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Transfer of Wealth: Ways to Preserve Your Clients' Legacies

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"The greatest wealth transfer in modern history has begun," according to a mid-2021 report in the Wall Street Journal. And, with tax reform’s big bite into estate values off the table, at least for now, many of your older clients may be thinking seriously about their legacies.

And these legacies will be significant. As of March 31, 2021, according to data collected by the Federal Reserve, Americans in their 70s and older had a total net worth reaching almost $35 trillion. By 2042, an estimated $70 trillion will change hands, including an estimated $9 trillion flowing to charities, according to research conducted by Cerulli Associates. 

As you advise older clients, an important part of the conversation will be to determine the best charitable giving vehicles to achieve their goals, particularly evaluating the potential role of a donor-advised fund or private foundation. Increasingly, your clients are learning about their options in mainstream media and likely have a greater level of awareness about charitable giving options than ever before, especially in the wake of the recent twists and turns concerning potential tax reform. 

Here are key points to keep handy for those conversations:

  • A donor-advised fund at the community foundation costs nothing to set up, and administrative fees are minimal. 
  • A donor-advised fund can be created quickly – even within days. A private foundation, by contrast, requires establishing a legal entity through state and IRS filings. 
  • Donating hard-to-value assets to a donor-advised fund delivers better tax benefits (deduction of fair market value) than a gift of the same assets to a private foundation (deduction of cost basis).
  • A client can deduct a greater portion of AGI (e.g. cash deductible up to 60% of AGI) with a gift to a donor-advised fund than with a gift to a private foundation (e.g. cash deductible up to 30% of AGI). 
  • Ongoing operations of a donor-advised fund through the community foundation are very easy, with no tax filings required. 
  • Sometimes, both a private foundation and a donor-advised fund are useful tools to meet a client’s charitable giving goals. The team at Akron Community Foundation can help you develop a structure for your client that maximizes the benefits of each vehicle within an overall philanthropy strategy.

Next, consider encouraging your clients to make charitable giving part of "living large" in their golden years, especially in light of an emerging trend that philanthropists at all levels are becoming increasingly intent on making an immediate impact on important causes.

The community foundation can help you develop an impact-focused philanthropy plan for your clients, including helping your clients "reverse engineer" the philanthropy structures that will be most likely to result in the difference your clients want to make in the world.

Keep an eye out for clients who match these characteristics: 

  • Families who have started to talk with you about multigenerational philanthropy but do not yet have any formalized plans.
  • Families who have publicly demonstrated a commitment to three or more charitable organizations.
  • Families who own a multigenerational family business such that corporate giving and enterprise legacy have become intertwined.
  • Families in which members across multiple generations appear to be actively involved in philanthropy discussions.

Finally, remind your clients that the best time to set up their philanthropic plans really is right now. By being proactive, your client has nothing to lose and everything to gain in ensuring that their charitable wishes are carried out. To that end, the community foundation regularly works with advisors whose clients wish to establish funds to receive bequests after the clients pass away. This allows clients to describe their charitable intentions, including naming advisors and suggesting nonprofits to receive fund distributions, and to guide their heirs through the client’s charitable legacy.

To learn more about your clients' legacy giving options, contact Laura Lederer, senior director of development and advisor relations, at 330-436-5611 or llederer@akroncf.org. We’re always available to answer your questions about philanthropy or to schedule a personal consultation with you and your clients – all at no cost.

Additional Resources

This content is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

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