Category: Philanthropy

After four outstretched years, the Bosnian war ended in 1995. While the international community declared peace, exhaled, and moved on, the locals were left to confront the threatening remnants of the war.

Decades after the ceasefire, more than half a million Bosnians still live in communities ringed by minefields. Bosnia has pledged to clear them by 2027, yet independent assessments say that deadline will be missed as the funds are not there. Beyond Bosnia, landmines and unexploded ordnance still kill or injure thousands of people every year, most of them civilians.

A landmine is not built to win a battle. It is built to paralyze a community. It keeps families off their land, away from water sources, and out of schools and clinics. It has no expiry date, no allegiance, and no memory of the cause that put it there. Bosnia and Herzegovina is one of several countries now described as “massively contaminated” by mines. The pattern repeats in Ukraine, which is now the most heavily contaminated country on earth. The cost of clearing it runs into tens of billions. While agencies debate and fund raise in increments, entire agricultural economies stall season after season.

This is not a failure of knowledge. In 1997, the Ottawa Treaty banned anti-personnel mines. More than 160 nations signed, yet the mines remain in the ground. In some cases, governments have even frozen or withdrawn funding from active clearance programs. Teams that had been working for years have arrived on site to find that the money has simply vanished.

When New Wealth Steps In

Into this gap stepped an unlikely actor: a small group of individuals whose wealth was built in Bitcoin.

They share a recognizable profile. They tend to think in long time horizons. They are skeptical of large institutions and of promises written in currencies they do not trust. Their wealth did not come from inheritance or corporate stock awards, but from holding a volatile asset through cycles that punished hesitation and rewarded conviction. As their financial position changed, so did the questions they asked.

One of them looked at landmines not as a foreign policy problem or an item in an aid budget, but as an engineering and logistics challenge. They did not convene a task force, commission a report, or write a single cheque to an existing charity and step away. Instead, they funded the design and deployment of mine removal technology built for real terrain and real conditions. That equipment is now in the field, in places like Angola and Senegal, finding and clearing mines one by one.

The sums involved are not symbolic. Tens of millions of dollars have gone straight into the physical removal of weapons from the soil, rather than into campaigns, conferences, or general appeals. For people living near those fields, the impact is simple to describe. A farmer who could not safely work his land for decades can plant again. A child who once walked a long detour to school can finally take the direct path. A village that has lived in the shadow of an old war can begin to build on ground that is no longer trying to kill it.

A Different Kind of Battlefield

The pattern repeats in another arena.

Human trafficking today is a criminal industry on the scale of a national economy. Some of its worst expressions are not in fragile states but in wealthy ones. California, one of the richest economies in the world, is also a major hub for sex trafficking.

Control is exercised through debt, threats, stolen documents, addiction, and the slow removal of every other option. Many victims are locked in a life they cannot see a way out of. When they are pulled out, they often emerge into a vacuum. Prosecutions target the traffickers and, at times, the trafficked themselves. Court victories matter, but they do not rebuild a life. Public programs, where they exist, are fragmented, underfunded, and built around compliance measures rather than human recovery.

Again, a wealthy Bitcoin holder chose to act. Rather than trying to fix the entire system, they asked a more focused question: what does a person need to rebuild a life after such exploitation?

The answer was not a single service, but a web of them: long term, trauma informed therapy; safe housing; legal support; clothing and essentials; real job training; relocation far from the networks that exploited them; and, above all, time. On that basis, they funded a dedicated recovery and resource center in California. The goal was a place where survivors could arrive with nothing and leave with genuine options. Tens of millions of dollars have been committed, quietly and without naming rights.

A Quiet Pattern of Intervention

These two stories are the sharp edges of a broader pattern. Clients of this type have bought and protected fragile ecosystems that might otherwise be sold or destroyed, underwriting conservation with their own balance sheets. One is building a veterinary training hospital in London, focused on animals that are abused, neglected, or endangered. Others are preserving cultural antiquities in regions where artifacts are routinely looted and scattered.

What links these choices is not guilt, sentimentality, or a taste for recognition. It is a particular way of relating to time and responsibility. Many of these individuals think more readily in decades than in quarters. They care less about whether a project is noticed this year than whether it will still matter in fifty. They ask what is worth preserving, what is worth building, and what can no longer be left to institutions that have already shown their limits.

From Ownership to Stewardship

This brings us back to Bitcoin, and to stewardship.

Bitcoin has produced a distinctive kind of wealth. It tends to be held by people who chose an unfamiliar asset, endured skepticism and volatility, and were willing to be wrong for a long time. They did not stumble into those gains; they held their way into them. That experience changes how they see capital. At some point, ownership — “this is mine” — gives way to something quieter: “this has been entrusted to me.”

Stewardship is not a line in a values statement. It shows up in what money is asked to do. It is the turn from “How much do I have?” to “What will I build or protect with this?” The psychologist Abraham Maslow argued that human potential is realized not in comfort but in purpose. In the realm of wealth, that shift is visible when people stop treating capital as a tally and begin treating it as a means.

Bitcoin fits that shift. It cannot be inflated away. It is hard to seize without the owner’s cooperation. It rewards patience and conviction. Those who have held it through its wildest swings are already trained to think beyond the next headline. The same instinct that keeps someone holding an asset for a future they cannot yet see is the instinct that can clear a field in Bosnia or fund a recovery center in California.

When people, who have lost faith in large systems, accumulate meaningful wealth, it is not surprising that some begin to step into work those systems have failed to do. They become, in effect, private stewards of public goods. That raises real questions: they are not elected, and they do not answer to voters. But in the cases described here, the alternative was not a more effective public response. It was no response at all.

Changing how you understand money is one act of stewardship. Deciding what that money will mean, and for whom, is another. The work in Bosnia, California, and beyond suggests that private choices, made by people with patience, can quietly bend the course of other people’s lives.

 

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This information is intended for general educational purposes only and should not be construed as legal or investment advice.

To give away money is an easy matter and in any man’s power. But to decide to whom to give it and how large and when, and for what purpose and how, is neither in every man’s power nor an easy matter. — Aristotle

Owning wealth suggests freedom to deploy it however you like. Stewardship retains that freedom, yet marries it with an obligation to consider who else is affected. It asks not only what this capital can do for you, but what it must do beyond you.

Reframing inheritance as stewardship rather than ownership shifts the relationship to capital from entitlement to responsibility. The inheritor receives not just assets, but a mandate to shape the arc of their impact across generations, whether the wealth sits in a business, a portfolio, or a pool of philanthropic capital.

For first generation builders, the work of creation often leaves little room for that question of why. The reckoning tends to arrive late and suddenly: a diagnosis, a rupture, a death. At that point, wealth is clearly going to outlive its maker, and the real issue becomes what travels with it.

This is where the next generation appears. They are not a problem set, but the family’s human capital. They bring skills and perspectives the founders cannot have. The task is to mentor them, let them make real but bounded mistakes, and invite them into decisions long before any transfer is formalized.

A better path treats stewardship as plural. One family member may run the operating company, another may lead the family’s philanthropy, a third may focus on values aligned investing. If the underlying principles are shared, each expression strengthens the whole.

Philanthropy as a Generational Bridge

Philanthropy is often the most reliable bridge for meaning between generations. It offers a shared project in which money is not just discussed as risk and return, but as a proxy for care, attention, and responsibility.

Raising genuinely philanthropic children begins with action. Parents who involve children early in giving decisions teach them that money has direction. The goal is to build the habit of discernment: how to evaluate a charity, question its model, and understand who is truly being served. Over time, the most powerful philanthropic voices in a family are those the next generation discovers for themselves, in response to the world they inhabit, not the world their parents remember.

This stance has shaped how we operate as a firm. Our revenue is tied to assets under management, yet we routinely work with families to give assets away. At first glance that runs against our interest. We do it because we believe that money held without purpose hollows out both the asset and the owner. Helping clients move capital to where it can do work is, in our view, part of the mandate of stewardship rather than a concession to it.

Structuring Your Charitable Giving

The architecture of a family’s giving should emerge from what they care about, not from a pre-packaged product menu. We have a 3-step process:

1. Identify passions — Multiple conversations to surface the client’s genuine passions and how giving can address them. Some arrive knowing; others need guided discovery.
2. Vet charities — We rigorously vet potential partners through hands-on due diligence: traveling to locations, meeting leadership face-to-face, assessing operations and culture, negotiating reporting metrics.
3. Ongoing monitoring — Philanthropy, like investing, requires an ongoing feedback loop. We ensure charities continue doing what they committed to, meeting agreed metrics, maintaining direction.

Within this structure, clients face an early choice: direct or indirect impact.

Direct impact means serving affected people immediately. Indirect impact aims at influencing systems, via education, technology, or institutional reform, usually with longer time horizons but broader reach. That choice shapes the charities we evaluate, the metrics we prioritize, and the cadence of giving.

Sometimes, no existing organization fits the vision. In those moments, philanthropy becomes entrepreneurial. One client’s broad commitment to racial and gender equality narrowed into a focus on women of colour disproportionately affected by trafficking. We pinpointed the area of greatest need and found no comprehensive walk in services. Rather than scale back, the family created a new charity and brought in an experienced anti trafficking group to run it. Here, the mission dictated the structure, not the other way around.

Sophisticated structures do not make philanthropy virtuous, but they often make it possible at scale. The choice of vehicle has consequences for taxes, timing, and the balance between family and charitable beneficiaries.

Charitable Lead Trust (CLT)

• Pays an annuity to charity for a set term; what remains goes to family.
• Suits clients with structured, predictable giving and high basis assets or cash.
• Counterintuitive upside: if trust assets grow faster than the assumed IRS rate, the excess can pass to heirs free of additional transfer tax.

Charitable Remainder Trust (CRT)

• Pays an annuity to the client or family; what remains goes to charity at the end of the term.
• Tax exempt wrapper: low basis assets can be sold inside without immediate capital gains, which are recognized gradually through annuity payments.
• Powerful for mined Bitcoin, appreciated stock, or investment real estate where an outright sale would trigger substantial tax.

Donor-Advised Fund (DAF)

• An intermediary charity: contribute assets, take a deduction at fair market value, then recommend grants over time.
• Lower friction than a private foundation and straightforward to set up.
• Popular for Bitcoin, since low basis coins can be contributed for a full FMV deduction without realizing gains, though most sponsors still force quick liquidation.
• We work with DAFs that permit holding Bitcoin and apply a “stoplight” framework to time sales rather than selling on day one.
• Important fine print: sponsors technically retain discretion to decline grant recommendations, even if they typically approve requests for qualified charities.

For some families with meaningful Bitcoin holdings, this is no longer just a speculative position; it is a pool of capital that could be put to work. When coins have appreciated significantly, choosing to move a portion of that gain into philanthropic vehicles can turn sharp price moves into a more predictable flow of funding for the causes they care about. The technical steps are familiar enough: pick the right structure, understand the tax treatment, be specific about what the money is meant to do. The more important shift is conceptual. Instead of leaving Bitcoin in its own speculative corner, the family is bringing it under the same stewardship lens that applies to the rest of the balance sheet and asking it to contribute to their longer story of impact.

Investing as Part of the Same Story

The portfolio also has the potential to be an expression of your philanthropic values. For some clients, this might be viewed as a point of friction. They are comfortable funding a shelter for trafficking survivors, less comfortable examining whether their equity holdings profit from supply chains that rely on forced labor.

We encourage families to see their investments as the complement to their giving, not its contradiction. A client who cares about human trafficking might refuse to hold companies implicated in slave labor allegations, then actively allocate capital to communities with entrenched racial inequality. In their minds, the public equity allocation is no longer a neutral backdrop; it is part of the same story.

Doing this well is operationally demanding. It requires what we call one offs per client family. Each set of values leads to a different pattern of exclusions, tilts, and private allocations. The due diligence is significant and cannot be automated without flattening the nuance out of it. Traditional firms, organized around scale and efficiency, often decline to go this deep, because efficiency is where their profitability lies.

We reject the assumption that bringing values into the portfolio necessarily means accepting weaker returns. In public equities, where most of the capital lives, tilting toward sustainable or values-aligned companies has not been shown to materially impair performance. In some cases, it may improve it. A company that intends to be around for the long term and manages environmental, social, and governance risks as a matter of survival is not obviously a worse bet than one that does not.

Deeper impact vehicles present different questions. Private credit that funds regenerative agriculture, venture capital backing underrepresented founders, or community development finance can all play a role. They come with distinct liquidity profiles, risk distributions, and time horizons, just as any private market investment does. The trade-off is not impact versus return. It is which part of the portfolio is asked to carry illiquidity, how much, and for how long.

One helpful way to see this is as an impact spectrum:

• Public equities
  • Shallow impact expressed through exclusions or modest tilts.
  • Shareholder voting and activism can deepen this slightly, especially where coalitions push for specific corporate changes.
• Municipal bonds and certain credits
  • Closer to the ground, with capital flowing into identifiable communities and projects.
  • Can pair income generation with clearly traceable impact.
• Private credit
  • Targeted funding with defined use of proceeds covenants.
  • Greater control over where and how capital is deployed.
• Private equity and venture capital
  • Deepest, most concentrated impact, often backing specific founders, innovations, or community strategies.
  • Requires families to accept long lockups in exchange for focused impact and potentially higher returns.

Across this spectrum, every position has impact; capital always lands somewhere and shapes something. The question is whether a family is deliberate about that effect or content to let it remain accidental.

Common Myths About Impact and Returns

Once families begin to see investing and giving as parts of the same system, a set of persistent myths tends to surface.

The first is the client who declares that they only care about impact and do not need returns. It sounds noble, but taken literally it erodes future capacity to give. If you consume principal to maximize immediate impact, you may limit what later generations can do in your name. Preserving and prudently growing assets is not greed by another name; it can be a way of extending impact across decades.

The second is the client who claims not to care about impact at all. Typically, this translates into a desire for maximum growth with minimal friction. Yet when we move from asset allocation to legacy planning, values surface anyway. Few people, when pressed, are indifferent to the way their wealth shapes the world their children live in. Even those who begin the conversation by insisting on neutrality often find that by the end, they are articulating preferences and red lines they didn’t realize they had.

The Family Business Question

These tensions become especially visible when the asset in question is an operating business rather than a securities portfolio. In recent years, some families that sold operating businesses to private equity are beginning to question that decision. A clean liquidity event and a handsome multiple can feel like a victory, but may later be seen as the moment they swapped a community building, employment generating asset for a pool of financial capital that now has to be stewarded in far more abstract ways.

In response, we see more families choosing to retain the business as a core family asset and as a primary tool for impact and stewardship. The company can be run with the same discipline as any investment portfolio, yet held in mind as something more: a site of identity, belonging, and local impact. The real choice is between a narrow view of wealth as financial capital alone and a broader one that understands the business as social and human capital as well.

Intersectionality and Depth

As younger generations step into these questions, many bring with them an instinct for intersectionality. They are less interested in scattering small gifts across dozens of unrelated causes, more interested in going deep on a problem and following its roots into other domains. Educating girls in rural communities, for example, becomes not only an education intervention but a climate strategy, a public health strategy, and an economic development strategy. The United Nations’ Sustainable Development Goals capture this interdependence: progress on one often accelerates progress on others.

The implication for families is clear. You do not need a dozen causes to be consequential. You need a small number of commitments you understand well, with partners you trust, and a willingness to follow complexity rather than flatten it.

Living as a Steward of Wealth

Stewardship is not just about the tools and structures you use, but about the posture you take toward wealth. It stands in direct contrast to hoarding: it treats each unit of currency as a decision, whether that decision takes the form of an investment, a philanthropic grant, or a purchase at a checkout counter. Many of the families we work with want their capital, in all its forms, to be in motion toward something that feels worthy of the effort it took to build it.

The coming decades will see an unprecedented transfer of wealth, in size and in character. Assets will change hands, but so will narratives. The families who thrive will be those who treat that transfer not as a problem to be managed away, but as a chance to declare, together, what they believe their wealth is for.

 

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This information is intended for general educational purposes only and should not be construed as legal or investment advice.

Those with significant bitcoin can use strategic philanthropy to accomplish many objectives, including creating an endowment through a Donor Advised Fund. DAFs an be particularly powerful if the structure can continue to hold bitcoin over the long term.

 

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Preparing Heirs for Responsibility, Not Just Access

Many of our clients express concerns about preparing their heirs for what they perceive to be the social responsibility of inheriting wealth. While not all clients share this view, those who do tend to feel particularly strongly about the need to prepare their descendants for this responsibility, which often translates to philanthropy. This article addresses how families with this worldview can prepare younger generations for inheriting wealth in a socially responsible manner.

A Simple Life Lesson

The Lilly Family School of Philanthropy at Indiana University conducts extensive research on philanthropic behaviors across lifespan. This seems intuitive enough, but their studies consistently suggest that early exposure to philanthropic activities can significantly influence one’s propensity to engage in giving and volunteering in adulthood.

Years ago, a colleague described to me the steps she took to educate her young children in social responsibility and philanthropy. In addition to modeling with her own giving, once each of her children attained eight years of age, during the holidays that child would be “given” $50 to donate to charity. My colleague would also teach that child how to use charitynavigator.org and guidestar.org to research the charities that most efficiently address the causes the child wished to support.

In this way, her children not only learned about philanthropy, but they also learned the importance of evaluating charities so they could give more effectively. As her children grew older, my colleague would periodically increase their annual charity allocation until, upon attaining 18, she would give $500 to the child for a donation to his or her favorite charity or charities. This simple lesson provides the framework for how the family can educate younger family members about social responsibility.

The Role of Legal Structures in Teaching Social Responsibility

Private Foundations

Wealthy families typically have at least one legal structure through which socially responsible education can take place. Historically, wealthy families have used private foundations as the cornerstone for this education. With a private foundation, heirs could serve as members of the foundation’s Board of Directors or, alternatively, could serve in a more limited advisory role (e.g., to determine specific grant recipients) to the Board. In this way, young family members can begin learning about philanthropy – and seeing its impact – before reaching their teen years.

However, utilizing a private foundation for this education has limitations. First, members of the Board have a fiduciary duty that is often overlooked. Thus, placing minors in this position is ill advised. Moreover, a role with the family’s private foundation is, at best, limited to that foundation’s charitable activities. If it is a grant-making foundation, the activities are limited to its grants; if it is an operating foundation, the heirs may also be able to experience the “hands on” charitable work being done by that foundation.

Regardless of the type of foundation (operating vs. non-operating), involving heirs in only the foundation has additional limitations. First, the family’s philanthropy is often accomplished through multiple avenues, not just a foundation. For example, the family may have one or more charitable trusts. Thus, the foundation offers only limited transparency into the family’s total philanthropy.

In addition, many wealthy families also utilize impact investing to create a social impact with their non-philanthropic assets. By definition, involvement limited to the family’s foundation can, at best, provide visibility only to the investments of the foundation. Since foundations frequently encompass only a fraction of the family’s wealth, visibility limited to the foundation does not give heirs a complete picture of how the family’s wealth – not just its philanthropic dollars – are impacting society. Ideally the heirs have transparency as to the totality of the family’s impact, with at least some say in the areas impacted.

As an aside, Donor Advised Funds have gained in popularity in recent years due to their simplicity, reduced costs, and lack of compliance headaches as compared to private foundations. In theory, an heir’s participation in the family’s donor advised fund would be substantially similar to their participation as an advisory member of the family’s private foundation’s board.

Private Trust Companies

A relatively recent legal development, the advent of Private Trust Companies, is changing how family’s address philanthropy and thus social responsibility with intergenerational wealth. A Private Trust Company (PTC) is a trust company controlled by the family and established specifically to serve as the trustee of the family’s irrevocable trusts. (PTCs are in response to the perceived conflict, particularly with younger generations far removed from trust creators, between descendants, on the one hand, and trustees, on the other.)

PTCs are currently available by statute in only a limited number of jurisdictions, but most of these jurisdictions not coincidentally are also the top U.S. trust jurisdictions due to their favorable trust laws. Our preferred PTC jurisdictions are Nevada, South Dakota, and Wyoming, but others also have merit.

General PTC management is provided by a Board of Managers, typically comprised of family members and independent outsiders, including an administrator in the selected jurisdiction. Significantly, the family can select which jurisdiction’s laws are most appropriate and advantageous for them, given their assets, goals and objectives, desire for a regulated versus unregulated PTC, etc.

More granular PTC management is provided by a handful of PTC committees, which often include the following:

• Philanthropy Committee
• Investment Committee
• Owner Education and Family Governance Committee
• Discretionary Distribution Committee
• Amendment Committee
• Audit Committee

The first three of the committees listed above may be limited to family members, and the Philanthropy and Investment Committees in particular create the opportunity to give heirs a holistic view of the family’s philanthropy and socially impactful investments; as the heirs age, their participation can increase accordingly, giving them increased visibility in their areas of interest. For younger heirs, sub-committees allow targeted, limited participation in these key areas.

Also relevant here, the Owner Education and Family Governance Committee creates the framework for participation and decision-making going forward. More specifically, this Committee develops the family’s policies and guiding vision and values that regulate family members’ roles, rights, and responsibilities with the family enterprise and with each other. The overall goal of these activities is to prevent the splintering of the family and family enterprise in future generations. Studies show that the potential splintering of the family is far more likely to dissipate intergenerational wealth than loss of capital, particularly as the family moves multiple generations away from the original wealth builder(s).

Conclusion

The legal structure(s) adopted by the family can have a significant impact on younger family members’ understanding of social responsibility and philanthropy. More so than a private foundation, a private trust company can give the family an ideal training ground for teaching social responsibility, and PTCs provide multiple avenues for encouraging areas of interest, including philanthropy and investments via committees and sub-committees. When generational wealth is at play, a PTC can provide a structure that encourages family harmony over generations, reducing the likelihood of wealth dissipation.

PTCs are not a panacea, however, and there are hard costs and administrative burdens the family should consider. But under the right circumstances, a PTC may provide the best structure for family involvement in social responsibility, while also providing a succession vehicle for the family’s intergenerational wealth.

The Bespoke Group provides strategic guidance at every step—helping you design an ideal structure and personalized giving strategy that reflects your values, ideals, and passions. We work closely with you to ensure that both your structure and philanthropy drive meaningful impact in the areas that matter most.

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If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.

Thank you for considering Bespoke as your partner in wealth management. We look forward to the opportunity to work with you.

This information is intended for general educational purposes only and should not be construed as legal or investment advice.

In the previous article, “How to Align Passion with Impactful Giving“, we discussed the fundamental aspects of philanthropic giving. In this article, we take a closer look at the different ways to structure charitable gifts and the advantages of each structure. We’ll start by discussing the role of foundations.

Conduit and Operating Foundations

Private foundations provide many of the same benefits of public charities if they are structured and administered as a conduit foundation or as an operating foundation.

A conduit foundation must distribute 100% of all property contributed to it before the end of the first quarter in the year following the contribution. For example, if you contributed $1,000,000 to a conduit foundation in 2024, the foundation would have to distribute that entire amount by April 15, 2025. Conduit foundations generally only make sense for benefactors who do not want to be directly involved in ongoing charitable activities, and who have several known public charities to which they want to distribute large amounts.

By contrast, an operating foundation does not just award grants; it is actively engaged in providing services that advance the tax-exempt purposes of the foundation. Although operating foundations require higher administrative commitment and overhead, they provide more beneficial charitable deduction opportunities for donors as well as additional flexibility and control. Private operating foundations may also create opportunities for family members to receive reasonable compensation for services they provide to the foundation.

The classification of a private foundation is determined on a year-by-year basis based on the foundation’s activities. In some years a foundation may be treated purely as a “private non-operating foundation” subject to the lower deduction limits and excise tax mentioned above. In other years the private foundation may be managed as a “conduit foundation” if it meets the 100% distribution test. And in other years it may qualify as a “private operating foundation” if it meets a specific two-prong qualification test discussed below. The key is to strategically manage the foundation’s investments and activities in a way that allows it to qualify as an operating foundation – at least in years that are most advantageous.

Private Operating Foundations

The most complex type of private foundation is a private operating foundation. If a private foundation satisfies both parts of a two-prong qualification test, it will be deemed to be an operating foundation. The first prong of the test is a mandatory income test that requires the foundation to spend at least 85% of the lesser of the foundation’s (1) adjusted net income (which does not include long-term capital gain income or contributions made to the foundation) or (2) its minimum investment return, on the “active conduct” of charitable activities. If the foundation does not meet the income test in a given year, it will not be treated as an operating foundation for that year regardless of any other test.

If the income test is met, then the foundation must also satisfy at least one of the following additional tests:

• Assets test – At least 65% of the foundation’s assets are devoted to the direct conduct of tax-exempt activities; or
• Endowment test – The foundation distributes at least 2/3 of its minimum investment return in the active conduct of its tax-exempt activities.

The foundation may meet the assets test in some years, and the endowment test in other years. It must meet the income test every year. In each prong of the qualification test, expenditures and distributions must be made in ways that advance the exempt activities of the foundation itself, rather than through grants to other individuals or organizations.

Defining “Active Conduct” for the Qualification Test

The following are general examples of expenditures and grants that may qualify as “active conduct:”

• Amounts paid or set aside to acquire or maintain assets used directly in the foundation’s exempt activities.
• Reasonable administrative expenses such as salaries, travel expenses, and other operating costs necessary to conduct the foundation’s exempt activities.
• Grants made as part of an active program in the foundation.
• Grants made with continuing supervision by the foundation (and with the grant recipient reporting back to the foundation).
• Tax on an operating foundation’s net investment income may be treated as a qualifying distribution.

By contrast, administrative expenses and operating costs that do not directly advance the foundation’s tax-exempt purposes do not constitute qualifying distributions.

As the above discussion demonstrates, private operating foundations are complex, but where you wish to fund a cause that is not being adequately addressed by other existing charities, a private operating foundation may be your best choice.

Private Non-Operating Foundations

A private non-operating foundation is a charity that primarily functions as a grant-making entity; i.e., it primarily makes grants to other charities rather than conducting its own operations. Like operating foundations, non-operating foundations are typically funded by an individual or single family.

Private non-operating foundations must annually distribute at least 5% of their net investment assets for charitable purposes, and their investment income is subject to a 2% excise tax. Moreover, when funding a non-operating foundation, you can deduct up to only 30% of your adjusted gross income for cash contributions, 20% for non-cash contributions (e.g., appreciated stock). Significantly, you can carry forward unused deductions for up to five additional years (i.e., six years total). Conversely, with a contribution to a conduit or operating foundation (or any direct contribution to a public charity), you can deduct up to only 50% of your adjusted gross income for cash contributions, 30% for non-cash contributions.

Donor Advised Funds

A popular alternative to non-operating foundations is the Donor Advised Fund (DAF). DAFs are separately identified accounts maintained and operated by public charities, known as sponsoring organizations. Once the donor makes the contribution, the sponsoring organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Significantly, the donor requests that the sponsoring organization make a distribution, but the sponsoring organization retains the right to deny that request.

DAF assets can be invested and grow tax-free, potentially increasing the amount available for charitable grants. With a DAF, the donor receives an upfront charitable deduction for the amount contributed to the DAF (using the higher deductibility limits), even though the funds may not be distributed to charity for some time. In fact, this benefit has caused DAFs to recently come under scrutiny in Congress, with recent proposals requiring a minimum annual payout and maximum term before all funds must be distributed to charity.

Benefits of Giving Appreciated Assets

Donating appreciated assets, such as marketable securities, provides unique benefits to both the donor and the receiving charity. With a contribution of marketable securities, you will receive a tax deduction for the current fair market value of the stock and any public charity can easily sell the stock, convert it to cash, and not pay any tax. By donating the marketable security itself, as opposed to selling the security and donating cash, the donor may avoid capital gains tax on the sale of the security and receive a charitable deduction, while the charity receives the full value of the security.

Structures for Making Charitable Gifts

As discussed above, a Donor Advised Fund is one structure through which charitable contributions can be made but it may have some limitations. Some DAF sponsoring organizations permit the contribution of other types of appreciated assets, such as real estate or digital assets such as bitcoin. However, not all sponsoring organizations will accept these assets, and with few exceptions, most DAFs will require the sale of these assets upon contribution. Thus, it is imperative that you communicate with the DAF sponsoring organization to ensure it will accept the asset(s) you wish to contribute and/or, that it will hold the appreciated assets for some future sale date.

Capital Gains Deferral Trust

Rather than giving appreciated assets directly to a charity or DAF, another option is to give those assets to a specific type of charitable trust, recognized and accepted by the IRS, that can then sell the assets and not pay the tax. As a result, the full value of the appreciated assets can then be invested.

The trust then pays a fixed percentage, typically to you and/or your spouse for life, based upon the value contributed. At the end of that term, the remaining balance is paid to the charity or charities of your choice.

With this strategy you receive an income tax deduction for the present value of the hypothetical amount going to charity, and the assets are protected from your creditors and are outside of your estate for purposes of the estate tax. This is an excellent way to give to charity in the future, while providing you a tax-deferred income stream now.

For example, suppose as a Colorado resident you own Microsoft stock worth $1 million with zero tax basis. Thus, if you sold the stock today, you would pay $200,000 in federal capital gains tax (20%) and $43,300 in Colorado capital gains tax (4.33%), netting you $756,700. (In all likelihood, the net investment income tax would also apply, further reducing your net by 3.8%.)

If instead you transferred the stock to this type of tax-deferral trust, the trust would sell the stock and have $1 million to invest. There are several options but with the most common type, the trust would pay you (and your spouse, if any) a fixed annuity (say 5%) for your lives. Thus, you would receive $50,000 per year for the rest of your lifetimes(s), subject to tax.

Annuity to Charity Trust

Another option is to contribute assets to a different type of charitable trust–one that pays an annuity to charity for a specified number of years and then transfers the remaining trust balance to your heirs.

This type of trust is perfect to establish a long-term charitable giving strategy during your lifetime (for example, if you want to contribute $x to your favorite charity for the next 20 years).

And under certain circumstances, this trust can even provide you with an upfront income tax deduction for the present value of the annuities paid to charity. Additionally, assets within this type of irrevocable trust are protected from creditors and free of gift or estate tax.

Distributions Directly from Your IRA

If you are over 70 1/2, you can distribute directly to charity up to $100,000 per year from your IRA or qualified plan. This reduces or eliminates your required minimum distribution by the amount of the direct charitable contribution (up to $100,000) and, significantly, removes the direct charitable contribution from that year’s taxable income, thereby reducing your taxable income by the amount of the direct distribution to charity, up to $100,000. For example, if your required minimum distribution is $85,000, rather than taking that distribution and turning around and making a cash contribution to charity, consider making the distribution directly from your IRA. By making a direct contribution from your IRA, the $85,000 will not be included in your taxable income, thus reducing your overall taxable income.

Conclusion

Charitable giving is a dynamic process with many different strategies that can be levered to achieve a lasting impact and bring additional meaning to your legacy. The Bespoke Group provides strategic guidance at every step—helping you craft a personalized giving strategy that reflects your values, ideals, and passions. We work closely with you to ensure your philanthropy drives meaningful impact in the areas that matter most.

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If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.

Thank you for considering Bespoke as your partner in wealth management. We look forward to the opportunity to work with you.

This information is intended for general educational purposes only and should not be construed as legal or investment advice.

The most meaningful philanthropy starts with a clear ‘why.’ For wealth holders, aligning giving with personal values and long-term vision is essential— not optional. This two-part series offers a blueprint for effective, values-driven philanthropy. In this first installment, we help you define what matters and where to begin. The second, “How to Structure Your Charitable Giving“, will provide a more detailed outline of various types of giving structures and alternative assets that can be gifted.

Identify Your Passion Causes

Some individuals come to us with fully formed views on philanthropy. Others have no idea how they should start their philanthropic journey. For this latter group in particular, the conversation often starts with the following question:

“Assuming a perfect world without limitation, what causes are you passionate about?”

Once you’ve defined these core causes, the question then becomes, “how can you best connect your philanthropy to these causes?”

Unsurprisingly, many individuals have limiting beliefs about their ability to make an impact on the causes they care about. These beliefs include thoughts like: my cause is too large or, conversely, my cause is too small; I don’t have the resources to impact my cause; my cause is too difficult to impact; impacting my cause requires disclosing my identity; etc.

In some cases, these limiting beliefs may reflect objective challenges, but more often, they are based on subjective perceptions. For example, one of our clients is deeply passionate about addressing racial and gender inequality, two massive issues that seem insurmountable, even with unlimited resources. However, through several conversations with various experts, the client learned that human trafficking is a socio-economic issue that disproportionately impacts women and people of color. This insight lead the client to address human trafficking in a particular region close to home by funding a center for victims of human trafficking. Today, that center serves a significant numbers of victims daily, making a meaningful impact on the community.

Another client couple is passionate about their church, a relatively small denomination with diocese in only a handful of U.S. cities. Given the small size of this church, the clients require absolute anonymity in making large contributions to their church. Through the assistance of a philanthropy consultant, we ensured total anonymity with their contributions. Further, after numerous conversations we determined that multiple smaller contributions over many years would likely have a much greater impact than a fewer number of large contributions, given the relatively small size of the endowment – and vision – of the church.

Once we align the client’s passion causes with potential philanthropy, we then explore the many ways in which the client can approach that philanthropy from a structural perspective. The first question is, are there charities that are addressing this cause, or does the client need to create a charity to address it? From there, we discuss various types of private foundations and their best use case to fit the client’s objectives.

Private Foundations Generally

At the risk of oversimplifying, there are three general classifications of private foundations: 1) private non-conduit, non-operating foundations, 2) private “conduit” foundations, and 3) private operating foundations. Of these, conduit and operating foundations enjoy many of the same benefits that public charities provide. Non-operating, non-conduit private foundations provide lower levels of deductibility and are subject to additional layers of tax at the entity level.

Private foundations are an excellent tool for managing the family’s philanthropy and incorporating younger family members into family wealth decision making. It should be noted, however, that private foundations are complex with significant regulations and administrative costs, and they are therefore not right for every family.

Ways to Give: Cash and Appreciated Asset Contributions

Cash contributions provide the immediate liquidity to fund charitable operations and thus are vital to many charities. Cash contributions also provide the highest level of deductibility against your adjusted gross income. However, there are other ways you can give . . . which may be advantageous to you from a tax perspective and may allow you to incorporate giving to your passion causes as part of your estate planning.

Rather than donating cash or a check, consider contributing appreciated assets such as marketable securities, which include stocks, bonds or certificates of deposit. Contributing appreciated assets provides additional flexibility and tax advantages when implemented within the correct structure.

Conclusion

A meaningful philanthropic journey begins with clarity of purpose—identifying the causes that matter most and aligning them with a strategy for impact. From there, the focus shifts to execution: how to channel resources effectively, and which vehicles— whether foundations, trusts, or donor-advised funds— are best suited to achieve that impact. This is typically an iterative process that sometimes takes place over many conversations, often over several months or longer. Further, one’s philanthropy is not static and may evolve and/or expand over time.

In this way, philanthropy can not only produce a significant impact, but it can provide tremendous meaning to those who engage in it. Many of our clients find unending joy knowing that they are truly making a difference. At The Bespoke Group, we take great pride in helping individuals and families find this joy.

If you’re interested in learning more, please read “How to Structure Your Charitable Giving” where we break down different types of foundations and trust structures, and how to identify what structure will best serve your values and philanthropic goals.

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If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.

Thank you for considering Bespoke as your partner in wealth management. We look forward to the opportunity to work with you.

This information is intended for general educational purposes only and should not be construed as legal or investment advice.