The unprecedented events of 2020 are fueling a growing sense of urgency among philanthropic families to make a meaningful impact on the organizations and causes they care about. Understanding each client’s charitable giving goals, as well as the strategies available to achieve those goals, can help advisors build lasting relationships.
As we near the end of this pivotal year, advisors should mind the these key trends in charitable giving:
1. Charitable giving is not just a consideration in estate and tax planning — it is the catalyst.
The motivating factors for creating or updating a will or estate plan have often focused primarily on tax planning and wealth transfer, with charitable giving as a by-product in service of those goals.
The effect of dual crises, COVID-19 and racial and social inequity, has led to heightened awareness, as people look for ways to help make a lasting impact.
The desire to invest in solutions to problems rather than simply make a donation leads to a more complex, long-term and multi-faceted approach to charitable giving that involves not just an individual, but the entire family across generations.
As the alignment of values with legacy becomes more of a priority, purpose and impact are considerations that are driving conversations about the need for comprehensive planning. Leading with what matters most and following that thread to determine how to best meet charitable goals can help an advisor become integral by moving from providing transactional advice to solution strategies.
2. Charitable remainder unitrusts, charitable lead annuity trusts and charitable gift annuities are surging in popularity.
Because of the current economic environment and changes imposed by the SECURE Act, charitable remainder unitrusts (CRUTs), charitable lead annuity trusts (CLATs) and charitable gift annuities (CGAs) — commonly referred to as split- interest vehicles as both the charity and the donor/beneficiary have a shared interest — are increasingly popular vehicles for charitable giving as donors look for flexibility and security.
The limitations on the distribution period to most non-spouse beneficiaries for IRA assets imposed by the Secure Act may be resolved by naming a CRUT as a beneficiary of the IRA. A CRUT is a tax-exempt entity which provides a beneficiary with income for life or a fixed-term then distributes the remainder to charity.
Under certain circumstances, the IRA account owner could fund the CRUT with multiple distributions from the IRA over longer term than imposed by the Secure Act.