Some people decide to make significant contributions to charity early in life. However, many donors decide to contribute after they retire or when they finally feel financially secure.

Financial advisors can play a crucial role when their clients consider leaving a charitable legacy by helping them determine:

  • How much they can give.
  • When they can donate.
  • Which assets to contribute.
  • If retirement assets should name heirs or a charity as beneficiary.
  • Whether they should donate directly to charities or establish a charitable vehicle, such as a donor-advised fund (DAF).
  • If a previously established charitable vehicle should be continued, ended, or converted – like a converting a private foundation to a DAF.

Clients who have sold their businesses or retired from successful careers often reflect on their legacy, striving to create meaning. Those who are still working may contemplate what they will do when they have more time for philanthropy.

Many clients have been successful business owners, caring parents, loving spouses, and loyal friends, but they often aspire to be remembered for their generosity and support to causes that impact their communities.

Those seeking to create a charitable legacy have many factors to consider, including:

  • Do they want to donate publicly or anonymously?
  • Do they prefer to start donating now or posthumously?
  • Would they like to involve friends and family in their philanthropic efforts?
  • Are they comfortable being an advocate or fundraiser?

These are just a few of the questions financial advisors can ask when they begin having charitable planning conversations with clients. Below are more topics to address to help solidify a client’s charitable legacy to expand philanthropy in the way that’s best for them.

Engaging Family Members in Charitable Decisions

At some point, most people with wealth determine how much they want to leave to children, grandchildren, and other heirs. Some may also wish to donate assets to a DAF or private foundation so they are put to good use during and after their lifetimes. Engaging heirs in philanthropic decisions fosters family unity– and allows those heirs to continue honoring the donor’s charitable legacy after their passing.

Initiating charitable planning with family now can yield benefits in the future. For instance, when parents communicate their intention to give or leave money to charity, it enables their children to plan accordingly. Having the discussion before a donor’s passing allows the next generation to actively participate in charitable decisions.

Donors and heirs may not always agree on the causes and charities they wish to support, but it is important to engage in discussions and respect these differences. There are always ways to find common ground or compromise. For example, when a family has a private foundation, they may establish complementary DAFsfor their children so they can give to causes outside of the foundation’s mission.

The next generation may not be interested in taking on the administrative burden of managing a private foundation. As a result, the foundation can be terminated, and the assets granted to charities or to various DAFs established for the heirs.

If donors have irreconcilable philanthropic differences with their heirs, they can develop a disposition plan for the assets of the foundation or DAF that predetermines the DAF’s charitable plan before the donor passes. This approach may be the only way to ensure the assets go to the charities donors support upon passing, in perpetuity, or for a limited number of years posthumously. However, financial advisors can help avoid this by including heirs in charitable planning as early as possible.

Creating a Charitable Plan for a Business

Business owners may want to establish a charitable plan for their businesses – even if they plan to pass those businesses down to the next generation or key employees. Funding a corporate DAF can help create a charitable legacy for the business owner. This can ensure that the company continues to support the local communities that have contributed to its success over the years.

Many business owners establish giving plans that allow employees to recommend charities for the business to support. Typically, a business establishes a charitable mission that gives the owners and employees some direction and ensures they recommend charities that are on-mission.

The DAF creator identifies who will continue to serve as the donor-advisor in their absence. If the business closes, the donor-advisor would recommend closing grants to various charities. Some business owners instead set up their own personal DAF, recommending several grants each year and crediting the business for the grant.

Engaging Donors Without Children

An increasing number of donors have no children or other heirs, and financial advisors can help them plan what to do with their wealth. Proactively engaging in discussions with individual donors and couples without children can help them make a meaningful impact – no matter what the future holds.

Donors without children may set up DAFs to distribute funds to charities upon their death instead of passing them down to their heirs. Others name nieces, nephews, or siblings as successor donor-advisors so the DAF accounts continue.

Let’s Talk About Legacy – Let’s Talk DAFs

Those who give to charity during their lifetime can experience the joy of giving, see the impact of their generosity, and receive recognition (if desired) from the charities they support. For others, it may be more suitable to provide funding later in life or posthumously. Regardless of when the giving takes place, financial advisors can help clients create a charitable legacy.

If you or your client are interested in exploring how a DAF can support a charitable legacy, contact American Endowment Foundation today. AEF is thrilled to talk to donors about how DAFs can fit into their charitable planning. Reach out today to see how we’re working to expand philanthropy.

NOTE: An earlier version of this article appeared at Rethinking65.