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Financial Planning > Charitable Giving

When Families Don’t Talk About Philanthropy

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Most wealthy parents do not discuss philanthropy with their children, much less agree with them on which charitable causes to support, Key Private Bank reported this week.

In a survey fielded this summer among some 125 financial advisors, 82% of respondents said few of their clients involved offspring in family philanthropy.

Not surprisingly, they noted that parents and children disagreed on the worthiest causes. Whereas 59% said the next generation supported environmental/sustainability causes, only 3% said parents did so.

Opinions flipped when it came to religious and faith-based causes, with 73% saying parents and 3% saying children supported them.

Fifty-seven percent of advisors put the generational differences down to a lack of conversation and/or participation in giving discussions between parents and children.

A third of advisors cited children’s absence in giving conversations, while one-quarter pointed to a lack of parental transparency around giving strategy.

“Nearly half of advisors said the biggest mistake they’ve seen among clients is not factoring philanthropy into their overall estate and legacy plans,” Anne Marie Levin, national director of family wealth legacy planning services at Key Private Bank, said in a statement.

“There’s a clear opportunity for parents and children to overcome generational differences and work together to find common ground and set a family mission for giving. These conversations should center how families can get on the same page.”

Giving Priorities

The advisor survey found that doing good in the world was a top priority for clients. Two-thirds of advisors said clients were motivated to donate to philanthropic causes by a desire to make the world a better place.

One-third said clients felt morally or ethically obligated to repay the people and institutions that had contributed to their success.

Absent an income tax benefit, however, clients were more likely to keep their donating approach the same, according to three-quarters of advisors.

The main triggers for giving were personal in nature — aging clients getting their estate in order or a family health crisis, for example — as opposed to global events, such as humanitarian crises and disease outbreaks.

Not only that, 71% of advisors said clients favored local causes, while just 2% said they focused on strictly national causes. Forty-nine percent of advisors said that over the last year, they had seen more wealthy investors direct one-time donations to organizations.

“For high-net-worth families, the best investment strategies go beyond protecting wealth ― they protect clients’ values,” Karen Arth, Key Private Bank’s national director of trust and wealth services, said in the statement. “Because giving can be so personal, the more thoughtful the philanthropy strategy, the more impactful the dollars will be.”

Charitably minded families have several giving vehicles, with varying degrees of tax efficacy, at their disposal.

Forty-three percent of advisors in the survey said measuring philanthropic impact was the most difficult aspect of charitable giving. Sixty-five percent said few, if any, of their clients used online charity assessment tools, such as GuideStar and Charity Navigator, to perform due diligence on potential philanthropic donations.

“Taking the time to investigate whether your donation is doing what it’s supposed to do can be a rewarding process,” Levin said.

— Check out 2 Tax-Smart Charitable Giving Strategies for the New Tax Era on ThinkAdvisor.


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