Updated on: June 17, 2024

It’s not always easy to engage family members around the discussion of wealth, especially across multiple generations. This is due to the vulnerable nature of discussing money. And hierarchy can often take hold when the head of household, oldest child, or “decision-maker” controls the funds and the conversation. However, one effective and non-threatening way to think about bringing a family together in the planning process is through charitable giving.

Philanthropy is a powerful way for families to pass along shared beliefs and values. A charitable planning conversation is all about learning more about one another, discussing a shared legacy, and ultimately, supporting charitable causes that are close to your hearts. This usually leads to a feel-good and productive conversation enjoyed by both the financial professional and the end-clients or family.

Getting the Charitable Conversation Started

There has never been a better time to bring up charitable planning. History has shown that during challenging times or disaster, Americans respond with philanthropy. And the past year and a half—involving the COVID pandemic, natural disasters, and social injustices—has resulted in overwhelming need felt across every community. In record-breaking numbers, Americans are stepping up to meet this need and learn about how they can put their wealth to work to support their favorite causes.

As a financial advisor, you can add value to their charitable giving process by introducing strategies that help your clients give more, and more effectively, to these charitable organizations.

Even when we aren’t in these unique circumstances, it is safe to assume that your clients are supporting charity in one way or another. About 90 percent of high-net-worth individual households give to charity year over year.¹ And nearly nine out of ten families discuss giving at least once a year. Yet, only about 16 percent have discussed this topic with their financial advisor.¹

This is a gap that every advisor can fill. Those who incorporate charitable planning into their practice find that it helps them engage “the unengaged spouse” and the next generation within a family. Bringing up charitable giving is an easy way to deepen client relationships and differentiate yourself as a financial professional.

How to Approach Multi-Generations of Families in Charitable Giving

We conducted a recent study² at Fidelity Charitable®, to look at attitudes and motivations across different generations of donors and detect any shifts in behaviors during these unprecedented times. The research found that roughly three-quarters of Millennials identify as philanthropists. This is in comparison to 35 percent of Baby Boomers and 48 percent of Gen X!

It’s evident that as this generation continues to age and inherit wealth, they will be looking for guidance on how to make a difference with their money. And it’s important to remember that giving takes many forms—it’s not just money, but also volunteerism, community service, and social cohort giving. We are seeing that these younger generations are eager to “get their hands dirty” and truly be a partner in doing the work. The money is only part of the solution.

This distinction in how each generation views themselves is a valuable consideration for advisors and should dictate when and how to approach charitable giving conversations across these groups.

Planning for Wealth Transfer and Philanthropy

When wealth passes from one generation to the next, there’s a likely chance that the inheritance will be removed from the financial advisor it has been entrusted with. It’s imperative for financial advisors to be engaging across multiple generations to keep those assets in-house.

Families are reconsidering their motivations for giving and how their philanthropy carries forward their values, aims, and objectives. It’s promoting deeper intentionality, humility, empathy, understanding, and trust. These shifts are prompting families to reflect on what they seek to build now and how it informs their legacy.

The legacy and estate planning discussion provides advisors a context to do this. Advisors should be having open, honest conversations about clients’ plans to leave assets—whether it’s going to heirs or philanthropic causes. Questions such as ‘What role will you play in your children’s and grandchildren’s future?’ or ‘What kind of legacy do you want to leave for your family?’ can help spur discussion.

There are a variety of ways you can plan for the future and carry on your charitable legacy. A few strategies that can help you weave those philanthropic topics in your planning conversations:

• Bequests made as part of a will or a trust
• Beneficiary of a charitable remainder or lead trust
• Designate a charity as the beneficiary of a retirement plan or life insurance policy

The Details on a Donor-advised Fund

A donor-advised fund is a dedicated account for charitable giving. When you contribute to a charity that sponsors a donor-advised fund program, such as Fidelity Charitable®, you may be eligible for an immediate tax deduction.

You can then invest the funds for tax-free growth and recommend grants over time to charities of your choice. Donor-advised funds provide many benefits for organizing and planning giving, but they also offer advantages in terms of income, capital gains, and estate taxes. In some cases, these benefits may be more advantageous than those from contributing to a private foundation.

Donor-advised funds also offer the ability to be named as the beneficiary to a retirement account. A lot of people who have their assets tied up in a retirement account may not necessarily want all that money traveling to the next generation. At Fidelity Charitable® we work with donors to name a donor-advised fund as their beneficiary.

From a succession planning standpoint, it’s a great opportunity to name the heirs as the account holders on the donor-advised fund. In this way, although they aren’t directly getting the money themselves, they do have the ability to carry out the family legacy through the fund.

Wealth Transfer Strategies

For more information on how to bridge generations with smart philanthropy and wealth transfer strategies, I suggest you view the webinar below, or check out the Smart Tax Strategies from Fidelity Charitable to view how charitable giving can impact your tax and estate planning.

Sources:

1 Fidelity Charitable Giving Report, 2014.

2 “The Future of Philanthropy: the evolution from charitable giving to charitable living”, Fidelity Charitable®, 2021.

eMoney Advisor LLC is a Fidelity Investments company and an affiliate of Fidelity Brokerage Services LLC and National Financial Services LLC.

Fidelity Charitable is the brand name for the Fidelity® Charitable Gift Fund, an independent public charity with a donor-advised fund program. Various Fidelity companies provide investment management and administrative services to Fidelity Charitable. Fidelity Charitable logo is a service mark of FMR LLC. 987623.1.0

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