THE ROLE OF TRUSTED ADVISORS IN PHILANTHROPY The HNW Client & Gift Planning

A bit of perspective… “To give money away is an easy matter and in any man’s power. But to decide to whom to give, and how large and when, and for what purpose and how, is neither in every man’s power nor an easy matter.” - ARISTOTLE

If you want this… Recognize this… Deeper relationships with existing clients Relationships with extended family members New relationships Fully two-thirds of HNW clients who have discussed philanthropy with their advisors failed to receive advice about giving vehicles or assistance in setting one up Advisor/Client Disconnect

PHILANTHROPIC MOTIVATIONS AND ASSUMPTIONS I

Top 3 Motivators: Doing Good What really drives people to make gifts? Why aren’t we on the same page? Being passionate about a cause Having a strong desire to “give back” Having a positive impact on society and the world

Secondary Motivators: Responsibility and Duty What else do they think about? Encourage giving by the next generation Religious or spiritual reasons The obligation wealth brings

Tertiary Motivators: Financial They can be important points but rarely drive the conversation Unfortunately these tend to be the things we think of first. Tax savings “Directing” tax dollars Diversification

Poor Assumptions Could this be closer to what you initially believed? Research suggests a large disconnect between advisors and their HNW clients. Reduction of tax liabilities Creating a family legacy Prestige/Influence Social status

GIFT PLANNING FOR THE FUTURE II

What do you need to do differently? Learn how to develop a strategic giving plan Understand philanthropic instruments and their utilization Integrate philanthropic goals into overall financial plan Engage the next generation

Strategic Giving Plan Helping a client integrate giving into their current financial/estate plan takes effort, but it can be worth it in the long run. Identify individual motivators Determine philanthropic intent-  Gift during life  Gift via estate  Gift use- endowment, capital project, scholarship, naming rights, etc Categorize asset types for lifetime gifts or estate gifts Identify possible instrument(s) SWOT analysis of plan

Understand what’s in your tool belt. The tools professional philanthropists use is extensive. Outright gifts  Cash, appreciated securities, personal property, real estate, artwork, closely held business interests, LLC membership, Gifts-in-Kind, “Related-use”, etc. Donor Advised Funds  Popular gift instrument for its unique characteristics Gifts that pay income  Charitable Gift Annuities, Charitable Remainder Trusts (CRAT, CRUT, NICRUT, NIMCRUT, Flip, etc.) Other types of Charitable Trusts  Charitable Lead Trusts (grantor & non grantor, shark fin, etc.) Gifts that cost nothing during life  Bequests, ILIT, Income for a beneficiary, Beneficiary designations, IRD items, QTIP, etc.

Integration Does your glossy financial and wealth management plan take into account their philanthropy? Really? Implement their charitable mission Distribute assets to their various interests as efficiently as possible Income source options for retirement or survivors Investment performance of trust assets Tax implications for survivors and heirs So much more…

G2 What does the next generation think about all of this? Are they as involved as they should be? Can you help your clients educate heirs about the family’s philanthropic priorities? Are you willing to let them be involved? Have you met their executor(rix)? Isn’t this beneficial to you as well?

REALITY CHECK III

Misplaced Focus Tax benefits are not the primary driver of philanthropy Focusing on technical issues fails to uncover the real motivation for giving The next generation (your client’s heirs) aren’t being engaged adequately

Misplaced Fear Advisors fear engaging in this discussion out of fear they will lose assets under management Many options exist for retaining the assets- CRT’s, CLT’s, DAF’s, and more can retain the advisor relationship Other strategies exist for leveraging assets for wealth replacement strategies

Ethical Issues for the Advisor Primacy of Philanthropy Respect Disclosure Conflict of Interest Confidentiality Reasonable Compensation