Will more high-net-worth individuals give their dollars to their children instead of charity because of the estate tax repeal in 2010?

A momentary lapse is NOT a repeal....who are you kidding?? Did you read "retroactive"?? The kids always want the money, even at 45-55 cents on the dollar. And while the uber wealthy may be different, most of my tithing and gifting clients couldn't care less about the tax incentive (they appreciate the tax code reward but are not significantly incented by the code). The IRA beneficiary rule change should be incenting foundations and charities to alleviate IRD taxes for donors at death. In the meantime, incentives and reward for living gifts of appreciated assets, RMDs, gift annuities, remainder and lead trusts, etc. are all still in play.

Clients who I would consider "super wealthy" have set up plans to give a small portion to the children and the bulk to charities or private foundation. None of them have requested any changes for this year.

I totally disagree that repeal of the estate tax will lessen charitable giving at death and during lifetime. Without the estate tax, the descedent will have far greater assets available for disposition as no estate tax will need to be paid. I believe about 10% of large estates today go to charity. When compared to the 45% estate tax savings, decedents will have far more resources available to them to give to charities, even if they aren't getting an estate tax deduction. I have confidence that a large portion of these savings will go to charity such that more than 10% of large estates will go to charity. With respect to lifetime giving, if there is no longer an estate tax and an unlimited estate tax deduction, advisers will start recommending to their clients that if they want to get tax benefits, they better get off their duffs and start giving. This way they can capture an income tax charitable deduction that can only be realized through lifetime contributions. This should accelerate giving, especially by the complacent super-well-to-do who postpone lifetime giving because on death they make a provision for charity. Again, in order to capture a current tax benefit, I believe more would contribute during life. If I were a policy leader focused on the impact of repeal on charitable giving at death and during life, I would really have to carefully balance these factors. In part it needs to cnsider human nature and what motivates people to do certain things. But to me a wealthier potential giver is in a better position to give than a less wealthy potential giver so removing a potential 45% tax makes a person far wealthier and, in all liklihood, more willing to give. I like my side of the argument better and would be a proponent of repeal should I be a policy maker looking after charitable interests.

I agree with ProAppeal...I find that nothing "hardens the heart" more than being forced into an action. My clients to a fault are very charitable and built their wealth by being "smart" business people. When they see the waste and fraud in Washington and the very thought of these "know nothings" putting more rules and regulations on them and/or forcing them into action makes them less charitable.

There's an interesting continuity to the posts here so far....earned and well managed wealth is more often gifted due to altruism, idealism, and social responsibility than by tax code incentives or penalties. However, the tax code does affect the form and timing of gifting strategies. And to Bob's point, earned wealth often understands the devastating effects of UNEARNED wealth, including inherited wealth, lawsuit bonanzas, lottery winners, celebrities and athletes, etc., which leads many wealthy families to disinherit purposefully. Not to the point of impoverishment certainly but in ways that encourage strength, creativity, and productivity in the next generations. This, I believe, is a very American trait and a philosophic rejection of entrenched, blue blooded wealth, with endless generations of spoiled and unproductive progeny (who have demonstrated an amazing capacity to squander and decimate their unearned wealth within 1-2 generations anyway). Not to suggest that there is no love of money and pursuit of wealth - simply that those smart enough and hard working enough to CREATE and MANAGE wealth in America, have a different perspective on it's ultimate distribution from our European and Asian cousins. Finally, I would note that my experience in estate and charitable gift planning is that there is no such thing as the either-or option suggested by the article - children or charity. There are many strategies which "replace" any and all charitable gifts made while living or at death if desireable to the client family. Indeed, there are current and at-death estate/charitable strategies which increase net wealth transferred to family; many are particularly useful in reducing income taxes NOW and are often used by the financially-secure demographic (as opposed to the super wealthy who use them too). The estate tax code at your unpredictable future death date is unknown but the income tax code this year offers plenty of incentive for the philanthropic to seek out professional planning help. I have worked many years in charitable gifting and I believe many charities (less so with foundations) are very short sighted and cash-gift focused to their detriment. I have found an amazing indifference among fund raisers about estate and charitable gift planning education for their donor bases. Frankly, my experience has been that helping those who already give to implement good strategies can greatly increase the size of gifts from those now giving without any new donors at all.....many charities just don't get it.

It should be noted that, while the Estate Tax has been repealed in 2010 (along with the Generation Skipping Tax), that does NOT mean that estate transfer taxes have gone away. The "modified carry over regime" that exists in 2010 will probably impact ten times as many families of those dying in 2010 as would have been impacted by the estate/gift/income tax law as it existed last year. "Carry over" is a record keeping NIGHTMARE! Moreover, the allocation of Basis Adjustment permitted under 2010 law (3.0 million to surviving spouse; 1.3 million to anyone else) is anything but simple, and may not be authorized by a decedent's estate planning documents. Many Americans now have estate planning documents that provide for bequests to charities in accordance with formulas referencing such things as "my gross estate as determined for estate tax purposes" or "the excess above that amount which will not be subject to estate tax". Those charities may not get anything if that estate owner dies in 2010. Congress has failed miserably in its responsibility to FIX this ongoing disaster. Most Congresspersons and Senators have no idea how huge a mess they created by (a) creating for a "now you see it; now you don't; now you see it again" estate tax law and/or (b) colluding in a refusal to repair the stupidly clumsy structure they built. And, from the reports I get, a fix isn't in the works because they're too busy playing "block the other side's efforts" to focus on crafting law that will allow American taxpayers to play intelligently for the future. Will charities gain or lose by the imposition of a "no estate tax but modified carryover in basis" in 2010? I don't know. They may gain OR LOSE by the almost certain HUGE increase in American taxpayers who revise their estate planning documents this year. (If your clients don't realize that they need to revisit their estate planning NOW, you'd better let 'em know!) I suspect that charities may lose some of what might otherwise have gone to them when clients understand that 2010 is a much better year for making gifts to grandkids than any year before OR AFTER. But I could be dead wrong on that. Wouldn't surprise me a bit. - John Olsen

I don't think it is an either/or decision. With the government not taking any, the beneficiaries can now be charity AND the children. The really significant social experiment is the literal life and death decision that those who are dealing with a terminal illness must make between now and when the tax is reinstated. Rick Prince, CFP, CLU, ChFC, CASL