A recent trend we are seeing in our client’s estate planning objectives is their desire to allocate a portion of their income or estate to charitable organizations.  This also seems to be a trend with the ultra wealthy. Bono (lead singer for the band U2) has a desire to alleviate third world poverty, Bill and Melinda Gates continue to fund programs all over the world, and Warren Buffett plans to give away the majority of his wealth.  Their objectives are primarily non-financial, but we see financial reasons behind the use of philanthropy as part of estate planning too.

Non-Financial Reasons:

  • To support an institution or organization:  college or private school, church, medical group, missionaries, or service organizations.
  • To enhance the quality of life for other people.
  • Recognition that there are many great organizations that need financial support.
  • Personal satisfaction of supporting a worthwhile organization.
  • Satisfaction of seeing during your lifetime how the gift affects others in a positive way.
  • To reduce the amount of money that would go to children who might squander it.

 Financial Reasons:

  • Reduce current year taxable income.
  • Reduce a future estate tax liability.
  • Reduce a capital gain tax liability.

 Some of our clients have the desire to give in this way but do not know how.  Direct gifts or donations can be made to an organization.  Also, Donor Advised Funds can be set up so funds can be contributed for current year tax benefits, while donations (grants) can actually be given at a future date.  Accounts can be invested in a variety of investment options (pools) and allocations, ranging from 100% in money market funds to 100% in stocks.

Direct gifts to an organization or through the Donor Advised Funds can be given as a lump sum or in smaller amounts over time.  Either way, the organization receiving the gift benefits and appreciates the donation.  Your adult children might also appreciate your giving heart and encourage you to give in this way. 

It is our desire at HFG to assist our clients with all of their goals and objectives.  If you would like to modify your will to include donations as part of your estate plan, language can easily be added to address your new objective.  Your financial advisor can work with your attorney to help make sure your objectives are being met.  If you wish to begin or increase your giving in this way, but are concerned about the financial implications, please consult with your advisor.

■ Written By: Stephen Palm