He says people in Fred's situation also should consider how they can best leverage their gifts.

"If you really believe in literacy or education, you can just give them the money," Roger says. "Or, you could put it in a life insurance policy, and when you die, the money could go to that foundation or charity. At that time, it could make for a bigger gift."

Sharla says people also should consider giving gifts other than cash. Sometimes a service organization will need property or a particular piece of equipment that donors could provide.

And be prepared to look beyond the borders of your city or state.

"A lot of people look at things close to home that make a difference, but there are a lot of (possibilities) outside the United States," Roger says.

The bottom line, Fred, is something we've all heard before.

As Roger says, "You can't take it with you."

I hope this helps Fred and any others who are financially successful and wondering what to do next.

And in case you've forgotten, Fred, I'm still open to any adoption proposals!

I'm still looking for examples of the best and worst financial advice you have received. Please send your stories, or your questions, to gkratz@desnews.com or to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.


E-mail: gkratz@desnews.com