Charitable giving is deeply woven into the fabric of wealth planning for most affluent individuals. According to BNY Mellon Wealth Management’s recent Charitable Giving Study, 91 percent of survey participants agree that a charitable giving strategy was part of their overall wealth strategy. That figure jumped to 100 percent for Gen X.
While all generations are committed to philanthropy, each generation favors different causes and has a distinct vision of the best way to support those organizations. According to Cerulli Associates, the Great Wealth Transfer is projected to pass $68 trillion to the next generation over the next 25 years.
Preparing for this massive shift, it’s important to ensure that wealth and family values are preserved and transferred responsibly across generations. These three steps can put families on the right path:
- Start the conversation: The first step is to open the lines of communication and speak frankly about philanthropy as a family. Be proactive about discussing legacy and values. Family meetings allow older generations to explain their giving philosophy and discuss how they’ve donated historically. The get-togethers also empower younger generations to have a voice and express their opinions on what causes are important to them as well as their charitable vision for the future. The aim is to encourage the sharing of ideas while showing commitment to understanding differing perspectives.
- Identify common threads: A Bridgeworks study found that Baby Boomers are inclined to donate to churches, local social services, children’s charities and animal rescues; while Millennials tend to gravitate toward health charities, human rights and international development. Rather than focusing on differences, families should coalesce around commonalities. Whether you are a Baby Boomer, GenX or Millennial, everyone wants to make the world a better place and all generations give for altruistic reasons. Our study found the top two motivators for giving were “a connection to a special cause” and “personal satisfaction.” In addition, nearly all investors are at least somewhat engaged with the charities they support.
- Put a plan in place: Once a family has identified shared beliefs and learned about various approaches to giving, the next step is to meet with their wealth advisor and create a plan. While nearly all affluent individuals agree that philanthropic planning is essential to wealth planning, roughly half currently have a charitable giving strategy, according to our recent HNW study. That figure drops to 39 percent for the Baby Boomer generation. There are many vehicles to facilitate philanthropy, such as charitable gift annuities and family foundations. A wealth advisor can present various options and help evaluate the ones that are best for a family’s needs.
While it may seem like there’s a giant chasm between generations, honest and open communication can bridge the divide. Ongoing conversations about philanthropy can maximize the impact of charitable giving and keep family values alive for future generations.