Philanthropy as a Wealth Strategy: Creating Impact with UHNW Portfolios

by Derek Myron, CFP?, Managing Director of Centura Wealth Advisory

For Ultra-High Net Worth (UHNW) individuals, philanthropy offers a unique avenue to not only give back to their charished causes but also to strategically enhance their wealth management plans. At Centura Wealth Advisory, we understand that philanthropy is more than just a charitable act; it is a powerful tool that can align with broader financial goals, provide significant tax benefits, and create a lasting legacy. Here, we explore how philanthropy can be integrated into wealth management strategies for UHNW individuals, maximizing both impact and financial efficiency.

Charitable Giving Strategies

Philanthropy involves more than simply writing a check. Strategic charitable giving allows UHNW individuals to support causes they are passionate about while also reaping financial benefits. Here are several effective strategies:

1. Donor-Advised Funds (DAFs): These funds allow donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. DAFs offer flexibility and can be a central part of a long-term giving strategy.
2. Private Foundations: Establishing a private foundation can provide control over charitable giving, allowing individuals to support causes they care about through grants, scholarships, and other programs. Foundations also offer tax advantages, such as deductions for contributions and reduced estate taxes.
3. Charitable Remainder Trusts (CRTs): A CRT provides income to the donor or other beneficiaries for a specified period, after which the remaining assets are transferred to a designated charity. This strategy offers immediate tax benefits and supports long-term charitable goals.
4. Charitable Lead Trusts (CLTs): In contrast to CRTs, a CLT provides income to a charity for a set term, with the remaining assets then transferred to the donor’s heirs. This can reduce the donor’s taxable estate while fulfilling philanthropic objectives.

Tax Benefits of Philanthropy

Incorporating philanthropy into wealth management can result in substantial tax benefits, enhancing the overall financial plan. Key tax advantages include:

• Income Tax Deductions: Charitable donations can be deducted from taxable income, reducing the donor’s overall tax liability.
• Capital Gains Tax Savings: Donating appreciated assets, such as stocks or real estate, can allow donors to avoid paying capital gains tax while still receiving a charitable deduction for the full market value of the asset.
• Estate Tax Reductions: Philanthropic contributions can reduce the size of a taxable estate, thereby lowering estate taxes and increasing the amount passed on to heirs.

Impact on Legacy Planning

Philanthropy plays a crucial role in legacy planning, helping UHNW individuals define and perpetuate their values and priorities. Thoughtful integration of charitable giving into an estate plan can ensure that one’s philanthropic vision endures for generations. Here’s how philanthropy influences legacy planning:

1. Family Engagement: Involving family members in philanthropic activities can instill shared values and foster a sense of purpose. This collective engagement helps build a cohesive family legacy around charitable efforts.
2. Lasting Influence: By supporting meaningful causes, donors can leave a lasting impact on society. Whether funding educational initiatives, healthcare advancements, or environmental conservation, philanthropic endeavors contribute to a legacy of positive change.
3. Strategic Philanthropy: Aligning charitable giving with broader financial and estate plans ensures that philanthropic efforts are sustainable and impactful. Strategic philanthropy integrates seamlessly with wealth management, providing long-term benefits to both the donor and the beneficiaries.

For UHNW individuals, philanthropy is a multifaceted strategy that transcends simple charitable acts. It offers a unique opportunity to achieve financial efficiency, fulfill personal values, and create a lasting legacy. At Centura Wealth Advisory, we specialize in crafting tailored philanthropic strategies that align with our clients’ financial goals and personal passions. By integrating philanthropy into wealth management, UHNW individuals can make a profound impact on the world while enhancing their financial well-being.

Let’s work together to design a philanthropic plan that maximizes your legacy and supports the causes you care about most.