Help your clients with charitable giving: Listen for charitable opportunities

Note: This is the third in a six-part series of articles contributed by the Maryland Community Foundation Initiative to help advisors work with their clients on charitable giving.

Philanthropy is a very personal decision. Giving money to improve the community reflects the values and beliefs of an individual.

Many clients may wish to be more charitable or effective in their giving, but may be unaware of some of the opportunities for charitable giving. An accountant can help clients realize their charitable objectives by listening for charitable giving opportunities, explaining options and suggesting solutions.

Many clients want their professional advisors to help them plan charitable giving. Your community foundation can work with you to answer these questions and help each client fulfill his or her charitable goals.

What are your client’s personal motivations for charitable giving?
What are your client’s charitable interests in the community?
What are your client’s priorities when focusing on a few areas that make the greatest impact?
What level of involvement does your client want to have in identifying charitable uses for his or her gift?
What type of giving instrument best fits your client’s financial situation and tax status?

Why talk about charitable giving?

Why should you talk to your clients about charitable giving? Often, professional advisors are reluctant to discuss charitable planning with their clients because they equate this area of planning with soliciting the client for a charitable gift. Some professional advisors feel uncomfortable talking about charitable giving unless the client raises the subject first.

This dilemma is resolved as soon as charitable planning strategies are seen as a critical piece of the overall planning process. By not broaching the subject, a significant opportunity may be lost for your client and the community. In fact, many individuals expect their professional advisors to bring up the subject if appropriate ... and assume charitable giving is not an option if the subject is not raised.

How do you know when you’re hearing a charitable opportunity? Timing is key. Significant giving opportunities often arise when clients are making major business, personal and financial decisions. Community foundation staff can work with you and your client to recommend the best charitable solution.

Charitable opportunities

There are a number of situations that lend themselves to charitable planning.

Year-end tax planning: Your client just earned a large bonus and wants to give a portion back to the community but has no time to decide on the most deserving charitable organizations. Recommend establishing a donor-advised fund through his or her community foundation for an immediate tax deduction, and the ability to stay involved in recommending uses for the gift for years to come.
Preserving an estate: Estate planning identifies significant taxes going to the IRS, but your client wants to direct dollars for local benefit. The community foundation can work with you and your client to reduce his or her taxable estate through a charitable bequest or other planned gift. Your client’s gift will create a legacy of caring in the community that stays true to his or her charitable intent forever.
Retiring in comfort: Your client is concerned about running out of money during his or her lifetime but has always been charitable. Recommend establishing a life income gift (such as a charitable remainder trust) at his or her community foundation that pays income potentially for life. Upon your client’s death, the gift can be distributed by the community foundation in accordance with his or her charitable interests.
Establishing a private foundation: Your client is thinking about establishing a private foundation but is looking for a simpler, more cost-efficient alternative. The community foundation can help you and your client analyze the pros and cons of creating a donor-advised fund, a supporting organization or a private foundation.
Closely held stock: Your client’s personal net worth is primarily tied up in a closely held company, but it’s important to him or her to give back to the community. Recommend establishing a donor-advised fund or planned gift; your client is eligible for a tax deduction measured by the fair market value of appreciated stock (less any planned gift value).
Sale or disposition of highly appreciated stock: Your client has appreciated stock and wants to use a portion of the gains for charitable giving, but the identified charities are too small to accept direct stock gifts. Suggest establishing a fund at a community foundation with a gift of appreciated stock. Your client receives a tax deduction on the full market value while avoiding the capital gains tax that would otherwise arise from the sale of the stock. Your client can even be involved in recommending uses for the gift, including the organizations and programs he or she cares about most.
Sale of a business: Your client owns highly appreciate stock in a company that is about to be acquired. The community foundation can work with you to suggest several ways to structure a charitable gift (including the use of planned giving techniques) to help your client reduce capital gains tax and maximize impact to the community.
Strategic giving: Your client is passionate about helping meet a specific community need and wants to make a meaningful gift. You and your client can work with grant-making experts at your local community foundation to understand community needs and programs and then direct gift dollars to make the greatest impact.
Substantial IRA / 401(k) assets: Your client wants to leave his or her estate to community and family and has substantial assets in retirement accounts. The community foundation can help you and your client evaluate the most beneficial asset distribution to minimize taxes, giving more to his or her heirs and preserving charitable intent.

What this means for your practice

Taking an active approach to charitable planning can build deeper, richer client relationships, enhance client loyalty and result in better service. It positions the advisor and the firm to be civic-minded. Indeed, as the “business” of philanthropy grows, if the advisor fails to relate charitable planning opportunities to the client, a competitor is sure to do so and the advisor may lose a client. Earning a reputation in the community as the CPA who cares about philanthropic planning is well worth doing.

When a broker or financial advisor recommends an appropriate planning strategy, it may easily generate more assets for management or the need for additional life insurance. Helping a client add value to his or her planning picture can also add value to your practice.

What is most important is that you are knowledgeable about the many ways charitable planning options can help solve everyday tax, estate and financial planning problems while adding value to the client’s family and the community. Community foundations can work with you to enhance the services clients seek from you and your firm – always respecting and working within the relationships you have developed and lead with your clients.

For more information

Log onto www.mdcommunityfoundation.org for more information or to connect to one of the community foundations near you. They include:

Baltimore Community Foundation
The Community Foundation of Carroll County
Community Foundation of the Chesapeake
The Columbia Foundation
Community Foundation of the Eastern Shore
The Community Foundation of Frederick County
The Mid-Shore Community Foundation
The Montgomery County Community Foundation
The Prince George’s Community Foundation
Community Foundation of Washington County

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