How to maximize the impact of your philanthropic giving | Private Banking

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High-net-worth (HNW) investors and families most often engage in charitable giving for moral reasons, according to a Key Private Bank Advisor Poll on philanthropy. Thirty-four percent of advisors surveyed said clients feel a duty to make the world a better place and 32% cited clients’ ethical obligation to repay the people and institutions that contributed to their success.

Still, philanthropic investments have a significant role in overall wealth and legacy planning. More than one-quarter (27%) of advisors say clients are interested in tax benefits resulting from charitable giving. Nearly one-third (31%) cite aging clients looking to put their estates in order as the top trigger for philanthropic giving. Yet, when it comes to philanthropy planning, the biggest mistake advisors see clients is make their failing to factor it into an overall estate and legacy plan.

Here is a checklist of some important topics to cover when considering how to put charitable giving strategies to work for familial wealth.

Develop a family philanthropic mission

Start philanthropy planning with a cross-generational family conversation on giving goals.

Nearly one-third (29%) of advisors say the most difficult part of philanthropy is defining a mission for giving and another 20% say that communicating philanthropic desires to family members is the hardest part. This points to family financial conversations about charitable missions and interests as a critical component of philanthropy planning.

Research causes and perform due diligence

Once a family philanthropic mission has been established, remember to thoroughly research potential causes and organizations to ensure values and goals are aligned.

Two-thirds (65%) of advisors say “hardly any” or “none” of their clients use online tools like GuideStar, CharityWatch and Charity Navigator[1] to perform due diligence and vet potential philanthropic donations before giving. This highlights the need for families to better understand the organizations they want to support. Some advisors even recommend that clients get personally involved with charitable causes.

Understand differences in giving approaches

Before choosing a giving approach, understand the fundamental differences of each and how they may impact your family’s finances — immediately and in the future.

For example, certain types of donations can be claimed as tax-deductible expenses, but new deduction limitations introduced in the Tax Cuts and Jobs Act (TCJA) of 2017 may affect investors’ ability to do so. Forty-six percent of advisors said they see some HNW clients choosing to donate in large lump sums (i.e., “bunching”) in light of the tax changes, allowing them to itemize in their giving years to get the deduction and take the standard deduction in other years.

Examine giving vehicles and strategies

As new types of charitable giving vehicles emerge — such as crowdfunding and peer-to-peer giving via social networks — consider which philanthropy strategies support your overall family financial goals.

Advisors say clients are split in their philanthropic giving strategies, based on what works best with their financial plans — 49% of advisors say they see more HNW investors directing one-time gifts to organizations, while 47% say they see more clients establishing donor-advised funds.

Measure the impact of donations

Philanthropy doesn’t end after a charitable donation has been provided. Consider ways of staying connected with causes to track the long-term impact of gifts.

The most difficult part of philanthropic giving is measuring impact, 43% of advisors said. That may be why HNW families prefer to give to causes that hit close to home, with 71% of advisors saying clients are more likely to donate to a local cause compared to just 2% of advisors who say clients primarily donate to national charities without a specific geographic focus.

For more information about how to make charitable giving part of your financial plan, contact your advisor.

Vince Lecce, CIMA®, CWS®, is KeyBank Rochester Market President and Sales Leader for Key Private Bank in Western New York. He can be reached at (585) 238-4107 or [email protected].

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