Conversation Starters

Conversation Starters

We've found that discussing charitable giving in the context of legacy, impact, and values can yield tremendous benefits in getting to know your clients better and in tailoring an approach to their goals. However, some advisors report that they avoid conversations about charitable giving because it feels too personal. If you're reluctant to discuss charitable giving for this reason, then you may wish to initially concentrate on the tax aspects of charitable giving, and its financial implications. You can help your clients develop a tax-smart strategic plan without getting into discussions of personal values.
Remember, you don't need to be an expert to help your clients with their philanthropy - you only need to be the facilitator: raising the subject, helping them to understand the financial implications, and identifying professionals, products, and services to help your clients achieve their personal goals.

How to Recognize Opportunities to Ask About Charitable Planning
Certain times, events, and opportunities in your clients' lives provide likely occasions for charitable gift planning. The chart below presents some of the major motivators affecting donors' gift planning.
The most advantageous gift plans incorporate two to three of these motivators. In discussing charitable giving with a client, identifying the life events and financial considerations motivating their decisions can help ensure that you take an integrated approach, providing the most benefit available for your clients.
  Common Examples Charitable Planning Considerations
Major Tax Event Liquidation of Significant Asset:
  • Privately-held business
  • Initial Public Offering
  • Significant bonus or incentive compensation payout
  • Other liquidation event
  • Donor needs deduction in same tax year as the liquidation
  • A vehicle which will support giving over multiple years
  • Granting levels which protect principal contribution
Capital Gains Tax Avoidance Active investors with frequent smaller liquidation events Donor frequently needs to transfer asset prior to liquidation to avoid triggering capital gains
Income Tax Reduction High adjusted gross income Donor needs an annual deduction to offset high taxable income
Conversation Starters
Major Tax Event
  • You'll likely know if your client is receiving an inheritance or bringing their company public: "A 'major tax event' is considered a good problem to have. But if it's not handled well, it can be a real missed opportunity. There are many tax concerns we'll need to address, but first, let's take a step back: Have you thought about what you want this money to accomplish for you?"
Capital Gains Avoidance
  • Your clients are probably not asking you to sell appreciated stock so they can donate the taxed proceeds to charity, but they may well be writing a number of checks to charities without considering the source for the cash: "It appears you write quite a few checks to charity-have you considered donating appreciated securities instead of cash? Because you avoid capital gains taxes when you donate securities instead of selling them, you can give the same amount to charity, but it 'costs' you less."

  • It may be appropriate to bring up charitable giving when discussing diversification more broadly, especially to address a concentrated position: "I'm concerned about over-concentration in ABC Co., but instead of just selling the stock and triggering taxes, you may want to use a portion of your holdings to meet your charitable goals and offset taxes."
Income Tax Reduction
  • You may have noticed that your client makes a lot of transfers to different charities at the end of each year: "The end of the year is a very active time for charitable giving. You may find that a consolidated approach makes year-end giving easier for you; it is also typically easier for charities to receive donations in the form of a grant check as opposed to donations of securities. Would you be interested in discussing how a charitable giving plan could benefit you - and the charities you support-at year-end?"

  • It may also be appropriate to bring up charitable giving when discussing income planning more generally: "You can choose to impact your community through paying taxes or through your support for charitable organizations. If you choose to give to charity, those gifts can reduce your income tax. Would you like to look at ways to incorporate tax planning and charitable giving?"
Life-changing Event
  • There are many life-changing events which spur people to re-examine their charitable giving. Whether it's a family illness, a birth, a death, or the graduation of a child from college, life's milestones often inspire people to take stock. If you have a client who's going through the estate planning process, they may be doing so because of a significant event: "Estate planning can be very technical, but at its core is the question of what you want to accomplish with your money-how do you want to affect your family and the broader community?"

Several factors come into play in determining the appropriate charitable gift vehicle for your clients. The key concerns are:
  • Type of asset to be contributed
  • Need for income and timing of that need
  • Tax benefits
  • Privacy
  • Control
  • Simplicity
  • Flexibility
  • Cost
Questions for Consideration
You may want to take the following questions into consideration in determining the right approach for your clients:

  • Are they currently using any charitable gift vehicles?
  • What assets are to be contributed?
  • What are the main tax concerns? (See "How to Recognize Opportunities to Ask About Charitable Giving" in the previous section.)
  • What's the expected duration of funding (a single event, annual contributions, or more frequent or conditional contributions)?
  • What's the desired duration of distributing (granting) to charities (one time, over the life of the donor or for multiple generations)?
  • What are the donor's future income needs?
A conversation about charitable giving can provide an easy introduction to a broader discussion of financial planning goals, and a better understanding of your clients. The better you understand your clients-not just how they want to grow their wealth, but what they hope to accomplish with their wealth-the better you're able to tailor a financial plan to their needs, and to build a trusting relationship that can last for generations.
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