charitable giving

As a retired financial planner, I admit that my favorite clients were those whose goals included generous charitable giving. One couple comes to mind. Not only did they make generous donations to their alma mater and favorite non-profits, but they also invested in community efforts to improve blighted areas. Their life purpose was passed along to their son who gave them his promise to continue their legacy.

My parents, although not wealthy by any measurement, made tithing their highest priority so I grew up in an environment that recognized the blessings that surrounded us and the desire to help others was ingrained in me.

Charitable Inclination

So, when I read a Fidelity Charitable report about the generation who will inherit from their baby boomer parents and the younger generations’ greater inclination toward charitable giving, I let out a cheer. The report was published last September and was geared toward a financial advisor audience so the results focus on ways that advisors can reach the next generation to retain or grow their client base.

“Among investor respondents who didn’t already have a financial advisor, those aged 21 to 41 – Generation Y millennials and Generation Z respondents – were twice as likely as those classified as baby boomers, aged 58 and above, to prefer a financial advisor who could help them with charitable giving goals. The study also found that among those with advisors, 71% of investors dubbed “Gen YZ” valued their advisor’s support in creating a legacy that benefits the world – compared to only 36% of boomers who did so.”

Research firm Cerulli Associates estimates that about $84 trillion will pass to the next generation by 2045 in the “great wealth transfer.” According to the research, that does not automatically mean that checks will be written to a favorite charity. Many of the next generation respondents want to be involved in other ways.

Charitable Involvement

The research found that younger clients want to be more innovative and strategic in their giving, as well as peer-engaged in the process. That could mean impact investing – choosing to invest in companies creating a social or environmental impact alongside a profit. They want their capital and charitable investments to work together to be part of an equitable and inclusive society.

The popularity of donor-advised funds (DAFs) is predicted to grow. DAFs provide tax benefits and give donors a more active hand in the philanthropic process than just a simple cash donation. A donor-advised fund is like an investment account for the sole purpose of supporting charitable organizations. 

Cash, securities, or other assets may be contributed to a donor-advised fund and the current market value is usually eligible for an immediate tax deduction. Then the funds can be invested, and any growth is tax-free. Grants can be made to any eligible IRS-qualified public charity immediately or over time.

DAF charitable giving accounts are available through many financial institutions – Fidelity, Vanguard, Schwab, or Bank of America, for example. Community foundations and many charitable institutions also offer DAFs. A quick online search will provide contact information for a DAF resource linked to a favorite charity or a community.

Charitable Resources

Of course, there are other ways to make charitable gifts and support the causes that you treasure. If you work with a financial advisor/planner, make sure they are aware of your desire. They can work with your legal and accounting professionals to find the best option for your situation.

If you are a boomer and want your charitable intent continued in the next generation, talk not only with your family or those who will inherit your wealth, but also with your advisors to make sure everyone is on the same page. If the research is correct, your beneficiaries are likely to welcome your intent and may even take it to the next level. What a wonderful thought that is for all of us!

Let’s Have a Conversation:

Is your charitable giving important to you? Do you expect the same intent of your beneficiaries? Have you shared your charitable wishes with your family or those who will inherit your wealth?