By Nicole T. Strbich, CFP®, CPWA®, EA, Managing Director of Financial Planning, Buckingham Advisors
Working with clients to help them identify their charitable goals and design a structure for how they can implement them on a generational level can be daunting. We are very fortunate to have The Dayton Foundation to address this need. The Foundation has strong roots in our community – over a century of charitable giving expertise – plus, a variety of options and an efficient structure in place to help your clients accomplish their goals. One of the many services that it offers, which we utilize for our clients, is Family Foundation PlusSM. This fund option is an alternative to establishing a private foundation with less administrative hassle and fees.
There are a wide variety of situations in which a client could benefit from creating a Family Foundation Plus, but I will discuss one example to help illustrate the advantages of this offering and how it can enhance and possibly increase the tax, estate and generational planning benefits for your clients.
In our example, Thomas and Sarah are working with their advisors to create an estate plan to accomplish their goals. One of their biggest objectives is to find a way to foster their love of helping the community by involving their adult children in their charitable bequests. They don’t want their private foundation to be a burden on their children due to the added administration, fees and tax considerations. In addition, they would like to reward their children for this work as a part of their overall plan. Thomas and Sarah also are very considerate of their tax planning and want to optimize it with their estate goals.
A Dayton Foundation Family Foundation Plus fund allows clients to structure their fund with no start-up costs, no separate legal or accounting fees, no annual tax return responsibility and no excise taxes or penalty taxes. Additionally, if Thomas, Sarah or their children decide not to award grants from their fund one year, that is perfectly fine, as there is no annual payout requirement unlike a private foundation. Because The Dayton Foundation has structured this charitable option to remove the administrative headaches associated with a typical private foundation, it allows their family to spend more of their resources on charitable causes that are important to them.
Thomas and Sarah have enjoyed many dinner conversations with their family discussing how and why they support various charities in their community, nationally and even internationally. Their Family Foundation Plus fund allows these conversations to continue and for their children to take a more active role in the future as advisors of the fund. As their fund continues into the next generation, the appointment of future advisors from the family can continue as well. Thomas and Sarah know their children’s time is valuable, and they want to make sure they consider that in making the request that they act as advisors of their fund in the future.
A Family Foundation Plus fund also allows Thomas and Sarah to contribute appreciated stock. This offers tax advantages over a normal foundation for these donations as deductions of 60% of adjusted gross income (AGI) for cash gifts and 30% of AGI for gifts of long-term capital gain assets are deductible. This type of tax planning is very important because it also allows Thomas and Sarah to match these deductible gifts with other types of tax planning to better position their assets for their goals and their next generation. Our current tax rate structure is scheduled to expire at the end of 2025. Without new legislation, our tax rates will revert to the structure that was in place prior to 2018. For many taxpayers, this will translate to higher taxes and increased tax brackets for future income. In the next two years, it will become increasingly important to review long-term expectations for taxes and consider accelerating income to be taxed at current rates.
Our partnership with The Dayton Foundation has saved our clients thousands of dollars over the years and increased their peace of mind in knowing that their charitable plans and assets are in good hands. Family Foundation Plus as a charitable fund option will continue to be an important resource for advisors in our planning with clients now and going forward as we navigate potential changes to our taxes and financial planning environments.
Nicole T. Strbich, CFP®, CPWA®, EA, managing director of Financial Planning with Buckingham Advisors, has over 15 years of experience in financial services. She is a CERTIFIED FINANCIAL PLANNER™, a Certified Private Wealth Advisor® and holds the federally authorized tax practitioner designation as an enrolled agent. Nicole can be reached at nstrbich@mybuckingham.com.
Please note: The Dayton Foundation does not practice law or offer financial or tax advice. The Foundation recommends that people considering establishing funds or legacies through the Foundation consult their financial, tax or legal advisor.