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Private Foundations & Donor Advised Funds: Charitable Strategies for Your Ultra-High Net Worth Client 

Mar 06, 2025

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Philanthropy plays a pivotal role in wealth management for ultra-high net worth (UHNW) families, defined as those with assets exceeding $30 million. For these families, engaging in charitable giving is not just a means of social impact; it’s also an integral part of a smart financial strategy. As tax laws evolve and the landscape of charitable giving shifts, it is essential for professional advisors—attorneys, CPAs, and financial advisors—to guide their clients in navigating these intricate waters. 

Understanding the Expanding UHNW Landscape 

The number of UHNW families has seen remarkable growth over the past two decades. In 2004, there were approximately 157,000 individuals with a combined wealth of $14.2 trillion. Fast forward to 2024, and that number is projected to soar to 426,000 individuals holding a staggering $49.2 trillion in wealth. Estimates suggest that by 2027, the UHNW population will surpass 500,000. This trend reflects a significant shift in wealth, assets, and philanthropic potential—making it clear that America remains a hub of wealth creation, housing 756 billionaires and many of the world’s millionaires—nearly 22 million people. 

Why This Matters 

As this demographic expands, advisors are increasingly sought after to provide insights on innovative tax planning and philanthropic strategies. Your clients may be eager to begin—or enhance—their charitable giving endeavors. Recognizing the importance of strategic philanthropic discussions is crucial for creating lasting client relationships.  

Many of your clients may currently utilize private foundations to meet their philanthropic goals. These foundations often reflect the values established by previous generations. However, with the rising popularity of donor advised funds (DAFs), which offer more flexibility and fewer administrative burdens, it may be time to reconsider the effectiveness of a private foundation as a sole charitable vehicle. 

Benefits for your client include:

  • Less IRS regulations 
  • Cost 
  • Flexibility in giving 
  • Incorporation of the next generation 
  • Comfort knowing their advisor can continue to manage assets (over $500k)  

Engaging with Greater Houston Community Foundation (Foundation) can open doors to innovative charitable strategies that meet your unique needs. By collaborating with our team of experienced philanthropic advisors, you can effectively navigate this transition, enhancing your clients’ philanthropic strategies while maximizing tax advantages. 

Key Considerations for Transitioning to a DAF 

Transitioning from a private foundation to a DAF can be advantageous for many clients. By partnering with the Foundation, clients can maintain the look and feel of their foundation while alleviating the administrative costs and tax compliance burdens associated with running a private foundation. This transition offers several administrative and tax benefits, including reduced operational complexities and enhanced donor engagement opportunities. 

Moreover, for those private foundations that are not ready to dissolve, the Foundation can provide services designed to relieve the burdens of administration and compliance, enabling clients to focus more on their philanthropic goals. This way, they can continue to operate effectively without the significant overhead of managing a private foundation. 

If your clients are contemplating this move, the Foundation can support them through the transition. Below are a few steps that should be considered for a smooth transition: 

  • Securing Board Approval: Ensure the foundation’s board is aligned on the decision to transition to a DAF. 
  • Final Expense Management: Assess and settle any outstanding costs or obligations tied to the private foundation. 
  • Asset Transfer to a DAF: Safeguard a seamless transfer of assets to the DAF, ensuring compliance with relevant regulations. 
  • Dissolution Documentation: Proper documentation and filing for the dissolution of the private foundation are vital. 
  • Tax Compliance & Final Tax Return: Ensure all tax obligations are fulfilled up to the point of transition, including filing the final tax return for the foundation. 

Continue reading: How Does a Donor Advised Fund Work?

Fostering Legacy and Impact 

Whether through a private foundation, a donor advised fund, or a hybrid of both, our mission is to empower families to fulfill their philanthropic aspirations. Our philanthropic advisors can assist you and your clients align their charitable giving with their values, engaging future generations in philanthropy, and creating a legacy that endures beyond their lifetimes. 

We invite you to connect with our team to discover the tailored philanthropic solutions we offer to support your clients in their charitable efforts. Contact Andrea Mayes today if you’re ready to get started with a donor advised fund. We will work with you and your clients to integrate strategic, fit-to-purpose charitable solutions. 

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