Philanthropy is often a centerpiece of family office operations, a focus that more often than not involves quite a bit of strategizing, budgeting, and planning. And while wealth owners are typically working on philanthropic activities throughout the year, these efforts crescendo during the fourth quarter.
Which means that family offices have an array of philanthropy-related priorities as autumn leads into winter. These agenda items include:
- Transparency and control. Wealth owners want a clear picture of who received their gifts. They want to know that donations got to their intended recipients.
- Tax efficiencies. Wealth owners want to be sure the smartest giving vehicles were used. From a tax and estate management perspective, it’s often more efficient to gift an appreciated stock than cash, for example.
- Cash flow management. Family offices that commit to annual giving need to manage those pledges. They need to know who is keeping track of them and where paperwork is stored. They need to plan properly to ensure funds are ready to go when they’re due.
- Corporate-structure management. The legal organization of some foundations entails annual giving requirements. Family offices need to meet those obligations to retain their status as foundations. They must have a way to ensure that that annual spend is met.
- Multi-year tracking. Family offices often have philosophies around which causes they want to support—e.g., 60% of philanthropy should go toward environmental causes over the course of a specific period. Wealth owners want the ability to observe multi-year gifting trends so that their family offices can recalibrate their philanthropy if necessary.
At Masttro, we’ve observed that these concerns around philanthropy are common across family offices. Anecdotally, we’ve also observed different patterns of giving: Some wealth owners tend to make bigger gifts to fewer organizations, while other wealth owners tend to make smaller gifts to more organizations.
Whatever the preference, however, wealth owners are largely unaware of the game-changing nature of wealthtech when it comes to philanthropy. Although younger generations have a sense that technology should be able to streamline gifting, few family offices recognize the full potential of wealthtech to do so.
Wealthtech platforms meet and exceed family office needs around philanthropy by offering:
- Comprehensive tracking abilities. The best platforms allow family offices to track assets both before and after giving. This helps family offices easily see gifts they’ve made and gifts they owe.
- Visibility across all types of charitable giving. Philanthropic donations come in many forms, from cash and investments to parts of an LLC or a piece of a property. Wealthtech at its finest allows family offices to see their philanthropic activities from A to Z, all in a single place.
- Sophisticated reporting. The best platforms allow users to pull reports on their gifting, organized by variables like dollar amounts or recipients. These granular insights help family offices identify the most tax-efficient gifting opportunities. A report that shows a large unrealized gain, for instance, can help family offices recognize that it would serve as a smart gifting vehicle.
- Oversight of donor-advised funds. To decrease tax obligations, family offices often use donor-advised funds. These accounts store philanthropic dollars for foundations, allowing them to lower their value immediately for lower tax overhead. Donations are later distributed from the donor-advised fund to charities of their choosing. The best wealthtech platforms allow family offices to oversee all steps of this deferred gifting process.
- Visualization of current versus future estate blueprint.Viewing a family’s estate structure in an easy-to-understand format and in one place allows users to quickly draw out patterns. Visualization adds a level of clarity and highlights details that might be otherwise overlooked. Lastly, visualization of proposed changes to an estate structure allows for more targeted conversations with family members.
Wealthtech’s ability to transform gifting operations is undeniable. Whatever the philanthropic priorities—maximum tax efficiency, maximum social impact, or some combination of the two—wealthtech platforms increase efficiency, improve communications, and highlight insights for smarter decision-making.