The Tax Cuts and Jobs Act, signed into law in late 2017, eliminated several tax deductions for wealthy clients, but advisors are taking advantage of the one big one that hasn’t disappeared—charitable giving to tax-exempt nonprofit organizations. According to a new survey by Fidelity Charitable, nearly half of advisors (47%) say that many or most of their clients increased charitable giving due to the loss of other deductions.
Advisors’ strategies for charitable giving varied, with 46% of advisors establishing a donor-advised fund. Forty-six percent said they donated appreciated securities to maximize deductions, and 44% employed a bunching strategy to maximize charitable deductions.
“Tax reform raised awareness on the part of advisors of the need to help clients be more thoughtful about the timing, assets and methods used for giving as a part of a holistic financial plan,” said Karla Valas, senior vice president, fundraising and distribution at Fidelity Charitable.
More than a third of advisors (36%) advised most or all of their clients to adjust their charitable giving based on tax reform.
Overall, charitable giving is becoming a larger part of advisors’ service offerings. On average, advisors said they discuss philanthropy with 58% of clients, up from 46% in 2015. More than half of clients, on average, could benefit from a charitable-giving vehicle, advisors said, up from 41% in 2015.
Fidelity Charitable tapped independent research firm W5 to conduct the survey, which encompassed 250 professional advisors in the U.S., including advisors, certified public accountants and attorneys. But the data here focused on responses from 175 advisors with assets under management of $25 million or more.
