A Note from Joe

The Bottom Line? We've Got You!

Keeping up with an ever-evolving landscape of tax legislation can be a full-time job! Many attorneys, CPAs, and financial advisors regularly ask Gulf Coast to provide a refresher course on the potential tax changes on the horizon that might impact charitable planning techniques. We stay on top of legal developments so we can support you during any changes coming your way.

If you would like Gulf Coast to provide an overview via a Lunch & Learn to better understand how we are addressing these challenges as well as other planning opportunities, please connect with us to schedule.

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Your March Content

Here's a quick rundown of three things you need to know on tax changes and the potential effects on philanthropy:

1. Sunsetting provisions of the Tax Cuts and Jobs Act of 2017. The TCJA’s scheduled expiration at the end of 2025 will revert key tax policies to pre-2017 levels, potentially affecting charitable giving incentives. For example, the top individual tax rate is scheduled for a bump from 37% to 39.6%, potentially increasing the benefits of charitable tax deductions for your high-income clients. At the same time, the limit for cash donations to public charities is slated to drop from 60% of AGI to 50%,reducing the deduction for some of your clients. Finally, the estate tax exemption is scheduled to drop to approximately $7 million per to schedule individual. Because the exemption would nearly be cut in half, and therefore more estates would be subject to tax, a larger subset of your clients could benefit from charitable bequests to avoid estate tax. All of this assumes, of course, that intervening legislation won’t prevent the sunset.

2. Potential expansion of charitable deduction. Proposals like the Charitable Act aim to introduce a universal deduction for non-itemizers, broadening tax incentives for your clients across income levels. The bill is still popular among industry leaders and appears to have maintained momentum since it was introduced.

1. 3. Consequences remain to be seen. Above all, the 2025 “cliff” may trigger the first major tax code rewrite in decades, which in turn surely would have a ripple effect in many areas of your clients’ lives, including within the charities your clients support. Post-TCJA, for example, charitable giving dropped by as much as $20 billion, according to one study, in the wake of reduced tax benefits.

2. The bottom line here is that we’ve got you! The team at Gulf Coast stays on top of legal developments at the intersection of tax policy and charitable giving. We keep our fingers on the pulse of potential implications for you, your clients, and the causes they support, and we are here to help you navigate any changes that may come.

GENERATIONAL SHIFTS: Fulfilling Clients' Charitable Wishes

We here at Gulf Coast have been involved in a number of discussions with advisors and donors alike regarding the transfer of wealth phenomenon currently taking place. These discussions are probably happening at a much higher rate in the Gulf Coast region given the wealth that resides here. Baby Boomers are focused on strategies centered around best practices in financial and estate plans to distribute wealth to their children in the most efficient and effective ways. Often times, charitable planning strategies can be an important aspect of those discussions. 

The dollars involved are eye-popping. Most attorneys, financial advisors, and CPAs have seen the Cerulli study’s estimate that $124 trillion in wealth in the U.S. will transfer through 2048.The research estimates that most of this wealth–$105 trillion–will pass directly to children, grandchildren, and other heirs. And, notably, the study estimates that $18 trillion will flow to philanthropy.

As the transfer of wealth gains momentum, advisors have a major opportunity to position themselves as trusted experts who can help clients not only structure efficient lifetime and estate gifts to heirs but also help ensure that clients’ charitable wishes are achieved. It’s crucial for advisors to know that Gulf Coast is here to help incorporate philanthropy into clients’ financial and estate plans. Here’s why this is so important:

• - There’s a knowledge gap. Clients may not be aware of the options and benefits of charitable planning. One of the opportunities we see most often among our affluent donors is in addition to transferring assets to children, they are seeking opportunities to instill a sense of social responsibility as well. This can easily be done through a donor-advised fund. Donor-advised funds offer a structured way to involve children in philanthropy, allowing families to discuss and decide on collective charitable goals, thereby fostering a culture of giving for future generations.    

• - Next-level strategies are key. Your ultra-wealthy clients will likely need to implement sophisticated strategies for transferring assets smoothly and tax-efficiently. Clients want to maximize the results of their charitable gifts while also protecting their families' interests. Leaning on Gulf Coast to help structure gifts of complex assets, such as closely-held business interests, can make a huge difference in reducing a client’s tax bill and achieving meaningful community impact.

• - Legacy planning starts now. It’s tempting to put off addressing a client’s wishes to support favorite charities in an estate plan. “We’ll look at that in a few years,” is a common but less-than-ideal approach. That’s because charitable bequests are best addressed as part of a comprehensive estate and financial plan. Naming a fund at Gulf Coast as the beneficiary of a client’s IRA, for example, is an extremely tax-efficient way to accomplish charitable wishes.

Our team is here to augment your expertise in charitable giving strategies. Not only will you be better able to meet clients’ needs, but you’ll also strengthen relationships and improve client retention. Please reach out to learn more about how Gulf Coast can help your clients make a lasting impact with their wealth while achieving their financial goals.

Your Resource.

As you serve your philanthropic clients, we strive to be your resource and sounding board. Understanding the charitable side of the equation allows us to serve as a secondary source for you as you manage the primary relationship with your clients.

Connect with us anytime! It’s our pleasure to work with you in partnership as you help your clients achieve their charitable giving goals for this year and many years beyond tomorrow.