Philanthropy has many drivers, and one of them is how it can bring family members together - an important consideration when people can sometimes clash over values and money.

The following article, exploring issues around charitable planning and how to get family members involved, comes from Fred Kaynor, who is managing director of relationship management, marketing and strategic partnerships, Schwab Charitable. The article also underscores the importance of philanthropy advisors - an issue that this news service has written about. 
We have also written about how COVID-19 and other crises have influenced philanthropy, and on the technical side, the case for and against private foundations and donor-advised funds (DAFs). (See examples here and here.)

The editors of this news service are pleased to share these views. The usual editorial caveats apply. Email tom.burroughes@wealthbriefing.com

According to a recent report from Cerulli Associates, it’s projected that by 2045, $72 trillion in assets will be transferred to heirs, with $11.9 trillion of that going to charities (i). Many donors are looking for ways to introduce conversations around philanthropy to their family in a meaningful way. As a result, 88 per cent of advisors are incorporating charitable giving into their practice to help better meet the needs of clients, deepen their relationships with multiple generations of clients, and differentiate their offering (ii).
 
Many people have found that philanthropy is a great way to increase connection, share values, and create meaning between family members. When families discuss their values and giving goals with younger generations, they can help maximize charitable contributions and extend their legacy. We hear many Schwab Charitable donors say it is important to leave a lasting impact on charitable causes close to their hearts and set children or grandchildren up to continue their giving beyond their lifetime, but not everyone knows how to get started. There are steps donors can take now to involve family members in their current charitable giving planning that will leave a lasting legacy.

Give younger generations a voice
Personal values are the leading factor in the decision to contribute to a particular cause or charity (iii). Many parents and grandparents can lead the conversation to share their values and causes they have chosen to support in the past, but children and grandchildren may be more engaged in the conversation if they are asked for their input and values. Hearing everyone’s input and interests can often make it a more enjoyable experience for all family members. 

Making this a conversation with family members can also introduce a different perspective to their charitable giving plan. While baby boomers have historically been the largest population of donors, philanthropy in the US spans all generations. In fact, millennials have significantly increased their giving from 2016-2022 and Gen Z is on track to become one of the most charitable generations ever (iv, v).  

Create a giving legacy plan with the family
A charitable legacy plan is typically part of an overall estate planning strategy, and in addition to providing charitable donations, seeks to implement tax-smart strategies. The structure of plans can vary based on charitable goals, giving vehicles, frequency of giving, and amount of giving. As donors evaluate their current giving plan and their plans moving forward, it’s important to consult family members who they want involved to help them implement and carry out the plan in the future. It’s also important for donors to consult their financial, tax, and estate planning advisors. 

Use a donor-advised fund as a way to consolidate the family’s giving
There are many ways an individual or family can give to charity. A donor-advised fund is a simple and efficient giving vehicle that can increase the amount a family is able to give to public charities. Once an account is open, any account holder or user can make an irrevocable and tax-deductible contribution to the fund. The contributions, which can be non-cash assets, are invested for tax-free potential growth over time and family members on the account can recommend grants to the eligible charities of their choice at any time. The overall goal is to increase dollars available for charity. Additionally, one of the benefits of contributing non-cash assets to a donor-advised fund is removing the capital gains tax, which can be up to 20 per cent, ultimately allowing more money to go directly to the charities of the donor’s choice.

Accounts may be opened with multiple account holders and account users age 18 and older. All individuals on the account have advisory privileges, which includes contributing, recommending investments, and recommending grants. These features make the accounts fitting for family engagement, and two thirds of Schwab Charitable account holders say they involve family members with their account (vi).  
Donor-advised fund accounts also have legacy or succession planning features, helping to ensure that a family’s charitable giving activity continues beyond any individual’s lifetime. At Schwab Charitable, donors may select any one or combination of three options:

1.  Naming family members or other individuals as successors on their account; 
2.  Recommending charitable organizations as beneficiaries of final grants of their account balance; and 
3.  Recommending charitable organizations for recurring grants over a specific timeframe (the Schwab Charitable Legacy Program). 

Have regular touch points to maintain engagement
Having family members interested and actively involved in charitable giving rarely comes from a one and done conversation. It’s important to have periodic conversations with open communication. Some might discuss giving at the holidays as families gather in person. Others might have regular monthly or quarterly meetings to discuss. It will look different for each family, but it’s important to find what works best for yours so that each family member involved feels a true sense of ownership and connection to the family’s charitable giving plan.

It's never too late to involve family in your charitable giving plan
While it’s great to begin charitable giving conversations with family early on, it’s never too late to get started. A financial advisor can be a great resource to help donors involve family members in planning.

There are also a number of resources and tools online to help people in any stage of their charitable planning take steps to involve family members, or increase their family’s involvement, in their charitable giving.

Footnotes

i  Cerulli Associates, US High Net Worth and Ultra High Net Worth Markets 2021: Evolving Wealth Demographics Report, 2021
ii  Results for all firms with $250 million or more in AUM. Past performance is not an indicator of future results. 2023 RIA Benchmarking Study from Charles Schwab, fielded January to March 2023. Study contains self-reported data from 1,300 firms. Participant firms represent various sizes and business models categorized into peer groups by AUM.
iii  The 2021 Bank of America Study of Philanthropy: Charitable Giving by Affluent Households, Indiana University Lilly School of Philanthropy, 2021.
iv  Giving USA, Special Report Giving by Generation, 2023
v  Forbes, Why Gen Z Might Become One Of The Most Charitable Generations Yet, 2022
vi  Teachable Moments, Schwab Charitable Donor Forum, 2020

Note
Schwab Charitable™ is the name used for the combined programs and services of Schwab Charitable Fund™, an independent nonprofit organization. Schwab Charitable Fund has entered into service agreements with certain affiliates of The Charles Schwab Corporation.