Charitable Giving Can Help Bridge Generations’ Differing Definitions of Wealthy
The recently-released Bank of America Private Bank Study of Wealthy Americans’s insights into shifting views on wealth and the disconnect on inheritance expectations make it a must-read, or at least a must-skim.
Notably, younger people tend to rally around a definition of “wealthy” in terms of having the means to live a life of purpose and make a difference. Older generations are more likely to define “wealth” in financial terms. Important for charitable planning is the finding that older generations may not be planning to leave the inheritance their children and grandchildren expect.
From Left to Right: Mitchell Clark, Coleman Clark, Betty Langston Wooldridge and Jim Clark at their flagship B.C. Clark Jewelers store.
Charitable giving is always an important strategy to discuss with your clients. Many high-net-worth individuals are philanthropic, and charitable gifts reduce taxable income and avoid estate taxes. Charitable giving strategies are particularly relevant as you and your clients address the possibility of increases in income and capital gains taxes for high earners, as well as increased estate taxes due to the looming exemption sunset.
What’s also notable is research indicating the number of “ultra high net worth” families (over $30 million) has increased dramatically over the last two decades. Globally, 157,000 individuals represented $14.2 trillion in 2004 and by 2024, 426,000 individuals represented $49.2 trillion of wealth. Fast forward to 2027, and this group is expected to grow to over 500,000. America alone is home to 756 billionaires and many of the world’s millionaires – nearly 22 million people.
Why Does This Matter?
Wealthy families will increasingly rely on their attorneys, CPAs and financial advisors to help them navigate savvy tax planning strategies, including charitable giving. And many of these families are very generous, so don’t underestimate your clients’ desire to get involved in charitable giving.
You may already be working with families who use private foundations to fulfill their charitable giving goals. In many instances, these private foundations were established by previous generations. But in recent years, donor-advised funds have become more popular, for many good reasons. Our team at the Community Foundation can help you explore a parallel strategy where your clients can carry out their charitable intentions using both a donor-advised fund and a private foundation.
In some cases, your clients may want to consider closing a private foundation and transferring the assets to a donor-advised fund because of the many administrative and tax benefits, as well as the value of being able to lean on the knowledgeable team at the Community Foundation.
We can help walk through the steps to shut down the private foundation, which include securing board approval, making sure final expenses are covered, transferring the assets to a donor-advised fund, filing the appropriate dissolution documents with the state, and submitting the private foundation’s final tax return reporting its dissolution and transfer of assets.
Whether your client pursues philanthropic goals through a private foundation, donor-advised fund or combination of both, we are here to help! Please reach out to our team to discuss the ways your clients can support causes that align with their values and passions and create a lasting legacy that extends beyond their lifetime.
The experienced team at the Community Foundation serves as a charitable giving resource to enhance the knowledgeable service you give your clients. We’ll help you structure a giving plan that maximizes tax advantages while achieving your clients’ charitable and financial goals. This newsletter is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.