Helping younger clients plan their charitable giving
Developing a thorough estate plan isn’t important only for Baby Boomers and Gen Xers. Millennials, who now make up nearly a quarter of the population in the United States, may prove to be more enthusiastic planners than their parents and grandparents, according to the 2022 Estate Planning Study: Millennial Estate Planning Continues in a Pandemic.
What does this mean for planning gifts to charity?
Your millennial clients may be interested in setting up charitable gift vehicles or discussing planned gifts in their will or trust earlier in their lives than some of your older clients. According to the recent Pew study, Millennials are good savers and it’s never too soon to discuss philanthropic intentions with your younger clients.
What’s an example of a giving technique that is well-suited for millennials?
As they build careers, switch jobs, and start businesses, millennials’ incomes may ebb and flow from year to year. This makes “bunching,” or “bundling,” through a donor-advised fund (DAF) at the community foundation very useful. Because contributions to the DAF are eligible for an immediate tax deduction – but are not required to be granted from the fund to charities right away – your client can “front load” donations into a DAF at a level that takes advantage of itemizing deductions during a high-income year, and then contribute less to the DAF in lower income years. Each year, your client can recommend grants from their donor-advised fund to favorite charities according to the timeframe that aligns with the client’s goals for supporting those organizations, regardless of the client’s income in that particular year.
Does bunching work with long-term appreciated assets?
Yes! Although it may seem obvious to professionals in the financial world, it’s not always top of mind for your clients to remember to donate long-term appreciated assets to their DAF. This is especially true of millennial clients who only now might be reaching a point in their lives when they own stock or other assets that have gone up in value. Donating an appreciated asset is tax efficient because the asset given to the DAF or other public charity typically is deductible at the asset’s fair market value. The charity, in turn, pays no capital gains tax on its sale of the asset, thereby generating more dollars to support charitable causes than your client would have had if the client had sold the asset and given the proceeds to charity.
We encourage donors to first seek the advice of their legal, financial, or tax advisors when considering a gift of non-cash assets. While our team does not offer tax advice, we stay knowledgeable on charitable giving strategies. Please contact Colleen Hill, Vice President of Development & Donor Services, at chill@cfhz.org or by calling 616–994–8853 if we can help you serve your clients.