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Major UHNW Charitable Donations at Record High

December 28, 2016

Large charitable giving has reached an all-time high, according to a report from Wealth-X and Arton Capital.

Worldwide philanthropic giving among individuals with a net worth of $30 million or more rose 3% from 2014 to 2015, according to the report. The study also found a correlation between large donations and wealth: those who have given at least $1 million to charity over their lifetime have a $300 million average net worth. These investors give away about half of their cash over their lifetimes, according to the report.

One major takeaway for financial advisors is that major donors keep a bigger share of their wealth, or $85 million on average, in liquid assets, the study found. Advisors looking to tap into the Millennial generation, meanwhile, should know that philanthropists in this generation are combining charitable giving with for-profit pursuits, according to the report.

With 2017 around the corner, many wealthy clients are looking to maximize the tax benefits of their donations, Mike Penfield writes in InvestmentNews.

One way advisors can help them achieve that is through charitable remainder trusts, according to Penfield, national director of the U.S. Bank Charitable Services Group. Doing so will let clients continue earning income but still receive an income tax deduction as well as reduce the gains tax liability on the property, he writes.

Another way to achieve tax benefits is to fund a lead trust with a concentrated stock holding, according to Penfield. Assets placed initially in such a trust will go to the donor’s heirs after a set term, while annual donations from the trust can cut down on the transfer tax due once heirs receive the assets, he writes.

Finally, advisors could help clients kill two birds with one stone, according to Penfield.

Using a charitable remainder trust, clients can diversify their stock concentrations by putting appreciated stock into the trust. At the same time, they get a charitable tax deduction for taking those assets from the estate overall, he writes.

Meanwhile, proceeds from stock sales by the trust go back into it, which can help clients avoid paying a capital gains tax, according to Penfield.

The client can draw an annual income from the trust, with the remainder going to the charity when the investor dies, he writes.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.