Wealthy families can now transfer their wealth to the next generations at a transfer tax discount of up to 50% while receiving up to a 50% charitable income tax deduction. Two important developments have allowed ultra wealthy families to enjoin their desires for multi-generation wealth transfer and expansion of charitable visions. A 2004 revised regulation permitted charities to create new pooled income funds (PIFs) that distributed income in the form of post-contribution long term capital gain under a trustee as long as it was included in the trust document—or a total return PIF. This new regulation allowed PIFs to distribute significantly more over time. This opportunity has only recently become an opportunity as these total returns PIFs are now permitting multi-generation donor agreements. Further, any realized long-term capital gain that is not distributed is considered permanently set aside for charity and not taxed to the trust or beneficiaries. This feature allows income to grow and compound tax-free for the benefit of future generations. These availabilities create more opportunity for ultra high net worth families and their charitable desires.
See Richard Haas, Fusing Family and Philanthropic Visions, Wealth Management, December 5, 2016.
