Developing a thorough estate plan isn’t important only for Baby Boomers and Gen Xers. Millennials, who now make up nearly a quarter of the population in the United States, may prove to be more enthusiastic planners than their parents and grandparents, according to the 2022 Estate Planning Study: Millennial Estate Planning Continues in a Pandemic.
What does this mean for planning gifts to nonprofits? Your millennial clients may be interested in setting up nonprofit giving vehicles earlier in their lives than some of your older clients. And because millennials tend to be better savers than their elders, it’s never too soon to discuss philanthropic intentions with your younger clients.
What’s an example of a giving technique that is well-suited for millennials?
As they build careers, switch jobs, and start businesses, millennials’ incomes may ebb and flow from year to year. This makes “bunching” through a Donor-Advised Fund at the Omaha Community Foundation very useful. Because contributions to a Donor-Advised Fund are eligible for an immediate tax deduction–but are not required to be donated from the Fund to nonprofits right away–your client can “front load” philanthropic donations into a Donor-Advised Fund at a level that takes advantage of itemizing deductions during a high-income year, and then contribute less to the Fund in lower-income years. Your client can recommend philanthropic donations from the Donor-Advised Fund to nonprofits according to the timeframe that aligns with the client’s goals for supporting those organizations, regardless of the client’s income in that particular year.
Does bunching work with long-term appreciated assets?
Yes! Although it may seem obvious to professionals in the financial world, it’s not always top of mind for your clients to remember to donate long-term appreciated assets to a Donor Advised Fund. This is especially true of millennial clients who might be reaching a point in their lives when they own stock or other appreciated assets. A long-term appreciated asset given to a Donor Advised Fund is generally deductible at the asset’s fair market value at the time of the gift. Because the appreciated assets are given to a qualified charity, the donor will not realize any capital gains at the time of the gift. Therefore, the transaction results in more dollars to support causes than your client would have had if the client had sold the asset (paid capital gains) and given the remaining proceeds to a nonprofit directly.
Does it work to give real estate?
Yes! Real estate can be an excellent long-term asset to donate to a Donor-Advised Fund at the Omaha Community Foundation, especially now. In late 2021, buying a second home appeared to be a strengthening trend. While higher interest rates and inflation might dampen that trend in the short term, the ability to work from anywhere is a reality that’s unlikely to disappear. This means even your younger clients, not just retirees, may be buying and selling second homes and rental properties. These clients could be good candidates to donate real estate to a Donor-Advised Fund. As with gifts of other long-term appreciated assets, a client’s gift of real estate to a Donor-Advised Fund at the Omaha Community Foundation is generally deductible at the asset’s fair market value at the time of the gift and avoids capital gains taxes. Thereby generating more money for causes than selling the property first and donating the proceeds.