For high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals, their wealth comes with the ability to create significant change.
However, wielding this influence requires strategic planning and understanding how to transform their assets into lasting legacies. This guide delves into how these individuals can engage in thoughtful and impactful giving that creates positive change.
Philanthropy is a continually developing field, shaped by the interests and visions of wealthy donors who seek to make a difference in society. With the right approach, these affluent individuals can skillfully transfer their enormous potential into an enduring legacy that impacts communities and causes they care about.
This guide outlines how these individuals can engage in thoughtful and impactful giving that transforms assets into positive change.
Begin with a Strategic Giving Plan
The path from assets to impactful legacies must always start with a strategic giving plan. Strategic planning aligns your vision, values, and financial capabilities with your philanthropic objectives. It requires you to identify the causes that resonate with your core values, set clear goals around those causes, understand the resources you can dedicate to these goals, and establish metrics to assess the impact of your contributions.
Engage in Grant-making
An effective way for HNW individuals to ensure that their assets translate into impactful legacies is through effective grant-making. This process involves donating funds to nonprofit entities that align with their philanthropic goals. It's vital to vet the organizations thoroughly, which includes understanding their mission, operational efficacy, and the results they have achieved with previous donations.
Utilize impact investing
Impact investing is a strategic, sustainable, and market-driven approach to philanthropy. It allows HNW individuals to invest in businesses or projects that generate a financial return and a social or environmental impact. Impact investing allows donors to sustain and grow their assets while contributing to positive societal change.
Consider a family foundation
Establishing a family foundation can be a powerful way to align your family's values with your philanthropic objectives. It provides a structured framework for managing, growing, and distributing wealth, all while allowing the family to work together towards common charitable goals. Family foundations also offer an excellent opportunity to educate younger generations about wealth management and responsibility.
Establish a Charitable Trust
A charitable trust is a legal entity that uses donated assets, such as stocks or real estate, to benefit causes that benefit the public. Charitable trusts may have some tax benefits but may only be suitable for some donors as the tax deduction is limited for most. Financial, tax and legal professionals can help you understand how a charitable trust works.
Implement Donor-Advised Funds
Donor-advised funds (DAFs) have become increasingly popular among HNW individuals for their simplicity, flexibility, and tax advantages. DAFs are philanthropic vehicles administered by public charities that allow donors to contribute, receive an immediate tax deduction, and recommend grants from the fund over time.
Rely on professionals
Engaging with financial, legal, and tax professionals specializing in philanthropy can help HNW individuals navigate the complex terrain of strategic giving. These professionals offer valuable guidance in crafting effective giving strategies, identifying worthy causes and organizations, and measuring the impact of your philanthropy.
Legacy giving and estate planning
Legacy giving involves making a significant charitable gift during a donor's life or death as part of their overall financial and estate planning. This method of giving allows you to support causes and organizations close to your heart and provides tax benefits that can help preserve more of your estate for your heirs.
In conclusion, transforming assets into lasting and impactful legacies requires thoughtful planning and strategic execution. The myriad of options available to HNW individuals—strategic giving plans, grant-making, impact investing, family foundations, charitable trusts, donor-advised funds, and legacy giving—provide a multitude of strategies for charitable giving.
By working with professionals and carefully considering and utilizing these giving strategies, HNW individuals can use their wealth to create significant societal change, personal fulfillment, and a lasting legacy.
Important Disclosures:
This material was created for educational and informational purposes only and is not intended as tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Investing involves risks including possible loss of principal.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
This article was prepared by Fresh Finance.
LPL Tracking #624105
Sources:
https://www.kiplinger.com/personal-finance/developing-a-charitable-giving-strategy-where-to-begin
https://www.irs.gov/charities-non-profits/private-foundations/charitable-trusts
