Philanthropy Is About More Than Just Tax Breaks

In today’s world where there’s no shortage of financial and estate-planning tools to help facilitate and maximize charitable gifts. It’s vital not only to understand the economics of larger charitable transfers but also to recognize that to the vast majority of philanthropically inclined clients, tax and other economic considerations are a means to an end and rarely serve to motivate the gift itself. In reality, virtually every gift is made as a result of a unique mix of motivators, and they’re often intertwined. It’s rare to encounter just one motivator. Most larger charitable gifts, whether current or deferred, tend to involve complex relationships among a number of these factors. Understanding the interconnection of motivations is a major key to helping clients determine the way to give what’s best for them. For instance, commentators have predicted that recent charitable growth may slow down or reverse in light of the Tax Cuts and Jobs Act of 2017. History reveals that giving levels have indeed slowed in the past when the value and/or utility of the federal charitable income deduction has been reduced due to federal tax law changes. These declines have always proved to be limited to 1 year at most, with renewed growth resuming as individuals and their advisors quickly adapt to the changes. The chart below shows the impact of major tax legislation in 1969, 1981, 1987, 1993 and 2001. In 1987, giving decreased in large part because of the acceleration of giving into 1986 prior to tax rate decreases slated for 1987. The same might reasonably be expected for 2018 as a result of widespread gift acceleration in 2017.