“The simplification of anything is always sensational.”
Gilbert K. Chesterton
Attorneys, accountants, and financial advisors tell us it’s getting harder to discern what’s relevant to their charitable planning work and they appreciate email updates like ours that are curated to cover the bases.
As always, our team builds this newsletter so that you can skim the material in 5 minutes or less to see what catches your eye. We provide links for further reading. You might even find a few of the resources suitable to share with your clients.
This issue features updates in three areas:
Trends that inform what your clients are thinking even if they aren’t saying it
Pending legislation that could impact charitable giving strategies
Recent IRS actions illuminating charitable tax planning pitfalls
Please contact us directly if we can be of assistance as you serve your philanthropic clients.
Trends that inform what your clients are thinking even if they aren't saying it
Hot off the press, the 2021 Bank of America Study of Philanthropy: Charitable Giving by Affluent Households confirms that wealthy families are as committed as ever to the nonprofit sector and community causes. Of the 1,626 households surveyed with annual income of at least $200,000 or a net worth of at least $1 million (not counting a primary residence), 88% gave to at least one charity in 2020. Indeed, average giving by this demographic grew to $43,195 from $29,269--a 48% increase--between 2017 and 2020.
The motivations and preferences behind that giving are also changing. Here’s how:
—For the first time, affluent donors care as much about supporting the issues (44%) as they care about supporting the nonprofit organizations themselves (45%). In the past, most affluent donors have put far more weight on the organization when considering charitable giving options.
—The issues themselves are shifting, too. For example, more than 20% of affluent households supported social and racial justice causes, and impact investing nearly doubled, during the period covered by the study.
—Diverse donors and younger donors are beginning to prefer structured giving vehicles, such as donor-advised funds, over direct giving to operating charities.
—Affluent volunteers give twice as much as affluent people who don’t volunteer.
—Affluent philanthropists are becoming more vocal about the challenges they face when making charitable giving decisions, notably:
Figuring out what causes they care about and where to make donations to support those causes (40%)
Figuring out a charitable giving budget and how much they can afford to give (32%)
Figuring out how to measure the results of their giving to be sure it’s making a difference (24%)
What most affluent households are not worried about, however, according to the study, are potential changes to the income tax rules. Indeed, 78% say their giving levels would stay the same or even increase if they could not deduct contributions.
Pending legislation that could impact charitable giving strategies
Even with a government shutdown averted (at least for now), there are still plenty of legislative loose ends that we’ll help you keep an eye on. Changes could directly or indirectly impact your clients’ overall charitable and estate plans.
Here’s what we’re tracking:
Implications of the infrastructure bill on the nonprofit sector as a whole
Specific tax changes that could occur under the Build Back Better plan
Potential expansion of charitable deduction opportunities for non-itemizers
If and when these or other legislative actions edge closer to becoming laws that could impact your clients’ charitable planning priorities, we’ll provide an update.
Regardless of what happens with the legislative agenda, we’re encouraged that the role of community foundations has become increasingly important in supporting your clients’ desires to improve the quality of life in the communities they love. (On that note, you might enjoy this inside baseball book excerpt as much as we did!)
Recent IRS actions illuminating charitable tax planning pitfalls
It requires a keen eye to spot unintended negative consequences of a well-meaning client’s charitable giving strategies! This fall, we suggest you take note of three cautionary tales:
Clients can no longer “hide” with confidence behind a so-called blocker LLC to avoid sticky self-dealing rules when a note is transferred to a private foundation as part of a tax-savvy charitable estate planning structure.
Although rarely imposed, intermediate sanctions on excess benefits are a real thing if a disqualified person attempts to use influential muscle to access financial resources.
Conservation easements--especially those of the syndicated variety--continue to land on the hot seat.