Clients are moving into one of the most charitable times of the year whether they are dropping some loose change in the bucket of a Salvation Army Santa or setting up a charitable trust.
In the fourth quarter, 43% of those surveyed as part of the biennial Bank of America Study of High Net Worth Philanthropy are planning to give more during the giving season from October to December, the report said.
We know from the study that there is an enhanced reliance on advisors, said Claire Costello, philanthropic practice executive for U.S. Trust, Bank of America Private Wealth Management.
This year advisors will have another factor to consider in their philanthropic planning: the tax uncertainties created by the potential expiration of Bush-era tax cuts. These tax questions will likely not affect how much individuals give, but it may affect the timing and structure of these gifts, Costello said.
Less than a third, 32%, of wealthy individuals surveyed said that taxes were a motivation for their giving, and half reported they would maintain current levels even if income tax deductions were capped or eliminated and 95% responded that they would maintain or increase their bequest even if tax deductions for estate giving were permanently eliminated. For many, holiday giving is based more so on family traditions, according to 41% of respondents in the survey.
According to Costello, those facts have been cited by both sides in congress during fiscal cliff debates, and the final tally remains to be seen, but overall there should not be a significant impact on giving levels.
Our data tells us theres not going to be a huge swing, Costello said. Im not sure that its not going to drop a penny, but I dont think theres going to be a significant drop at all if you simply look at whos itemizing their deductions in this country.
While taxes may not affect how much they give, it is important when considering the timing and structure of gifts.
Tax implications are a consideration in the structuring and timing of gifts, she said. Philanthropy is an increasingly important part of the overall wealth planning process, and is therefore increasingly integrated with any wealth structuring and tax planning that occurs at year-end.
Donors have become increasingly more structured in how they give, according to the survey. In 2011, 19% of wealthy households used a giving vehicle such as a donor advised fund compared to 16% in 2009 and less in 2007. Moreover, 26% of wealthy donors reported having a private foundation or donor-advised fund with an additional five percent saying that they planned to start one in the next five years.
Donor advised funds are especially popular when giving near the end of the year because they are super easy to set up, Costello said. They can be done online or within minutes with a paper application, but many clients will still involve a third party advisor.
Forty percent of those high net worth individuals planning to make donation consulted with at least one type of outside advisor last year. In 37% of cases, they reached out to their financial advisor.
You may consult your financial advisor or tax attorney or legal structuring advisor as to what your plan should look like or could look like and how thats integrated into your overarching wealth plan, Costello explained.