Developing a thorough estate plan isn’t important only for Baby Boomers and Gen Xers. Learn the best techniques to help your millennial clients with estate planning and planned giving.
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. The full text of the study is chock full of insights that you can use to help your millennial clients, but here are just a few of our key takeaways.
What's different about advising millennials?
Your millennial clients may be interested in setting up charitable gift 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 giving techniques work best for millennial philanthropists?
As they build careers, switch jobs and start businesses, millennials’ incomes may ebb and flow from year to year. That's why “bunching,” or “bundling,” through a donor-advised fund at Kalamazoo Community Foundation is a smart giving technique for your millennial clients. Because contributions to the donor-advised funds (DAFs) are eligible for an immediate tax deduction—but are not required to be granted from the fund to charities right away—your client can “front load” donations into a DAF at a level that takes advantage of itemizing deductions during a high-income year, and then contribute less in years when their income drops. Each year, your client can recommend grants from the donor-advised fund to favorite 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 their donor-advised funds. This is especially true of millennial clients who are only now reaching a point in their lives when they own stock or other assets that have gone up in value. Donating an appreciated asset is tax-efficient because assets given to donor-advised funds or other public charities are typically deductible at the asset’s fair market value. The charity, in turn, pays no capital gains tax on its sale of the asset, thereby generating more dollars to support causes than your client would have had if the client had sold the asset and given the proceeds to charity.
Millennials’ end-of-life planning preferences have departed from the previous generations’ traditions, right down to the most popular songs played or performed at a memorial service. Sought-after titles now include Beyonce’s “I Was Here” in addition to Frank Sinatra’s “My Way.”
Are millennials interested in giving real estate?
Yes! Real estate is an excellent long-term asset to donate to a donor-advised fund at the 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 even 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 community foundation avoids capital gains taxes and generates more money for charitable causes than selling the property first and donating the proceeds.
Do you have more questions about philanthropy and your younger clients? Contact Donor Relations Officer Cindy Trout at ctrout@kalfound.org and set up a time to chat!
