Crisis can be a catalyst to clarify goals, create sustainable impact

While charitable giving will remain an ongoing need, now is also the time for more robust legacy and generational wealth transfer planning

The emergence of COVID-19 early this year sent a wake-up call to philanthropists. Families, individuals and foundations turned toward their communities to ask, “How can I help?” Many advisers were there by their sides.

That’s certainly the case at Laird Norton Wealth Management, where I became CEO last month. Over the past few weeks, I’ve watched my new colleagues advise clients on strategies for supporting their communities and adjusting their plans to stay focused on long-term goals.

Looking for creative solutions, families accelerated their giving from multiyear pledges into immediate gifts or sought to change or eliminate restrictions on grants. Many foundations lifted reporting requirements to alleviate the burden such requirements can place on overstretched nonprofits. Some even set themselves up as advocates, placing calls to elected officials and community stakeholders to draw attention to critical issues that needed to be addressed.

What these clients — many of them members of multigenerational families — were doing was putting their full balance sheet to work by activating their financial, social and even political capital. To them, the pandemic has begun to clarify what matters most. And with the initial urgency tapering off, there is now tremendous opportunity for these families to plan for the bigger picture.

We’ve found that charitable lead annuity trusts, private foundations, donor-advised funds, gifts of stock or other assets and donations from retirement funds are all being used as vehicles for impact.

Charitable gifts that provide immediate assistance are especially helpful, as many nonprofits remain in dire need. Balances built up in DAFs, which many families use for tax planning flexibility, are being put to work supporting nonprofits in need now. Giving securities that have increased in value saves capital gains tax, is deductible and benefits the nonprofit when the gift is sold. Those over age 70½ can contribute up to $100,000 to charity directly from an individual retirement account with the benefits of a tax-free distribution. And the CARES Act increases the amount of a cash gift that qualifies for a 2020 tax deduction to 100% of adjusted gross income.

While charitable giving will remain an ongoing need as the effects of the pandemic continue to unfold, now is also the time for more robust legacy and generational wealth transfer planning, given the historically high lifetime estate and gift tax exclusions, historically low interest rates and depressed asset values.

Interest rates on intrafamily loans, for example, are dramatically lower than on consumer loans or mortgages, making them a flexible, cost-effective and tax-advantaged means of transferring wealth and providing relief to family members. Grantor retained annuity trusts likewise offer advantages to families who want to transfer wealth in the form of an asset – a family business or a security, for example – while minimizing personal estate and gift taxes.

COVID-19 is a call to action. Now more than ever, families are talking about, testing and relying on their values. And, as they step back and get intentional about their goals — and how to maximize their full balance sheet — many are thinking deeply about what’s most important and adjusting their plans to match. They want strategies nimble enough to address immediate critical needs while maintaining their generational wealth transfer goals.

As advisers, our job is to help paint a bigger picture. After decades working with dynamic multigenerational families, and now as CEO of a firm that’s part of a seven-generation business-owning family itself, I have seen up close how well-planned actions — from philanthropy to wealth transfer to legacy planning — can become catalysts to clarifying goals and creating sustainable impact.

Kristen P. Bauer, a long-time adviser to multigenerational families, became CEO of Laird Norton Wealth Management in May. She can be reached at [email protected].