Top Trends in Charitable Giving for High-Net-Worth Individuals

Provisions of the Tax Cuts and Jobs Acts (TCJA) has shifted the shifted the focus of charitable-giving to high-net-worth individuals and decreased the incentive for moderately wealthy individuals to donate to charitable organizations. The following are a few vehicles and concepts that high-net-worth donors and some moderately wealthy donors should be considering.

• Gift Bunching Combined with DAFs
  • Many Americans no longer itemize their deductions now that the TCJA increased the standard deduction to $24,000 per couple. The charitable deduction is an itemized deduction, so there is less incentive. For those that were used to giving less than the new standard deduction, a moderately wealthy individual can now set up a donor advised fund (“DAF”) either with a local community charity or with a financial institution-sponsored fund and give the aggregate amount to the DAF.
• Grantor Charitable Lead Annuity Trusts—CLATs
  • Grantor charitable lead annuity trust, or CLATs, can be set up where one or more charitable organizations receives a series of periodic payments for a number of years from a trust, after which time, the remaining amount left in the trust is paid to non-charitable beneficiaries, generally family members or trusts for their benefit, free of gift and estate tax.
• Holistic Tax And Estate Planning
  • Wealthy individuals can maximize the efficiency of charitable giving while retaining control over investments (such as family limited partnerships) and reducing taxes by integrating such charitable vehicles with FLPs or FLLCs.
• Almost Charitable LLC
  • An interesting current technique is actually no technique and produces no immediate charitable deduction. This is the use of a standard LLC as a centralized charitable giving fund. In this case, an individual forms an LLC and funds it with cash or other assets that he ultimately plans to give to charity.

See Seth Kaplan, Top Trends in Charitable Giving for High-Net-Worth Individuals, Financial Advisor, July 27, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.