Unite Financial Planning With Your Values Through a Philanthropic Structure
Today’s high-net-worth individuals (HNWI) and families have access to powerful tools for navigating estate planning, including several structures that align a prudent strategy for wealth transfer with a family’s philanthropic goals. Increasingly popular donor-advised funds, as well as charitable trusts and family foundations, aren’t just tax strategies — they’re vehicles for creating generational impact.
Here’s a brief overview:
Donor-Advised Funds (DAF) are investment accounts dedicated to charitable giving. Account holders can contribute assets, receive immediate tax deductions, and retain advisory privileges over how their funds are invested and distributed to support the charities they care about.
Charitable Trusts offer even more sophisticated options. These irrevocable trusts transfer assets to charitable organizations with two primary configurations: Charitable Remainder Trusts provide income to donors, with remaining assets ultimately directed to charity. Charitable Lead Trusts channel income to charitable organizations first, with residual assets returning to the family.
Family Foundations represent the most comprehensive philanthropic structure. These private nonprofit organizations controlled by the family allow that family to create structured, multigenerational giving strategies. Foundations are not just about tax efficiency, though they do provide substantial tax advantages. They also embed philanthropic values into family culture and create a lasting legacy of social impact.
It’s crucial for HNWIs and families to consider philanthropic structures as part of their overall strategic planning because the consequences of inaction are stark, with much higher tax exposure than necessary and lost opportunities for making meaningful contributions to causes you care about. Families can begin by assembling a specialized team dedicated to carrying out their philanthropic goals and financial objectives, including an estate planning attorney, tax professional, and wealth management advisor.
The process also should involve deep reflection. What causes resonate with the family’s values in this generation and the next? How can wealth be a tool for broader societal impact? These aren’t just financial decisions but deeply personal choices that reflect a family’s core beliefs.
Successful philanthropic planning is about more than tax efficiency. It’s about creating a legacy that extends beyond financial wealth to the multigenerational impact you have the potential to make.