Charitable Planning: Have the Conversation NowSubmitted by American Endowment Foundation on October 10th, 2016
If you and your clients want to add stress to what should be a rewarding, gratifying, fulfilling and even joyous experience, then do not talk with your clients now about their charitable giving plans for the remainder of the year.
Instead, wait for them to contact you at the end of December at which point you can hear about what tax-inefficient donations they intend to make or have already made, which stocks or mutual funds they want to think about donating at the last minute, which other assets outside of your control that they decide they no longer want but ask if they could be donated to charity, which charitable vehicles they would like to set up but may not be able to given the late notice, which new causes or charities they may decide they may want to support but first want to research and vet, which family members they may want to get involved in their charitable giving decisions, and how much they assume would be the right amount that they should donate to charity by year-end.
If, however, you want to be able to enjoy the holiday season with your family and friends instead of working late each night leading up to December 31, if you want to enable your clients to experience the satisfaction and pride that they should because of their generous donations, and if you want your clients to appreciate how you have helped them in ways they could not have imagined previously, then for everyone’s sake, please initiate the charitable discussion now.
Clients will appreciate your call now, as they know that they will soon have to plan if they have not begun to do so. Often they are aware that they can be more effective and efficient donors, but because they wait until the end of the year, they may just repeat what they did the previous years. They are usually passionate about different causes or organizations and want to support them, but because the charities simply ask them for checks or credit cards, that is what the donors give them.
You can be a hero and further deepen these client relationships by making just a few (or more!) simple (or more complex!) suggestions that will enable them to be more generous with their contributions or enable them to keep more money themselves. If you are talking with prospective clients now as they begin to think about making year-end donations, you can differentiate yourself from other advisors by discussing the topic.
Here are the steps and items you can discuss with them:
- Review donations they have already made this year, and look back at what they did at the end of last year.
- Discuss what assets they intend to donate, and whether any investments that you control should be sold, the sale of which may create a large capital gain and subsequent tax bill if not donated to charity.
- Ask if there are other assets they no longer want or need or plan to sell that can be used as a donation, such as a vacation home, business (donate a portion or all of the privately held stock), art or collectibles, farmland or other real estate, life insurance, etc.
- Discuss if they have a donor advised fund (DAF) or other charitable vehicle, or whether it makes sense to open one. If you do not manage those assets already, determine if you can since most clients want their advisors to manage their charitable assets to get the optimal performance. American Endowment Foundation (AEF), enables advisors to manage at any amount, Fidelity and Schwab allow a $250K minimum and others including community foundations allow at typically higher levels. Some DAFs allow more control and offer more investment options than others.
- Are there new charities that they intend to support this year? For any substantial donation, donors should meet with the charity they intend to support. Non-profits are very busy during December, so this visit can be scheduled earlier.
- Clients should also be encouraged to talk with charities they regularly support to discuss if they have any special needs or other ways in which they can help them.
- Should clients make a large donation now to a donor advised fund that can enable them to make grants over a number of years to one or many charities? Some donors don’t want to give too much to one charity at one time, or they have a complex asset that a charity cannot accept, so they can donate it to a DAF from which it can make numerous grants that will be easy for a charity to accept.
- If clients want to get their children involved or seek the advice of other friends or family members, start the process now instead of rushing the process when everyone is busy with the holidays. Suggest a Thanksgiving meeting with the family to discuss this if it can’t be done before.
- If clients know that they need to make a donation for tax reasons but just cannot or will not decide where to donate before the end of the year, establish a donor-advised fund so they get the full tax donation that they are entitled. Though nearly all donors who establish DAFs intend to make grants at some point, encourage them to start the process to identify charities they will support.
- Include your clients’ other advisors when possible and appropriate. For example, attorneys who recommend that their client set up a DAF should engage the wealth advisor to ascertain whether one DAF would enable the clients to achieve their goals and also allow the advisor to manage the assets.
By having the conversation now, your clients will thank you, and the charities your clients support will thank your clients. It is the ultimate win-win-win!
(This article originally appeared in FA: Financial Advisor, October 15, 2015)
Here at AEF, we look forward to discussing the particulars of your client and how a donor advised fund may be right for them and their circumstances. Call us at 1-888-660-4508 or contact us; we look forward to helping you.