Despite all of the varied paths we take in life, most of us tend to want the same things for ourselves. The freedom to do what we want. The ability to take care of our loved ones. A feeling of contributing meaningful work while making time to enjoy our hobbies. And most of us want to give back. Almost all of us have causes that we believe in.

Even with the bad rap that the wealthy frequently get, they play an inordinate role in supporting civic and charitable causes. Each year the largesse of the wealthy helps preserve our natural resources, support the arts, and comfort the afflicted. We have been proud to help our clients support different causes they believe in such as their local churches, schools or special interests. They lean on our advice to guide them in the most efficient way to donate and help their cause, if possible.

It’s good to be reminded that so many wealthy individuals are driven by the best of intentions. I always have to smile when I read newspaper profiles on the passing of “secret millionaires”. Every community in America seems to have one – the modest, unassuming neighbor who saved wisely and amassed a fortune unknown to his or her neighbors. They often work in professions you wouldn’t have expected, even custodians or postal workers. And they almost invariably leave a hefty portion of their estate to causes they care about. The story will inevitably recount the amazed reaction of a foundation or non-profit leader moved to tears by a check that will allow them to touch countless lives. When I read these stories, I can’t help but wonder – who could possibly have wanted that person to fork over more of that money in taxes? What higher use could there be of those funds than honoring a cause the deceased cared about?

Unfortunately, it can often be quite perplexing to figure out how to make such gifts possible. It requires careful planning to ensure that your estate will go to support causes you believe in. For the wealthiest among us, the most prestigious options are opening a private foundation. High-profile examples like the Gates Foundation and the Clinton Global Initiative are among the best known, but there are increasing examples across the country. 2014 saw a record 86,192 private foundations in the US, distributing $52 billion in charitable giving. If you aren’t quite at the level of opening up a self-named foundation for addressing your pet cause, fear not. There are still plenty of steps you can take to help ensure that your wealth can benefit the cause that you choose.

Making the Most of Your Charitable Gifts

  • Donor-advised funds – These funds allow you to contribute your assets to an account specifically designated to release funds to a charity of your choice in the future – tax-free. Such vehicles are routinely criticized by pundits as a means for the wealthy to dodge their tax obligations in the name of charity. Nonsense, I say – these tools create win-win situations, helping to channel resources to deserving organizations that would otherwise have to search for support elsewhere or scale back on their operations.
  • Charitable lead trust – Think of this as a charitable remainder trust in reverse, in which a selected charity receives an ongoing income stream from the interest earned by the assets in the trust. At the end of a specified period of time – such as the lifetime of the donor, for example – remaining principal left in the trust can revert to the donor or their beneficiaries. These vehicles create tax savings in the form of charitable deductions, reducing the size of your taxable estate.
  • Charitable gift annuity – Just as a conventional annuity provides you with a predictable income stream, this vehicle sets up a consistent source of funding to the charity of your life. You agree to transfer assets to a charity you’ve chosen for the duration of your life in return for a tax deduction. This is also a commonly used vehicle for universities and civic organizations.

While there are many worthy causes, the amount of money donated to charitable organizations make donors prey for faulty schemes. Donors are advised to do research into the organization, leadership and request before transferring funds. If you need help, feel free to reach out to my office here.

For more information about the exceptional needs of wealthy families pick up a free copy of Exceptional Wealth here.

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