Affluent Millennials Use This Strategy to Lower Taxes and Build Next-Gen Wealth While Giving Back

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Affluent millennial woman
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Millennials, who are now the highest-earning generation in the United States, have found a strategy that helps them lower taxes and build next-generation wealth while giving back, writes Jonathon Morrison for Forbes.

Millennials with high incomes who are philanthropic and focused on impact investments are increasingly turning to optimized charitable lead annuity trusts. These are a special type of charitable lead annuity trust that optimizes contributors’ tax and economic benefits.

By shifting assets that are equal to their desired tax deduction into a new OCLAT investment account, millennials create a triple tax-advantaged retirement account that has the potential to grow exponentially over time.

The account is also a giving engine that donates to charity in increasing amounts based on a fixed schedule and an IRS-set hurdle rate.

This strategy for tax deduction is approved by the IRS and provides many benefits that are attractive to wealthy millennials, such as a high funding limit and charitable giving, savings for retirement, and components for generational wealth transfer.

Specifically, the person funding the OCLAT is given a tax deduction that is equal to the amount that was contributed to the trust that year. This provides immediate tax savings. Furthermore, the OCLAT assets are exempt from personal creditors, lawsuits, and bankruptcy.

The OCLAT funder selects the starting charitable period, which is typically 30 years, and invests the funds while making required donations of a part of the trust assets to charities they select.

At the end of the charitable period, the funder can usually expect to get back two to five times their original contribution to the OCLAT. This may be transferred back to them with no income taxes or given to their children or other heirs with no income taxes or the 40 percent federal gift/inheritance tax.

Read more about this strategy in Forbes.

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