Insight Article

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April 01, 2025

Talk to Clients’ Families about Charitable Giving ahead of the Great Wealth Transfer

April 01, 2025

Talk to Clients’ Families about Charitable Giving ahead of the Great Wealth Transfer

Insight Article

Talk to Clients’ Families about Charitable Giving ahead of the Great Wealth Transfer

April 01, 2025

Inclusive Charitable Planning, such as a tax-deductible donor-advised fund (DAF), may help practitioners develop relationships with spouses and children of clients.”

With $105 trillion expected to flow to heirs over the next two decades¹, wealthy individuals and advisors must be more mindful than ever when considering how to manage, grow and preserve family wealth and charitable giving. Cerulli projects that a record $124 trillion, in wealth will be transferred through 2048, with $105 trillion flowing to heirs and $18 trillion going to charity. The majority (81%) of those transfers (nearly $100 trillion) will come from Baby Boomers and older generations.

The Great Wealth Transfer creates an urgent demand to foster relationships with clients’ spouses and children, and to develop long-term growth strategies. Conducting family meetings and maintaining a regular cadence of communication with family members is an important best practice, according to 89% of firms surveyed by Cerulli in 2024. The massive intra-generational shift includes $54 trillion to be passed down to spouses before eventually transferring intergenerationally to heirs and charities. Widowed women in the Baby Boomer and older generations will receive nearly $40 trillion, and millennials are expected to inherit more than any other generation with $46 trillion, signaling a major opportunity to expand the dialogue on intra-generational wealth attitudes and behaviors.

Broadening Relationships with Charitable Giving
Inclusive Charitable Planning, such as a tax-deductible donor-advised fund (DAF), may help practitioners develop relationships with spouses and children of clients. A DAF is a charitable account that allows donors to give to charities over time, contributing cash, stocks or other assets while receiving a tax deduction in the year of the donation. It is more vital than ever to include children as successors on giving accounts or to include flexibility for incorporating a DAF so that advisors can start building a relationship with future heirs.

Engaging in conversations about a person’s passion and values can nurture more meaningful relationships. Advisors can bridge the gap and become a client’s trusted advisor through thoughtful discussions. Passions and values often guide charitable giving.

DISPLAY 1

Asset Location and Timing Contributions and Distributions
Asset location and timing are essential to charitable giving. It is important to identify the right type of asset to give --such as long-term held low basis securities, mutual funds, securities that are about to go through a corporate action (the key is gifting shares prior to a shareholder vote), etc. Gifting a portion of the sale of a business or home may provide donors with a reduced capital gain as well as a deduction to offset the remainder of the gain while maintaining liquidity to begin saving for future gifts.

Gifting assets in a year where you may have a gain, as well as during your working years where you may have a higher adjusted gross income (AGI), allow donors to allocate deductions in higher income tax years, while the ability to save money and gift to charities in the future.

Charitable Planning with a DAF
DAFs provide donors an opportunity to gift an appreciated asset (no capital gains recognized), receive an upfront deduction and invest the account for potential tax-free growth for charitable giving. This vehicle is similar to a private foundation and can provide the framework to establish an actionable plan for lifetime giving and succession planning.

For example, donors who may want to support charities in retirement can use funds from a DAF established during their working years. For future giving, donors can leave endowments for charities or name successor donor advisors, such as their children to help direct the family’s giving account.

With DAFs, donors can enjoy the benefits of a private foundation without the upfront cost to establish, or administrative hurdles, and with greater flexibility to give over time.²

Establish Legacy DAFs with Clients Children
Some DAF programs allow clients to fund and establish a DAF for their children to manage their own charitable giving account as younger individuals may want to invest and distribute to different causes than their parents. This allows the future heirs to direct their own charitable giving account and enables advisors to work directly with the future inheritors.

Bequest and Estate Gifts
Donors without successors may want to name some qualified assets (not taxable on the distributions) as a beneficiary of a DAF. This setup can help donors reduce their estate and provide a proper plan in place for gifts to be distributed and recognized well in the future.

Bottom Line: In anticipation of the Great Wealth Transfer, we believe that inclusive charitable planning may help advisors engage with their clients and their clients’ families on a deeper level while developing relationships with clients’ spouses and heirs who will eventually inherit the giving account.

¹ The Cerulli Report—U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2024.
² Private foundations have a 5% annual giving requirement whereas a DAF do not have a 5% requirement at the account level, but most DAFs will gift at least 5% of the aggregate DAF account assets to charities.

Eileen Tam

Director of Philanthropic Solutions,
Eaton Vance

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