There’s another less altruistic side to this story you’d be forgiven for not knowing. Chouinard used a remarkable tool to preserve family control for future generations, minimize his ongoing tax liability, and protect philanthropic privacy.

Introduction to the 501(c)(4)

Meet the 501(c)(4)—the little-known Swiss army knife cousin to your standard 501(c)(3) entity. Contributions to C4s (as they are known) are not tax deductible, so they don’t get much love. However, for cases where we run into charitable deduction income cap limits, have illiquid assets that exceed the lifetime gift tax exemption, or have clients who want to bolster philanthropy with political advocacy, donating to a C4 is an attractive strategy.

Whether you’re a founder, operator, or generational owner, “heavy is the head that wears the crown,” as Shakespeare wrote. Walking the tightrope to balance family, employee, and business needs while managing IRS regulations can be a difficult trade-off. Getting something like heir liquidity often involves giving up business control (usually clipped significantly by taxes). 

The c4 has become an increasingly helpful vehicle for philanthropy beyond charitable donations to include community organizing and political advocacy. The Internal Revenue Service (IRS) has recognized it as a non-profit that promotes social welfare. While contributions to 501(c)(4) organizations are not tax-deductible, these entities enjoy tax-exempt status on their income, and our firm can help. 

Flexibility and Control

Transferring assets to a 501(c)(4) offers families control without the burden of those dreaded federal gift taxes, an appealing perk for estate planning. Unlike private foundations, these entities aren’t restricted by excess business holdings rules, no 5% minimum distribution, or 1.39% investment income tax. So, if you’re a business founder, you don’t have to retire to the beach just yet. You can stay in the game, keep steering your company, and make sure the profits are doing good in the world, whether for social causes or political goals. It’s like having your cake, eating it, and sharing a piece to make the world better, too!

Political Influence and Privacy

Regarding political influence, 501(c)(4) organizations are like the secret agents of the charity world. They can lobby and participate in some partisan activities, provided these aren’t their primary focus. This gives donors a powerful tool to support specific candidates and legislative causes, all while avoiding Schedule B requirements. In addition, these organizations are not required to disclose their donors, offering privacy unavailable to other charities. Ever wonder where the term “dark money” came from? Look no further. 

Tax Advantages

Did we mention the tax advantages? Well, it’s worth mentioning them again. 501(c)(4) organizations can engage in a wider range of activities than 501(c)(3) charities. While you don’t get a tax deduction for your donation, you can avoid capital gains and estate transfer taxes. In Chouinard’s case, this amounted to somewhere between $700-800 million on the $3 billion low-basis donation. 

You don’t have a place in the Hamptons? 

Let’s be honest for a second. You probably won’t be flying your private jet to the Hamptons for a weekend of champagne and caviar. It’s a small club, and as comedian George Carlin once said, “You ain’t in it.” 

Still, Tru West Financial provides alternatives like Donor-Advised Funds, Family Foundations, and super PACs for those with $2+ million in investable assets. These options deliver similar benefits regarding tax advantages, privacy, and political impact.

At Tru West Financial, we prioritize personalized financial strategies, focusing on relationships over transactions. Our experienced advisors help you navigate complex wealth management issues, offering custom solutions to maximize charitable impact, influence political processes, or secure your legacy. Contact us today to start your journey towards a secure and impactful financial future.

The post Stewarding the Family Business – How to be Nimble for Future Generations appeared first on Tru West Financial.

Donations to their donor-advised fund allow George and Kate to manifest their desire to make an impact and, more importantly, focus on their kids while conveniently choosing to decide later on the charities to whom they want to give.

So, What Exactly Is a Donor-Advised Fund?

A donor-advised fund (DAF) is a charitable investment account created solely to support the causes you care about most. You contribute cash, stocks, or other assets while getting an immediate tax deduction. But don’t rush to spend it all at once; those funds can be invested for tax-free growth. This means you can make your charitable dollars go even further over time.

Think of it as planting a tree that grows money. You decide when and where to harvest the fruit by recommending grants to your favorite charities whenever you’re ready.
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So, How Does It Work?

Setting up a DAF is like opening an exclusive bank account, but instead of stashing away your cash for a rainy day, you’re gearing up to make the world a better place. Here’s how it breaks down:

1. Contribute: You make an irrevocable donation of assets to a sponsoring organization – think community foundations or financial institutions. These assets could be cash, stocks, or even real estate.
2. Tax Perks: As soon as the donation is made, you get a nifty tax receipt. It’s like instant karma but for your taxes.
3. Grow: The sponsoring organization invests the funds, and they grow tax-free. It’s like your money is at a health spa, getting all buffed up.
4. Advise: You get to recommend which charities should get grants from your fund. You maintain advisory privileges over the disbursements and the investment strategy.
5. Donate: Once approved, your chosen charity will receive the funds. The best part? You can support any 501(c)(3) organization.
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The Benefits of Donor-Advised Funds – Why Everyone Wants In

There’s a reason DAFs are the fastest-growing charitable giving vehicle in the United States. They’re versatile, efficient, and packed with benefits.

• Strategic Giving: Spread your donations over time and be strategic about your charitable impact.
• Family Affair: Keep the spirit of giving alive across generations by involving your family in philanthropic decisions.
• Immediate Tax Benefits: Enjoy tax deductions now and decide on donations later.
• Consolidation: Streamline all your charitable contributions into one fund. It’s like tidying up your financial closet.
• Maximize Deductions: By bunching your donations once every few years into a donor-advised fund, you can exceed the standard deduction ($14,600 for single filers, $29,200 for married filing jointly in 2024) and itemize.
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But Wait, There’s a Catch

Donor-advised funds charge an administrative fee for recordkeeping and administrative duties, which can range from 0.25% to more than 2%. Some donor-advised funds restrict the charities you donate to or have rules around minimum account balances. Our firm regularly conducts marketplace due diligence to survey the menu of DAFs so we can ensure every client gets the best match.
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The Bottom Line on Donor-Advised Funds

DAFs offer a unique blend of immediate tax benefits, strategic giving, and long-term growth, making them an attractive option for many. They’re not just about giving money away; they’re about giving it away smartly. Despite some drawbacks, their flexibility and growth opportunities make DAFs a powerful tool in the arsenal of modern charitable giving.

At Tru West Financial, we prioritize personalized financial strategies, focusing on relationships over transactions. Our experienced advisors help you navigate complex wealth management issues, offering custom solutions to maximize charitable impact, influence political processes, or secure your legacy. Contact us today to start your journey towards a secure and impactful financial future.

The post Donor-Advised Funds Explained: Strategic Giving for Tax Savings and Impact appeared first on Tru West Financial.

What is a Charitable Remainder Trust?

A Charitable Remainder Trust is an irrevocable trust designed to convert your assets into a lifetime income stream, provide a tax benefit, and ultimately benefit a charity or charities of your choosing. When you transfer assets into a CRT, the trust pays you or designated beneficiaries a fixed income for years or for life. After the trust term ends, the remaining assets are donated to the charity or charities you’ve selected.

How Does It Differ from Other Irrevocable Trusts?

While there are many types of irrevocable trusts, each designed for specific estate planning objectives, Charitable Remainder Trusts are unique in their charitable component and the financial benefits they offer. Unlike other trusts that may focus solely on asset protection, tax efficiency, or passing wealth to heirs, CRTs provide a means to support charitable causes as part of your legacy. Additionally, Charitable Remainder Trusts offer income to the donors or their beneficiaries, which is not a feature of all irrevocable trusts.

Benefits from a Financial Planning Perspective

Tax Benefits: One of the primary advantages of a CRT is the immediate tax deduction you receive upon funding the trust. The deduction is based on the current value of the remainder interest that will eventually go to charity, calculated using IRS guidelines.

Income Stream: Charitable Remainder Trusts provide you or your designated beneficiaries with an income stream, which can be particularly beneficial in retirement planning. This income can be a fixed amount (annuity trust) or a percentage of the trust’s assets, recalculated annually (unitrust).

Capital Gains Tax Avoidance: When you fund a CRT with appreciated assets and the trust sells these assets, there is no immediate capital gains tax. This allows the total value of the assets to work for you, generating income, part of which will ultimately benefit your chosen charity.

Estate Tax Reduction: Assets placed in a Charitable Remainder Trust are removed from your estate, potentially reducing estate taxes and increasing the inheritance for your heirs, especially when paired with other planning tools like an irrevocable life insurance trust.

Philanthropic Goals: Beyond the financial benefits, a CRT allows you to make a significant charitable gift that can be fulfilling and create a lasting legacy.

But how would this work in a real-world scenario?

Imagine that Jane, a 65-year-old retired entrepreneur, has accumulated significant wealth through her business ventures and holds appreciated assets like real estate and stocks. She is passionate about supporting her favorite charities, for which she has volunteered for years. Still, Jane is also concerned about maintaining a reliable income. She’s worried about tax liabilities as some of her friends didn’t seek a financial advisor and ended up paying for it. Jane established a Charitable Remainder Trust (CRT) by transferring some of her appreciated assets (an investment property she has owned for years, but would like to sell as she wants less responsibilities in retirement) into the trust. This move allows her to avoid immediate capital gains taxes, receive an immediate charitable income tax deduction, and secure a steady income stream throughout her retirement.

By structuring the Charitable Remainder Trust as a unitrust, Jane ensures that she will receive annual payments based on a fixed percentage of the trust’s assets, recalculated each year, providing financial security. Additionally, the assets in the CRT are removed from her taxable estate, potentially reducing estate taxes. After her death, the remaining assets in the trust will be donated to her chosen charities, creating a lasting legacy that supports the causes she cares about. This strategy enables Jane to integrate her philanthropic goals with her financial planning, achieving tax efficiency, income security, and a meaningful charitable impact.

Key Takeaways

Philanthropy Meets Financial Planning: Charitable Remainder Trusts uniquely blend charitable giving with income generation and tax planning, offering a comprehensive approach to managing your wealth.

Tax Efficiency: The immediate tax deduction and potential capital gains tax avoidance are significant financial planning benefits.

Income for Life: A CRT can provide you or your beneficiaries with a steady income stream, adding a layer of financial security.

Legacy Building: By establishing a CRT, you create a lasting impact, supporting the causes you care about while managing your financial future.

At Tru West Financial, we are dedicated to helping you explore charitable giving strategies that align with your financial goals and ensure your philanthropic intentions are carried out seamlessly until the end. Our personalized approach to wealth management ensures we understand your aspirations and work diligently to achieve them.

The post Maximizing Wealth and Giving Back: Understanding Charitable Remainder Trusts appeared first on Tru West Financial.

If you have substantial assets, you understand the value of setting up future generations for success. One of the greatest gifts you can provide is helping fund your grandchildren’s education through a 529 college savings plan. And thanks to recent legislation, this gift just became even more powerful.

The FAFSA Simplification Act brings a lucrative “grandparent loophole” (some also refer to it is the “529 wealth transfer loophole”) that allows you to contribute generously to a 529 plan without jeopardizing your grandchild’s eligibility for financial aid. This opens up a wealth of strategic opportunities for families.

The Grandparent 529 Plan Advantage 

Previously, distributions from a grandparent-owned 529 plan counted as untaxed student income on the FAFSA, potentially reducing aid by up to 50% of the distribution amount. For example, a $20,000 withdrawal could slash a student’s aid package by $10,000 – a significant penalty.

However, starting in the 2024-2025 academic year, the new FAFSA rules no longer require students to report cash support or 529 plan distributions from grandparents. This means you can fund a grandchild’s education through a 529 plan without diminishing their ability to qualify for need-based aid and scholarships.

Tax-Smart Wealth Transfer 

In addition to protecting financial aid, grandparent-owned 529s allow for highly tax-advantaged wealth transfer when used optimally:

• Tax-Free Growth: 529 plan assets are tax-free over decades, maximizing your contributions.
• Tax-Exempt Withdrawals: Distributions avoid federal and state taxes when used for qualified education expenses.
• Gift Tax Benefits: You can contribute up to $18,000 annually per grandchild ($36,000 from a couple) without triggering the gift tax. Even better, you can front-load up to 5 years’ worth of gifts.
• Estate Planning: 529 plan assets removed from your taxable estate can translate to significant estate tax savings when transferring wealth.

Let’s put some numbers into perspective. Say you contribute $5,000 annually from age 50 to 66, totaling $80,000, which grows tax-free (for this example, at an estimated 6%) to around $115,000 by college enrollment. For a $150,000 4-year public university degree (including tuition, room, board, and other expenses), this $115,000 covers approximately two-thirds of the total cost. The remaining $35,000 in expenses allows your grandchild to qualify for substantial need-based aid like grants, work-study, and subsidized loans since assets in a 529 plan aren’t factored into federal aid formulas. This way, your $115,000 contribution would cover most expenses while making them eligible for additional aid to afford the remaining balance without excessive debt.

Leave a Lasting Legacy

Funding your grandchildren’s education is one of the most meaningful wealth transfer actions you can take (and it definitely elevates you to “favorite grandparent status”). With the new “grandparent loophole” in 529 plans, you can ensure your contributions have maximum impact by:

• Allowing your grandchildren access to a college education without crushing debt
• Positioning them for future economic success (not paying for college into their mid-40s)
• Help them get a jump start on life with a solid financial footing out of the gate

At Tru West Financial, we help affluent families like yours develop customized wealth transfer strategies that are tax-efficient, compliant, and aligned with your values. Our experienced team can guide you through all aspects of 529 planning, from projecting education costs to structuring contributions for maximum benefit. We’ll ensure your generational wealth has a smart, lasting impact.

Education planning is a critical component of your overall financial plan and legacy. Contact us today to explore how the 529 grandparent loophole opens new possibilities for your family’s future prosperity.

Neither Tru West Financial nor its investment advisor representatives are CPAs or tax attorneys. Our work involves coordination with your qualified tax professional, not providing tax advice or recommendations directly.

The post A Smarter Way for Grandparents to Fund College: The 529 plan “grandparent loophole” appeared first on Tru West Financial.

1. Identify Your Passion

Charitable giving can be deeply satisfying, but everyone has different values. What type of impact do you want to make? Reflect on significant events or experiences in your life that have shaped your values and interests. Did a personal experience inspire you to support a particular cause? Consider donating to organizations that resonate with you on a deep level.

2. Do Your Research

Many wonderful, worthwhile charities exist, but many charity scams exist. Before you donate, research to ensure you’re giving to a reputable organization. Ensure any charity you’re considering qualifies as a tax-exempt 501(c)(3) organization and is financially healthy. Sites such as Charity Navigator and GuideStar provide great insight into various organizations.

3. Donate Early

If you wait until the end of the year to make your charitable donations, it may be challenging to implement some tax-efficient strategies. Beginning the process earlier in the year will give you time to identify the organization(s) and make an impact in a tax-savvy manner.

4. Maximize Your Gift Giving

Many employers offer to match employees’ charitable donations. Check if your employer does so and take advantage of that match to double your impact.

5. Think About Alternative Ways to Donate

To maximize your charitable impact while reducing tax liabilities, consider donating appreciated assets, not just cash. Donating stock that has appreciated for at least a year allows you to give more because you’ll avoid triggering capital gains taxes. Your financial advisor can help you transfer shares directly to an organization of your choice.

6. Consider a Donor-Advised Fund

A donor-advised fund allows you to set aside funds for charitable donations and receive a tax deduction in the current year while making your donations in future years. Your donation is held in an account you advise, and you can donate to organizations of your choice. There are several advantages to this approach:

• Your donations grow tax-free.
• By donating securities that have been held for more than a year, you can avoid capital gains taxes.
• If you itemize your taxes, you can receive a tax deduction of up to 60% of your adjusted gross income (AGI) on cash donations in the current year.
• If you itemize your taxes, you can receive a tax deduction in the current year on long-term appreciated assets in the amount of their fair market value, up to 30% of your AGI.
• You can also receive a five-year carry-forward deduction on non-cash gifts exceeding the AGI limit.

7. Give as a Family

Donating to charities is a great way to reinforce your family values and deepen your impact. Encourage your kids to set aside a portion of their allowance or money received as gifts to donate. Discuss the importance of helping others, and allow your kids to help select the causes you support. Also, consider ways to volunteer as a family. Establishing a spirit of giving within your household can reinforce your family’s priorities and inspire your kids to be life-long givers.

At Tru West Financial, we believe charitable giving is an integral part of any client’s financial plan. And frankly, it will make your heart feel full. We’ll help identify and implement charitable gifting strategies that help maximize your impact and minimize your taxes. For more information, contact us.

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