If you work with donors and investors, you’ve probably encountered scenarios like the one I had to advise when the circumstances forced difficult but crucial decisions. Recently, I was introduced to a family with significant real estate holdings following the death of the family matriarch.
They were very reluctant to meet with me. They assumed I was going to talk about life insurance or estate planning—another advisor trying to sell them something. Instead, I explained that my work sits at the intersection of estate planning and tax mitigation, helping clients convert tax into philanthropy.
One of the family members immediately said rather tersely: we are not interested in any of the estate planning, only in what you said about turning into charity.
That conversation changed everything.
At a subsequent meeting with two of the siblings, I learned that their parents had previously completed an estate freeze. Following the mother’s death, the family was facing approximately $3.4 million in tax.
Their plan was straightforward: sell the family home and use the proceeds to pay the tax. But there was another possibility.
I explained that charitable giving as part of an estate plan at death can be a remarkably powerful estate-planning tool. Subject to the applicable rules, charitable donations can be used to significantly reduce or mitigate tax otherwise payable by an estate.
Here’s the simple math I use to explain the concept:
For every $2 directed to charity at death, $1 of tax turns into $1 of charitable impact.
The family was already highly philanthropic. Like most people, they simply hadn’t connected philanthropy with their estate and tax planning.
We arranged a meeting with two of the family’s accountants. We reviewed the wills and examined whether the executors had sufficient latitude to make charitable gifts from the estate.
Then came the moment I’ll remember.
One of the siblings left the meeting, went down to the car, came back upstairs with a cheque book and wrote a $7 million cheque to the family’s charitable foundation!
Think about that for a moment:
- $3.4 million of anticipated tax
- $7 million of charitable impact
The family had found a way to redirect money that otherwise would have gone toward taxes into something they deeply cared about: their family’s charitable legacy. That was the “aha” moment. I often describe every estate as having three potential beneficiaries:
- Family
- Government
- Charity.
And, in a simplified sense, families have a choice of these two on how they want their wealth ultimately distributed. This family knew immediately which two they wanted:
Family and charity. Not government.
That simple realization is something more wealthy families—and their advisors—need to understand. But the story didn’t end with the $7 million charitable gift.
The family wanted to preserve the charitable legacy while also keeping the family financially whole. So, we explored a strategy to replace the $7 million charitable gift for the family through life insurance.
Because timing and cash flow were important, we used an insurance financing strategy designed to allow the family to continue investing its capital in the real estate and other investments where it had considerable expertise.
In other words, philanthropy didn’t have to mean sacrificing the family’s financial objectives. The family was able to create a significant charitable legacy while also addressing its own long-term wealth planning. And that opened the door to a much bigger conversation.
The siblings had substantial future estates of their own. There were outdated wills, cross-border considerations, shareholder planning and significant potential capital gains taxes associated with the continued appreciation of the family’s real estate.
Now, however, philanthropy was no longer an afterthought. It had become part of the planning conversation. That’s the bigger lesson I took from this case.
There is an enormous opportunity sitting between the worlds of wealth management, tax and philanthropy. Many advisors understand tax planning. Many understand estate planning. Charities understand fundraising and donor relationships. But what happens when these disciplines come together? That’s where remarkable opportunities can emerge.
The accountants involved in this case were excellent professionals. Yet this particular charitable planning opportunity had not been part of the original conversation.
For wealthy families, philanthropy is often treated as something that happens after the estate plan is finished—rather than something that can be incorporated into the planning from the beginning.
My experience has taught me that one of the most powerful questions an advisor can ask a wealthy client is not simply:
“How much tax will your estate have to pay?”
It may be:
“If you’re going to pay that tax, would you rather have those dollars go to the government—or create something meaningful for the causes and communities you care about?”
The answer won’t be the same for every family.
But the question will likely open a conversation that otherwise never happens. And often, that conversation can turn success into significance. In this case, it turned a $3.4 million tax problem into a $7 million charitable legacy.
Imagine how many more charitable legacies could be created if strategic philanthropy became a standard part of the conversation between wealthy families, their advisors and the charitable sector.
Mark Halpern, CEO at WEALTHinsurance.com is a well-known CFP, TEP, MFA-P (Certified Financial Planner, Trust & Estate Practitioner, Master Financial Advisor Philanthropy) mark@wealthinsurance.com www.WEALTHinsurance.com .
