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Legacy Matters
BlogsPublications | March 28, 2024
4 minute read
Legacy Matters

Hot Topics for Private Clients and Family Offices from the 2024 Heckerling Institute on Estate Planning – Part Two

In our previous blog post on the 2024 Heckerling Institute on Estate Planning, we highlighted some of the concepts and cases related to valuation that were discussed at the conference. In this second post, we share some of the conference’s relevant takeaways for high-net-worth clients and family offices related to other “hot topics” in wealth planning.

1. 501(c)(4) Social Welfare Organizations

Under certain circumstances, it might make sense to form a 501(c)(4) social welfare organization rather than a 501(c)(3) charitable organization. A (c)(4) is an organization that provides benefit “in some way” to the community and is substantially focused on social welfare, but also may engage in non-social welfare activities (typically less than 15% of total activity). As a result, a (c)(4) allows for the same charitable activities as a (c)(3), plus a few more outside the scope of what is typically permissible for a (c)(3), including, but not limited to, some level of lobbying and political activity so long as these activities both serve a public goal.

The “pros” of a 501(c)(4):

  • There is no public support test.
  • Private foundation self-dealing rules do not apply.
  • There is no tax on dividends earned by the (c)(4).
  • Contribution of appreciated property to the (c)(4) will not trigger gift tax or gain (rather, the (c)(4) may later sell the asset and avoid capital gain entirely).
  • A (c)(4) has a broader array of permitted activities than a (c)(3).

The “cons” of a 501(c)(4):

  • Taxpayers receive no charitable income tax deduction for assets (cash or property) contributed to the (c)(4).
  • Unrelated business income tax (UBIT), private inurement and excess benefit rules apply.
  • If control is retained, it is likely the (c)(4) will be includible in the taxpayer’s estate.

The takeaway: While this type of entity does not make sense in all cases, it might be a good strategy for younger philanthropists who wish to affect great change with fewer rules and restrictions.

2. ESG Investing and Trustee Duties

ESG (environmental, social and governance) investing is a hot topic right now, with a focus on whether ESG investing always means an investor must sacrifice financial growth to accomplish social goals and also what considerations must be weighed by a trustee who has been instructed to engage in ESG investing.

ESG investment strategies began in the 1970s with religious investors who would screen-out companies connected to objectionable products, policies, etc. Modern ESG investing goes well beyond providing negative screening and considers ideas such as a company’s ethics, views on human rights or work in sustainability practices. Further, it is well documented that investing with an ESG focus does not always mean sacrificing return.

This balance between pursuing ESG goals and upholding financial responsibilities is especially difficult for trustees to maintain. Since a trustee must act in the sole interest of the beneficiaries without imputing the trustee’s own personal views, conflicting ESG and financial goals can create issues for trustees when making investment decisions.

Examples of questions trustees are currently facing include:

  • Is a trustee violating their duty of loyalty and duty to invest assets prudently when investing in ESG investments if the focus of the investment is not on maximum return?
  • What if the current beneficiaries request that the trustee engage in ESG investing? Although this could mean that the trustee may not have liability to that class of beneficiaries, does the trustee have potential liability exposure as to future generations of beneficiaries and/or remainder beneficiaries?

The takeaway: With no clear rules here, good communication with all current generations of beneficiaries is vital when ESG investing is contemplated. In cases where it is determined that pursuing a certain ESG investment strategy would not maximize financial returns for all generations of beneficiaries, trustees may want to seek legal counsel or request court approval of the investment policy they are using.

3. The Corporate Transparency Act (CTA)

Many sessions during the Heckerling conference focused on the CTA. This law, which was effective in January, requires new reporting tasks for many family offices and other entities, including limited liability companies (LLCs), limited partnerships (LPs) and S and C corporations. See our previous blog post on this topic here.

The takeaway: Although legal challenges to the CTA are underway, reporting obligations have started, and entities and family offices that are required to file reports will need time to collect the necessary information and may need legal guidance on determining the individuals that qualify as beneficial owners of each reporting company.

If you have questions on any of the topics highlighted here or need assistance with any wealth planning questions or issues, please contact your Warner attorney or Laura Jeltema at or 616.752.2161.