CHARITABLE PLANNING

Jeffrey D . Haskell & Jennifer E . Bruckman

Foundations can help by sometimes giving directly to people . But watch for the tax implications .

HE ECONOMIC , SOCIAL AND MEDICAL TURMOIL OF THE past few years is no secret . The cumulative impact of Covid-19 , social turmoil , the Russia-Ukraine conflict and natural disasters ( such as wildfires and hurricanes ) has dramatically increased need everywhere .

Macroeconomic variables such as rising interest rates and inflation have amplified those challenges , making it difficult for the philanthropic sector to address people ’ s needs . According to Giving USA ’ s 2023 annual report , total giving was down in 2022 , with giving by individuals showing the sharpest decline .

However , the same report shows that giving by foundations increased 2.5 % in 2022 . Meanwhile , when we looked at the data from our own organization , Foundation Source , and our nearly 1,000 private foundation clients , we found that these clients gave 14.7 % more in 2022 than 2021 , for a total of $ 865 million in 2022 charitable aid .

Given the decline in total giving , contributions from committed philanthropists and private foundations are increasingly vital in this environment . So as the busy year-end giving season approaches , it ’ s important to consider the strategies your clients are using to deploy their dollars to people in need .

Grants To Individuals

To expedite assistance and cast a wider net of charitable support , private foundations are increasingly making direct grants to individuals , a unique way they can give in addition to their more common methods . Foundations

As the busy year-end giving season approaches , it ’ s important to consider the strategies your clients are using to deploy their dollars to people in need . do not need to set up a separate nonprofit for granting directly to individuals and families , and they don ’ t always need to seek prior approval from the IRS .

Our private foundation clients took advantage of such grants in 2020 to help address emergencies and hardships stemming from the pandemic shutdowns , and we observed a resurgence of these gifts in 2022 as charities faced challenging economic conditions . Your clients with family foundations may consider grants to individuals in the coming months as they continue looking for ways to stretch their philanthropic dollars and help their communities .

Types Of Grants As long as certain procedures are followed , and a foundation ’ s bylaws permit them , private foundations can make several types of direct grants to individuals . Some require advance approval from the Internal Revenue Service while many do not .

Fortunately , even when IRS approval is required , it ’ s needed only once for the overall program , not for every grant . Once approval is obtained , a private foundation may continue making grants under the approved program indefinitely , as long as the program is not modified in any material way . However , if a foundation sought to greatly alter the program — say , by changing who is eligible — then the IRS would have to reapprove it .

NOVEMBER 2023 | FINANCIAL ADVISOR MAGAZINE | 23