Wealth Planning Insights

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On December 9th, the Financial Times (FT) published an opinion titled Does the American dream foster inequality?

I had great difficulty with the central theme of this article as noted in the following quote “…while Americans may recognize their nation’s problems with inequality, they have less desire to do something about it than their counterparts in the west.” The article focused entirely on government social programs.

After reading this article, I felt the need to write a Letter to the Editor which they published on December 15th, excerpted here.

“I think there is one important piece of the inequality puzzle that went unreported in this article. That is the role of our non-profit organizations in America. There is a huge network of non-profits (funded mostly by the wealthy) that add focused support in areas where it is most needed – education, food security, shelter, job assistance, and healthcare.”

For many of our clients, charitable giving is essential. Some are deeply involved in community non-profits -- participating as volunteers, serving on boards, and/or giving generously. Others make charitable gifts a central element of their estate planning.

Tanglewood’s role is to help our clients understand the many charitable strategies and vehicles they can use to accomplish their goals. Very often the charitable gift can be leveraged through appropriate tax planning.

The most basic tax leverage is the gifting of highly appreciated securities to get both a tax deduction and the elimination of long-term capital gains. This can be done directly to a charity or to a client’s own Donor Advised Fund (DAF). We have set up well over 100 DAFs among our clients and ourselves. They are a great way of involving young family members in the family’s charitable planning.

Charitable giving can also be tied into other family goals. For example, the income from an asset can be split from the remainder value (value at the end of a period or at death).

A Charitable Remainder Trust retains the income for the client but gives the remainder to the charity of their choice. A Charitable Lead Trust gives the income away to charity but retains the remainder interest for family members at a significant discount.

Thoughtful charitable giving is in our firm’s DNA and is an important part of our wealth planning process.

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