Giving advice on charitable giving

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

As an accountant, your daily work most likely puts you at the convergence of two forces in society today: an enormous increase in personal wealth and a substantial concern for community.

Despite recent setbacks in the stock market and our economy at large, the number of households with investable assets of $500,000 or more rose from 11.2 million to 33.5 million from 1995 to 2005.

At the same time, people from all economic backgrounds are giving back to their communities in record numbers. Community-based philanthropy is in the front ranks of this movement. In 2000, total annual gifts to community foundations increased to more than $4 billion, up 13 percent from 1999.

What does this mean for your practice?

These trends affect your practice in two significant ways.

First, many advisors are incorporating charitable giving as an integral component in their financial and estate planning activities. They ask their clients, “Do you have charitable giving interests?” as part of their standard planning practice. Charitable giving advice is a value-adding element in an advisor’s portfolio and a service welcomed by clients who expect an integrated approach to their wealth management.

Second, advisors are incorporating community foundations as trusted resources in delivering charitable giving knowledge and products to their clients.

Is it ethical to refer clients to community foundations?

Sometimes accountants question whether it is ethical for them to refer clients to community foundations. By doing so, aren’t you advocating a particular charitable cause?

You are not, because of the fundamental difference between community foundations and other charities.

Community foundations are set up for people to give through them; they are not the end-users of charitable dollars. In 2003, Maryland’s community foundations distributed more than $23 million to charitable organizations. Most of those funds came from donor advised or donor designated funds. It was money that donors passed through the community foundations to other non-profit organizations.

Community foundations act as go-betweens for donors and non-profits. They are organized to help people give effectively to improve the quality of life. They work with your clients to help them give to charities and meet their tax planning goals, and do not dictate the type of gifts their donors can make. By making a referral to a community foundation, you’re not advocating a particular cause.

Getting help with charitable advice

How can community foundations help you give your clients charitable advice? They can:

identify your clients’ charitable giving interests and motivations;
match personal charitable interests with tax planning needs;
create and implement charitable plans that are integrated into major business, personal and financial decisions;
facilitate complex forms of giving and execute technical giving instruments (such as charitable remainder trusts);
provide information on community needs, and on the local agencies and programs that make a difference in the areas your clients care about most; and
deliver grantmaking expertise and a range of administrative services related to charitable giving.

Community foundations are a resource for you. They can help you enrich the charitable giving strategies of your clients. Here’s why:

Community foundations are neutral experts with technical information on a range of planned giving options, from executing gifts of real estate, stock or personal property to establishing donor advised funds or income-producing charitable annuities. Community foundations help advisors provide their clients with the best charitable giving strategies based on each client’s unique financial situation, tax status and giving goals.
Community foundations have in-depth information on local needs and non-profit organizations. When clients ask, “How can I make sure my charitable gifts will make a difference?”you can turn to your local community foundation for information on the programs and agencies that are working well in the specific areas of interest. Community foundations are in touch with local organizations and activities addressing the broad spectrum of community needs, from the environment, arts, education and economic development to special programs for youth, families and senior citizens.
Community foundations serve as vehicles for giving for your clients. For example, community foundations can establish donor-advised funds, the very popular mechanism through which a client can make a charitable gift and stay personally involved in suggesting uses for that gift over time. Community foundations are frequently named in bequests as stewards for estate assets that a client wishes to direct to address specific areas of community need in perpetuity. Giving through a community foundation also provides a client time and resources for evaluating potential grant recipients, as well as the ability to give to multiple charities with a single gift.

For more information

Log onto www.mdcommunityfoundation.org for more information or to connect to a community foundation near you.

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