The Top Ten Ingredients for Successful Charitable Planning

The Top Ten Ingredients for Successful Charitable Planning

Article posted in on 25 October 2011| comments
audience: Advisors in Philanthropy | last updated: 22 March 2013


Advisors who don't provide philanthropic advice are missing a big opportunity. Here are the top ten things to consider in the philanthropic planning process.   

By Meg Lassar

Financial advisors can go to great depth on investment strategies with complex maturation schedules, risk profiles and tax minimization. But charitable giving, it seems so … soft, doesn’t it? 

Charitable giving is a topic that will come up more often since over the next 40 years there will be an estimated $41 trillion in wealth transferred from one generation to the next as baby boomers retire in numbers. If historical trends hold true, around 6% to 8% of that wealth will go toward charitable causes.   

Surveys by PNC Wealth Management and Bank of America conducted last year indicate that high net worth (HNW) individuals view philanthropic decision-making as inextricably linked to their broader financial planning initiatives. When one considers this fact, it’s no surprise that clients are turning to their legal and financial advisors to assist them in developing plans for charitable giving.  

However, philanthropy is often the most underexamined portion of a wealth-holder’s financial portfolio. According to a 2010 Fidelity Charitable Gift Fund survey of private client advisors, only 52 percent provide philanthropy-related advice. 

Clearly, this is a missed business opportunity. 

In order to help advisors work more effectively with clients around the development and implementation of charitable intent, the following “top ten” list outlines items to consider in the philanthropic planning process. Having this information at your fingertips means you will be better able to: 
•    Engage clients in discussions about charitable intent, options and opportunities
•    Ensure that clients have the resources necessary to support philanthropic activities and interests
•    Educate clients about the responsibilities that come with meaningful philanthropy

One: Key Questions For Initiating The Conversation

Incorporate key questions into client intake surveys and annual reviews to help integrate the charitable planning conversation in a way that respects clients’ privacy, values, and autonomy. Guiding questions such as “what percentage of your assets do you plan to devote to philanthropy?” and “what does successful philanthropy look like to you?” help advisors to better understand clients’ philanthropic goals, who they want involved in the charitable planning and decision-making processes, and how they envision implementing their charitable activities.

Two: Charitable Planning Checklist

Charitable planning is a multifaceted process involving several key players (see item three, “The Client-Centered Team”).  A comprehensive “to do” list will ensure that advisors cover all of the most important, and some of the most frequently overlooked, aspects of the charitable planning process and will tell them which professionals should be included at each stage. 

Items on such a checklist might include:
•    Assess donor intent
•    Determine time horizon for charitable giving vehicles
•    Periodically review the estate plan to ensure that named charities, giving strategy and named trustees are still in alignment with clients’ intent

Three: The Client-Centered Team

Effective charitable planning requires the collaboration of a diverse set of private client advisors—from wealth managers to accountants to estate planning attorneys. A key element of the client-centered team is the philanthropic advisor—a professional with specialized knowledge of the nonprofit sector that can help colleagues to navigate the philanthropic landscape. 

Four:  Comparative Information on Charitable Giving Vehicles

Often, advisors fall into the pattern of recommending those giving vehicles with which they have most familiarity. Yet different types of donors are best served by different types of giving vehicles. Be sure to research the benefits and limitations of all the options so that you can discuss and ultimately recommend the vehicle most suited to your clients’ needs. 

Five:  Leveraging Charitable Lead And Remainder Trusts

Charitable Remainder and Charitable Lead Trusts provide a means by which clients can transfer wealth in a tax efficient way to both charitable and non-charitable beneficiaries. 

Six:  Financial/Estate/Tax Planning Considerations For Non-Cash Asset Contributions

By donating non-cash assets such as appreciated securities, artwork or real estate, clients can support the causes they care about while preserving cash and generating income tax benefits. However, donating illiquid assets takes a bit more planning than traditional cash giving. It is therefore paramount that advisors are well versed in the benefits, limitations and processes associated with gifting these types of assets.

Seven:  Engaging The Next Generation 

A recent survey of multi-family offices by New Philanthropy Capital found that 85 percent of families with children either discuss or actively involve their children in philanthropy, and 60 percent of these families would find philanthropy advice useful in doing so.

Therefore, it is important for advisors to be aware of various strategies for bringing children and grandchildren into the planning process, including:
•    Providing opportunities for experiential learning. For example, you might encourage clients to set aside a pool of discretionary funds over which the next generation has spending authority. 
•    Encourage grandparents to write letters describing the motivations behind their philanthropy and laying out the goals they hope to achieve with their charitable investments. Letters such as these can foster meaningful dialogue across generations and help guide the continuation of family philanthropy.

Eight:  Legal Fundamentals Of International Giving

International giving by U.S.-based donors is on the rise. In fact, international giving by U.S.-based foundations has more than tripled over the last decade, from $2.0 billion in 2000 to $6.7 billion in 2009.  Facilitating direct cross border giving comes with its fair share of paperwork. With a guide outlining the legal fundamentals—and a trusted attorney with expertise on the issue—you can help your clients to realize their global giving goals. 

Nine:  Due Diligence 

Conduct due diligence on the nonprofit organizations your clients wish to support.  Checking tax-exempt status, reviewing organizational audits and budgets and inquiring about conflict of interest policies will give clients confidence that they are funding organizations that are effectively governed, accountable, fiscally responsible and aligned with their core values. Prudent due diligence is especially important as the nonprofit sector grapples with economic fallout, state government funding cuts and the stain of recent high-profile scandals.

Ten:  Philanthropy Resources For Clients

The following are examples of resources that you can introduce to your clients in order to enrich their philanthropic experiences:
•    Regional Associations of Grantmakers (RAGs) bring donors together for networking and educational purposes with the goal of improving the quality of life in a particular region. Advisors can find out if there is a RAG in their region by visiting
•    Peer Funding Networks provide donors with shared interests the opportunity to fund projects together, to learn grantmaking best practices or to learn more about a particular issue area. For example, the Environmental Grantmakers Association promotes effective environmental philanthropy by sharing knowledge, facilitating collaboration, and catalyzing action on environmental issues.
•    There are also national associations such as the Association of Small Foundations which provide donors and their advisors access to the most up-to-date and highest quality information on best philanthropic practices. They host webinars and conferences that allow donors to share their funding experiences with one another and learn about the most recent trends in philanthropy. They also publish useful resource guides on wide-ranging issues from foundation governance to instilling philanthropic interests in children.

More information, tools and resources for supporting the charitable planning conversation can be found in the Charitable Planning Desk Reference for Advisors™. The Desk Reference was developed by a team of philanthropic, legal and wealth advisors to help their colleagues seamlessly integrate charitable planning into their broader advisory practices. By doing so, advisors will further solidify their relationships with clients, thereby increasing the potential for new referrals and opening the door to new clients searching for assistance in realizing their philanthropic goals.

Meg Lassar is an analyst with Strategic Philanthropy Ltd., a philanthropic advisory practice based in Chicago serving clients worldwide. The firm works with individuals, families, and closely held and family-owned businesses, helping them plan, assess and manage their charitable giving.

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