September 2024 Professional Advisor News

“Nothing is so fatiguing as the eternal hanging on of an uncompleted task.”
– William James

Procrastination is a drain in ways that go far deeper than the incomplete task itself. We know this intellectually, but it can be so hard to break the procrastination habit. It seems that the more daunting the task, the harder it is to tackle. This may be a reason some of your clients routinely put off important planning discussions. And of course, many of those discussions are tax-sensitive, which means year-end can get very hectic and stressful for clients who wait until the last minute.

As the year begins to wind down, consider tapping into your clients’ philanthropic interests as a catalyst to motivate them to start addressing year-end planning items right now rather than waiting until November or December. You may discover that the uplifting topic of philanthropy makes it easier to at least start a conversation. Then, the conversation can evolve to include not only charitable giving topics, but also other tax planning topics that need attention.

Here’s how this could work with a client:

• Review the charitable components of the client’s estate and financial plans, including provisions in wills and trusts, beneficiary designations, donor-advised funds, prior years’ tax deductions, and historical gifts to favorite charities.
• Reach out to the client to suggest that you meet – or at least jump on a call – to check in on 2024 charitable giving plans and other items.
• Open the conversation by briefly recapping the charitable planning components already in place and the client’s history of giving. Then ask the client about their plans for 2024.
• As you talk with the client about charitable intentions, bring up various charitable giving tools and opportunities that match those intentions. In each case, a charitable discussion can be a springboard for general tax planning items that need to be addressed before year-end.
• For example, if a client who is over 70 ½ mentions wanting to support a particular need or organization in the community, you can suggest that you loop in the GiveWell Community Foundation team to potentially establish a field-of-interest or designated fund, which can then receive distributions from the client’s IRA up to $105,000 annually per spouse. This, in turn, opens the door to discuss Required Minimum Distributions and other elements of retirement planning in general.
• If a client mentions that they are already dreading gathering tax receipts for 2024 charitable donations, suggest that the client consider setting up a donor-advised fund at the Community Foundation to serve as a convenient and rewarding “hub” for charitable giving. Going forward, the client can conduct the bulk of their giving using the donor-advised fund and avoid the mad scramble for receipts. If the client already has a donor-advised fund, make sure they know how to use it most effectively, and reach out to us for help. What’s more, discussing charitable donation receipts presents a nice opening to remind a client about other paperwork that may need to be gathered or completed to meet overall estate and financial planning goals.
• When your client talks about nonprofit organizations they plan to support before year-end, you could remind them not to automatically reach for the checkbook. Most of the time, highly-appreciated marketable securities (or other highly-appreciated, long-term assets) are ideal gifts to a client’s fund at the Community Foundation or other public charity because the client is eligible for a tax deduction at the assets’ fair market value, and the proceeds from the sale of the assets will flow into the client’s fund free from capital gains tax. That means more assets are available to support the client’s favorite causes. In addition, the conversation about highly appreciated stock can segue naturally into a conversation about overall stock positions.
• Philanthropy topics can naturally lead into even more topics that are sensitive to year-end timing, such as annual exclusion gifts, estimated tax planning, and updating wills and trusts before the extended family gathers for the holiday or travels together overseas.

Our professional staff is here to help you serve your charitable clients every step of the way, every month of the year. We understand that late-December transactions are often unavoidable. We’re happy to collaborate with you according to your clients’ schedules, whether that means helping you plan in September for year-end, preparing fund agreements in December, or getting a jump on a new year and processing stock gifts in February. It’s our pleasure to assist in a personalized way that makes sense for each of your clients.

If many of your clients serve on nonprofit boards of directors or regularly support nonprofit organizations, endowments have likely already been on your radar. The Lilly Endowment’s recent record-breaking gift of $100 million to the National Park Foundation has certainly raised the profile of not only charitable giving in the United States, but also the various legal structures that can be utilized to accomplish charitable goals.

The Lilly Endowment is an example of a foundation established by shareholders in a family business (in this case, Eli Lilly and Company) to provide charitable support in perpetuity; in other words, as its name suggests, an “endowment.”

“Endowments” can be created by private donors to carry out a family’s charitable intentions for generations to come. Endowments like this typically distribute only net income; the principal stays intact and cannot be accessed. On the other hand, a nonprofit’s board of directors can establish an endowment to help the organization weather the ups and downs of both the economy and community needs. When an endowment is created by an organization itself, and its board of directors is permitted to vote from time to time to dip into principal for specific reasons, the endowment is often referred to as a “quasi-endowment.”

GiveWell Community Foundation can provide structure and offer services for all types of endowments, whether established by a nonprofit’s board of directors or by a private donor, and whether the endowment is small or large.

Here are four situations that could signal an opportunity for you to suggest that a client explore establishing an endowment at the Community Foundation:

• The client serves on one or more nonprofit boards of directors, especially if the client serves on the executive committee, finance committee, or investment committee. In those cases, you and the client may decide that fiduciary board duties call for the board authorizing the creation of an endowment or reserve fund for the organization.
• The client has been deeply involved in a handful of charitable organizations for many years, whether as a board member, major donor, or both. This type of client could be interested in personally establishing an endowment fund at the Community Foundation to support a particular organization (or multiple organizations) in perpetuity.
• The client has been engaged with a wide variety of nonprofit organizations over the years and overall has been actively involved in civic activities. A client like this would likely be interested in exploring ways to establish a permanent endowment to support community needs as they arise in the future and are difficult to predict right now.
• The client is a big believer in philanthropy in general, and perhaps has led capital campaigns or provided matching dollars for several favorite organizations’ fundraising efforts. This client may be interested in establishing an endowment fund to support GiveWell Community Foundation itself, thereby helping to ensure that the Community Foundation can continue to grow philanthropy, connect donors to the causes they care about, and facilitate dialogue about critical community issues.

Please reach out to learn more about these and other client scenarios where an endowment fund can help a client achieve financial and estate planning goals as well as charitable goals. GiveWell Community Foundation is itself a permanent institution, and our board and staff are honored to help strengthen our community in perpetuity through endowments and a wide variety of other fund types. We look forward to working with you and your clients!

GiveWell Community Foundation’s professional staff keeps a finger on the pulse of current events and legal developments that could impact the way you work with your charitable clients. Below are three notable items that you’ll likely want to keep in mind this fall:

Election year implications
Naturally, as a professional advisor, you’re interested in how the results of the November elections could impact tax laws. What you might not know, though, is how significantly an election cycle can impact nonprofit organizations. Keep this dynamic in mind as you meet with clients who serve on nonprofit boards. These clients will appreciate the fact that you’re aware of the challenges. They’ll also be glad to know that you’re happy to loop in with the Community Foundation as a resource to structure and accept complex gifts as nonprofit organizations amp up their fundraising efforts this year.

Snapshot of giving trends
If it feels like more clients are asking about giving techniques such as crowdfunding, using appreciated stock to support nonprofits, and setting up donor-advised funds, you are not imagining it. These trends are real! It’s smart to stay up to date at a high level so that you’re aware of what’s going on with philanthropy. Beyond that, our professional staff is here for you and honored to take your call any time a client mentions that they would like to launch or update a charitable giving plan. In most cases, we can provide tools and services that will help your client achieve their goals. In any event, we’ll help you figure out a solution, whether or not the Community Foundation ultimately plays a role. You know your clients, we know philanthropy.

For your calendar
If you’re in search of tools to help motivate clients to move forward with financial and estate planning, be sure to note that National Estate Planning Awareness Week is coming up. October 21 – 27, 2024, is this year’s designated timeframe to help the public understand the basics of estate planning and the reasons it’s so important. The original House of Representatives resolution includes key points that may spark messaging ideas for your client outreach. And of course, on all things related to charitable planning, simply reach out to our professional staff. We’re happy to share best practices for encouraging clients to get serious about planning all aspects of their estates, including the legacies they’d like to leave to their favorite causes and the community they call home.