As February comes to a close, it’s still not clear what might happen with tax reform given the fluid status of the Build Back Better Act. But that doesn’t mean we can’t approach the tax season with enthusiasm for helping philanthropic individuals and families achieve their goals for improving the quality of life in McHenry County. According to a 2021 Harris Insights & Analytics survey, 60% of Americans are expecting their taxes to go up in the next four years. And most of them are looking for ways to minimize taxes now, rather than waiting for retirement.
With that in mind, we are here to help you more easily start conversations with your clients about their philanthropic plans by raising the issue not in a vacuum, but within the context of their families, their businesses, and a charitable giving marketplace that continues to deliver twists and turns.
“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, a research and consulting firm specializing in asset management and distribution trends worldwide.
As you advise an older client, an important part of the conversation will be to determine the best charitable giving vehicles to achieve your client’s community 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 (as you pick up the phone to call the The Foundation!):
–A donor-advised fund at The Foundation costs nothing to set up, and ongoing fees are minimal.
–A donor-advised fund can be created quickly–usually within a week. 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).
–Ongoing operations of a donor-advised fund through The Foundation are very easy, with no tax filings required.
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.
The team at The foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This email is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.