Some wealthy people like to leave a legacy through gifting to their college of choice. However, a new tax could reduce endowment funds.
In a surprise move, the GOP has included a tax on college endowments which could create problems in the future, according to CNBC in “Wall Street college stars are surprise tax reform targets.”
Under the proposal, university endowments would face a 1.4% tax on investment income. If the endowments have executives who are compensated more than $1 million a year, they would face a 20% excise tax.
Several wealthy endowments currently pay multiple executives more than $1 million a year.
If this proposal passes, it could mean that wealthy donors will want to give to their alma maters in different ways. Money given to the endowment funds will also not go as far as it does now.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, which could include gifting to your favorite university.