By Joan B. Kaye, Senior Vice President and Relationship Manager, Key Private Bank
With external dynamics like tax reform and the rise of socially responsible investing shifting the philanthropy landscape, dealership owners have more ways than ever to make an impact on their communities.
Wanting to give back is one thing. Carving out time for philanthropy is another—especially as managing day-to-day operations of the dealership is a top focus for owners.
Yet as we face the largest intergenerational wealth transfer in recent history—where a whopping $68 trillion will be passed on to children over the next 25 years—auto dealership owners need to develop robust and up-to-date philanthropy plans and communicate those plans with the next generation.
To better understand philanthropic investing strategies and execution, the Key Private Bank Quarterly Advisor Poll released in September 2019 surveyed advisors on their charitable giving experiences, the key triggers for giving among high-net-worth (HNW) clients, the common challenges they see, and the steps families are taking to measure the impact of their donations.
Here are five ways auto dealers can refurbish their philanthropy plans to get the most mileage out of their donations and preserve family wealth across generations:
- Chart a Philanthropy Roadmap
The poll found HNW families most often engage in philanthropy and giving back for moral reasons, with 34% of advisors saying clients feel a duty to make the world a better place and 32% saying they feel an ethical obligation to repay the people and institutions that contributed to their success.
Yet when it comes to philanthropy planning, the biggest mistake advisors see clients making is failing to factor charitable giving into their overall estate and legacy plan. This points to an opportunity for auto dealers to create a charitable giving roadmap rooted in the legacy their family wants to leave, and taking steps to ensure their values and wishes are captured for future generations.
With nearly one-third (29%) of advisors saying setting a family mission for giving is the most difficult part of philanthropy, cross-generational conversations are a great place to start. These conversations can help auto dealership owners get on the same page with their family members about what legacy they want to leave, and how that legacy can be expressed through charitable giving.
- Agree on Donation Destinations
More than half (57%) of the generational differences seen in philanthropy strategy stem from a lack of conversation or participation in discussions among parents and children. What’s more, one third of advisors (33%) cite lack of child involvement in giving conversations, while one fourth (25%) point to a lack of parent transparency around giving strategy.
Setting the stage for open and transparent conversations with family members is critical to finding common ground on which charitable causes to donate to and charting a path to align philanthropy with the family’s values. In these discussions, dealership owners should raise questions like, ‘What kind of legacy do we want to leave?’ and ‘What difference do we want to make through our donations?’ to get on the same page about giving.
Ultimately, these conversations should be about more than money. They should be about the family’s legacy and leaving a mark on the world—where the focus shifts from financials to building a strong bond between parents and children, full of trust and communication.
- Maximize Mileage from Giving Approaches
The poll found clients are split in their giving strategies and behaviors. Some 49% of advisors say they see more HNW investors directing one-time gifts to organizations, while 47% say they see more clients establishing donor-advised funds and just 4% say more clients are engaging in crowdfunding and peer-to-peer giving via social networking platforms.
Before choosing a donating approach, auto dealership owners should start with an understanding of the fundamental differences in each giving strategy and how they can impact the family’s finances, both immediately and in the future. For example, certain types of donations can be claimed as tax-deductible expenses, but new deduction limitations introduced in the Tax Cuts and Jobs Act of 2017 may impact auto dealers’ approaches to doing so.
Charitable Remainder Trusts (CRT) and Donor-Advised Funds (DAF) are two powerful vehicles that can enable dealership owners to be strategic, both tax-wise and “philanthropy-wise.” CRTs can help dealership owners convert low-basis assets, such as stock and real estate, into lifetime income, while generating substantial tax savings and providing support for important causes. DAFs can offer dealers a flexible, tax-efficient way to give back, in which funds are typically invested and grow tax-free—increasing giving capacity and the impact of every dollar. Auto dealers can also name beneficiaries for their DAF so future generations can continue giving in the years ahead.
- Pop the Hood to Inspect Charities
Two-thirds (65%) of advisors say “hardly any” or “none” of their clients use online tools—like GuideStar, CharityWatch and Charity Navigator—to perform due diligence and vet potential philanthropic donations prior to giving. Yet once a family philanthropic mission and strategy has been established, it is important for auto dealer owners to thoroughly research potential causes and organizations to ensure that values and goals are aligned. Some advisors even recommend that clients become personally involved with the organization that the client plans to donate to.
- Check the Rear-View Mirror to Measure Impact
The most difficult part of philanthropic giving is measuring the impact of donations, reported by 43% of advisors. That may be why HNW families prefer to give to causes that hit close to home—with 71% of advisors saying clients are more likely to donate to a local cause within their community, compared to just 2% of advisors who say clients primarily donate to national charities without a specific geographic focus.
Yet part of what makes giving back special is being able to see the impact of dollars donated to charitable causes. Working with an advisor to investigate whether philanthropic investments are doing what they are supposed to do can be a rewarding process for auto dealership owners.
One of the most meaningful aspects of accumulating wealth is the ability to give back in significant ways. But for auto dealership owners, philanthropy is about more than simply giving money. It’s about pairing personal values with what matters most to help their communities, and the world at large, speed toward a brighter future.
Joan B. Kaye is senior vice president and relationship manager with Key Private Bank. She can be reached at Joan_B_Kaye@KeyBank.com or 1-516-660-9851.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice. KeyBank is Member FDIC. KeyCorp. © 2019.
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