Gifts and charitable donations can be modelled either as Gifting Goals or Gifting Expenses (previously known as Legacy Expenses) in the software. This special category of expense/goal ensures that, if applicable, gifts are taken into account when Inheritance Tax is calculated and tax credits are calculated on gifts to charity.
Goals are trackable expenses, which means that if you input the gift/donation as a goal rather than an expense, you will be able to demonstrate to the client visually whether or not they are on track to achieve this goal. You can read more about the difference between goals and expenses here: About Goals.
How to input a Gifting Goal
1. In the Dashboard click the '+' button in the bottom right corner of the screen and then click Goals:
2. From the list of available options, click Gifting Goal:
3. Complete the Basics data input screen with the mandatory details.
Change the owner dropdown to whoever is making the gift/donation (default is joint for couples).
In the recipient type dropdown, select the person receiving the gift if they are listed as a person in the plan. If not, select 'person outside of plan'. For donations to charity, select 'charity'.
In the recipient name field enter a name. This is what will show on reports. If you enter the name as 'grandchild', for example, the report will show the goal as 'Legacy gift to grandchild'.
In the amount box input the amount of the gift/donation and select the frequency. This should be set to 'annually' for a one-off gift.
Optionally, you can also set the priority of the goal, set the inflation rate (which is used to inflate the amount input from the start of the plan to when the gift/donation is made) and select whether the amount is a present or future value.
4. Click Timing on the left hand menu. If an event exists for the year when you want the gift/donation to be made, click on the event icon and then click Set as Start Event. If an event doesn't exist yet, double click on the bar of the chart for the year when you want the gift/donation to be made to create a new event. Give it a name and then select Set as Start Event.
5. Next, still in the Timing screen, click on the event at which you want the gift/donation to stop then click Set as End Event. For a recurring gift/donation this would be an event in the future. Again, if one does not exist yet, you can create a new event by double-clicking on the relevant bar of the chart. For a one-off gift/donation, use an event in the same year as the start event.
6. Optional step for recurring gifts/donations only: if the recurring gift/donation will increase/decrease in future, you can click Steps on the left hand menu and schedule a future change to the amount of the recurring gift/donation: How to use Steps.
7. Optional step if you wish to specify which account should be used to pay the expense: By default the software will use its usual expense fulfilment logic and use income, then cash, then liquid assets according to the liquidation order in Plan Settings (see further reading below for more detail on this). If you want to over-ride this logic and specify a particular account(s) to be used to fund this goal, click Payment Sources on the left hand menu. Click on the account(s) you want the software to use in the left hand Available Payment Sources list which will move them to the right hand Preferred Payment Sources list.
Tip: the Only Use Preferred Payment Sources option should be used very sparingly, if at all. When on, this setting can create artificial shortfalls if the preferred source is inadequate to fund the linked goal. These artificial shortfalls can prevent the software’s Insights from returning results.
When might you tick the “Only Allow…”option? In most cases, we recommend only using this setting in a what-if scenario. For example, your clients want to make a future gift to their children from a particular asset and you want to run a test to determine if they are saving enough to a particular account to cover this. Even if the account is set as a preferred payment source, income and other assets sources will be used if the account does not have the funds to meet the linked goal. However, by selecting the Only Use Preferred Payment Sources option, you could in this scenario test the account for adequate funding. Again, we recommend using this setting sparingly and normally only in scenarios.
8. Save the goal by clicking Done, top right.
Tip: Check the Goals section of the Dashboard to view the goal progress:
How to input a Gifting Expense
1. In the Dashboard click/tap the '+' button in the bottom right corner of the screen and then click Expenses:
2. From the list of available options, click Gifting Expense:
3. Complete the Basics data input screen with the mandatory details.
Change the owner dropdown to whoever is making the gift/donation (default is joint for couples).
In the recipient type dropdown, select the person receiving the gift if they are listed as a person in the plan. If not, select 'person outside of plan'. For donations to charity, select 'charity'.
In the recipient name field enter a name. This is what will show on reports. If you enter the name as 'grandchild', for example, the report will show the expense as 'Legacy gift to grandchild'.
In the amount box input the amount of the gift/donation and select the frequency. This should be set to 'annually' for a one-off gift.
Optionally, you can also set the priority of the expense, set the inflation rate (which is used to inflate the amount input from the start of the plan to when the gift/donation is made) and select whether the amount is a present or future value.
4. Click Timing on the left hand menu. If an event exists for the year when you want the gift/donation to be made, click on the event icon and then click Set as Start Event. If an event doesn't exist yet, double click on the bar of the chart for the year when you want the gift/donation to be made to create a new event. Give it a name and then select Set as Start Event.
5. Next, still in the Timing screen, click on the event at which you want the gift/donation to stop then click Set as End Event. For a recurring gift/donation this would be an event in the future. Again, if one does not exist yet, you can create a new event by double-clicking on the relevant bar of the chart. For a one-off gift/donation, use an event in the same year as the start event.
6. Optional step for recurring gifts/donations only: if the recurring gift/donation will increase/decrease in future, you can click Steps on the left hand menu and schedule a future change to the amount of the recurring gift/donation: How to Use Steps.
7. Optional step if you wish to specify which account should be used to pay the expense: By default the software will use its usual expense fulfilment logic and use income, then cash, then liquid assets according to the liquidation order in Plan Settings (see further reading below for more detail on this). If you want to over-ride this logic and specify a particular account(s) to be used to pay this expense, click Payment Sources on the left hand menu. Click on the account(s) you want the software to use in the left hand Available Payment Sources list which will move them to the right hand Preferred Payment Sources list.
Tip: the Only Use Preferred Payment Sources option should be used very sparingly, if at all. When on, this setting can create artificial shortfalls if the preferred source is inadequate to fund the linked expense. These artificial shortfalls can prevent the software’s Insights from returning results.
When might you tick the “Only Allow…”option? In most cases, we recommend only using this setting in a what-if scenario. For example, your clients want to make a future gift to their children from a particular asset and you want to run a test to determine if they are saving enough to a particular account to cover this. Even if the account is set as a preferred payment source, income and other assets sources will be used if the account does not have the funds to meet the linked expense. However, by selecting the Only Use Preferred Payment Sources option, you could in this scenario test the account for adequate funding. Again, we recommend using this setting sparingly and normally only in scenarios.
8. Save the expense by clicking Done, top right.
How to view Gifting goals and expenses
In the Cash Flow chart in Dashboard or the Let's See screen you should see the black Total Need line has increased in the year(s) of the gift/donation(s). To see more detail, click the Year View button, top right of the chart, move the slider to the year of the gift/donation and click Expenses (gifts input as goals or expenses will show here). Click on the name of the goal/expense to view the payment source for the gift/donation.
Note regarding Inheritance Tax: gifts will be recorded in the background as Potentially Exempt Transfers and can be seen in the Nonexempt PET/CLT section of the Overview > Legacy screen.
Note regarding gifts to charity: any tax credits on charitable donations can be seen in Year View > Taxes.
How to edit a Gifting goal or expense
In the Dashboard click the name of the goal or expense you wish to edit.
This will open up the goal or expense item and you can then edit any of the details by clicking on the relevant data input field.
How to delete a Gifting goal or expense
In the Dashboard click the name of the goal or expense you wish to delete.
This will open up the goal or expense item. Click the trash can symbol next to the goal/expense name:
Then click the Delete button to confirm.
Further reading
Editing items in a client case