Estate Planning: Strategies for Philanthropy
March 20, 2024
Adam Yale, Partner and Portfolio Manager
Bruce Van Kooten, CFA®, Partner and Portfolio Manager

How can high-net-worth families and individuals create a legacy through philanthropy? For many high-net-worth investors, charitable giving may be essential to a long-term retirement, estate, and tax planning strategy. Your wealth manager can chart a course to achieve your overall goals.

While we are in the business of helping you grow and preserve your money, if giving is essential to you, we want to ensure you give the right way.

Why Philanthropy?

Philanthropy in Latin means “love of mankind.” Philanthropy in America typically focuses on benefitting people’s lives through donations to charities or enabling systematic changes that help to solve challenges in the areas of poverty, education, healthcare, or social causes.

While we are in the business of helping you grow and preserve your money, if giving is essential to you, we want to ensure you give the right way.

Private philanthropy can fill the gap. Through generosity, you have the power to do good, to make a difference, and to feel good about yourself.

Your goals can be on whatever scale you prefer, from potentially impacting your neighborhood to changing the planet. The only limitations are your imagination and means.

How Can I Donate Assets?

1. Appreciated Assets

Many of our clients make charitable contributions by donating stocks that have increased in value over the long term. The benefit is that you won’t pay capital gains tax on the appreciated assets. In addition to stocks, you can donate bonds, mutual fund holdings, assets in your life insurance policies and retirement plans, real estate, collectibles, fine art, and other physical assets. Private equity and cryptocurrency may also be part of a charitable contribution.

2. Donor Advised Funds

Investors can gift assets via a donor-advised fund (DAF). A DAF is an investment account whose only purpose is to support the charities you want to help. The money you put in a DAF can only go to a charitable organization. A key benefit: growth on the assets in the account is non-taxable. DAFs are relatively easy to establish, let the donor choose the charity after the setup, and are often the program of choice for donors looking to gift relatively smaller amounts, meaning less than $2 million

A donor-advised fund is an investment account whose only purpose is to support the charities you want to help.

3. Charitable Remainder Trusts

Alternatively, you many give through a charitable remainder trust (CRT). A CRT provides dual benefits. With a CRT, your donated assets go to your charity of choice, and you can direct the dividends and growth of those assets to give you consistent income. DAFs are generally for people or businesses who want to gift a substantial amount, typically $2 million or more. The reason is that CRTs can cost quite a bit in legal and accounting fees to initiate. A key drawback is that once you set up a CRT, you can’t change, stop or delete it. It’s irrevocable. It’s in the name.

4. Retirement Plans

Donors can also give assets in an individual retirement account (IRA) and other retirement plans. The laws are labyrinth and often require an experienced guide to reach your destination. Depending on when and how you give, your contributions may qualify as a tax-free charitable distribution, lower your adjusted gross income, and generally lower your blood pressure.

If you own a small business, you can use corporate giving to help the causes you care about—while simultaneously engaging your employees.

Private Foundations

Some investors with typically at least $1 million or more to donate may create a private foundation. As the foundation owner, you’ll have total control over grants and programs. If you go this route, you’ll reduce your federal income tax for each year you contribute, potentially avoid capital gains taxes, and decrease any estate tax.

Business Donations

If you own a small business, you can use corporate giving to help the causes that are meaningful to you while simultaneously engaging your employees. You’ll want to ensure that the issues and organizations you love also resonate with your employees, and you can provide matching cash contributions to encourage employee giving. Your employees can volunteer their time to a list of approved charities, such as a local food pantry, religious organization, the arts, and more.

What Are the Benefits of Working with a Wealth Manager?

Know Your Needs

The best wealth managers work with you, understand your investment personality, and know you and your family’s financial planning, tax, estate, and philanthropic objectives.

Consider the Strategy

Charitable giving can provide tax benefits as well. Three examples: To reduce your capital gains liability, you can make charitable donations of assets you’ve held for more than one year. You may donate to public charities to reduce income taxes. Contributors can also establish a donor-advised fund in which asset growth is not taxed.

Set Up the Account

Wealth management firms can set up your account(s), select the assets and custodians, and monitor for overall effectiveness.

Asset Managment

Wealth management firms with an investment management team can also help analyze and select the best securities for your philanthropic initiatives.

Due Diligence

You may also need assistance performing a background check by a specialist who conducts due diligence on potential charitable recipients. Some financial advisors can help you with grantee due diligence and/or governance of your giving entity to ensure that your charitable dollars make the biggest difference.

Strategic Philanthropy

Strategic philanthropy is based on choosing to make a lasting impact on a cause or causes that matter the most to you. When you’re working on your estate plan, it’s a good idea to have a discussion with your wealth manager if you have one. Your wealth manager isn’t just there to assist with your estate plan; they can also serve as the leader of your team, bringing in an estate attorney or a tax specialist if necessary. With a wealth manager in the mix, everyone can get a full picture of your financial situation as well as your long-term financial goals.

For many high-net-worth investors, charitable giving may be an essential element of a long-term financial strategy that may include retirement, estate, and tax planning. Your trusted wealth manager, if you have one, can help determine what you’d like to achieve with your overall strategy. A wealth manager can also chart a course to set and achieve reasonable philanthropic goals, set up your account(s), select the assets and custodian, and monitor for overall effectiveness.

Final Thoughts

At Lawson Kroeker, we spend a significant amount of time thinking about our client’s future goals, their financial plans and our role in helping them get to where they want to be. We know our clients have many estate planning options available. It is important to take all of these considerations into account when thinking about how to grow your money. We construct a custom estate plan just for you.

About Lawson Kroeker

Lawson Kroeker Investment Management, founded in Omaha, Nebraska is a third-generation wealth management firm that helps a select group of high-net-worth clients achieve their life goals by providing investment advice and building custom investment solutions.

Lawson Kroeker provides a broad, thoughtful, prudent, and ongoing financial roadmap tailored to each client. We focus on and understand each client’s risk tolerance and needs—whether growth, capital preservation, tax mitigation, or special situations. We also help clients with trust and estate management and philanthropy services.

Adam Yale, Partner and Portfolio Manager—Mr. Yale started his investment career in 1997 with First Manhattan Co., an investment advisory firm in New York, NY as an analyst of publicly-traded real estate securities and direct real estate investments. From 2006 until the 2022 merger with Lawson Kroeker, Adam was the sole Principal at Red Cedar Capital, LLC, a Registered Investment Advisory firm he founded that employed a fundamentals-based investing strategy. He earned a B.A from the University of Michigan and a Master’s in Accountancy from the University of Denver.

Bruce Van Kooten, CFA®, Partner and Portfolio Manager—Mr. Van Kooten has been a Lawson Kroeker Partner and Portfolio Manager since 2006 and has more than 45 years of institutional and private investment management experience. Bruce has worked as a trust investment officer with First National Bank of Omaha and as a senior investment portfolio manager at KPM Investment Management and Wells Fargo Private Asset Management in Denver. Bruce earned the Chartered Financial Analyst (CFA®) designation in 1987 and is a member of the CFA® Society of Nebraska. He has a Bachelor of Science degree in Business and Economics from Iowa State University.

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