Charitable giving is something that many people only think about at the holidays, when mailboxes are jammed with greeting cards, homes are festooned with lights, and the airwaves are filled with tunes about peace on earth. What with all the goodwill and bell-ringing elves lurking outside the grocery store, it takes a tough nut to withstand the urge to share at least some of one’s good fortune–and the prospect of gaining tax advantages by year-end adds yet more sheen to the idea. And yet the urge rarely seems to last: Come January, advisors are turning back to their “real” work, the bread-and-butter tasks of advising clients about investments and insurance.
It’s not surprising, really. After all, encouraging clients to give their money away seems counterintuitive; when client assets exit stage right, an advisor’s opportunity to earn fees on those assets generally goes with them. But what if there were some way to turn charitable giving advice into one’s bread and butter, and have not only “Christmas in July,” but all year-round?
David Harris, 52, founder of the one-man consulting firm Legacy Solutions, Inc., in Santa Rosa, California, has found a unique way to make it happen. He doesn’t manage investments or collect commissions, nor is he an attorney paid to draft wills or trusts. Rather, for a simple hourly or project fee, Harris spends his time guiding clients through a process of identifying their charitable and estate planning goals, and exploring the strategies and vehicles that can help them achieve those ends.
It’s not all pie-in-the-sky idealism, of course: While some clients may show up with specific philanthropic intent, others may simply want to make general estate planning arrangements. Either way, however, charitable gifts usually appear somewhere on the final plan. “I don’t approach this as, ‘Charity is the solution and that’s where we want to go,’” Harris says. “But the fact is, if you’ve been successful in this society, some of what you have is your own capital, and some of it is going to be shared with society whether you like it or not. The only choice you have is, do you want to do that involuntarily, through the tax system, or do you want to do it voluntarily, using charitable planning mechanisms that allow you to choose what aspects of society you want to support and strengthen? Faced with those alternatives, people generally want to choose.”
And estate tax or no, there will always be tax incentives to nudge clients toward charitable giving, says Harris. A 10-year veteran of the planned giving department at the California/Nevada United Methodist Foundation, Harris emphasizes that charitable intent, not taxes, should always motivate the initial decision to give. Among his clients, Harris sees incentives for those facing business succession or the sale of a concentrated stock holding, a closely held business, or highly appreciated real estate. (Harris won’t speculate on the future of the estate tax, but he does point out that any tax that affects 1% to 2% of the population is likely to retain its popularity, since most people want to tax the other guy, not themselves.)
The greatest satisfaction from this kind of work, says Harris, is when he can help clients achieve several disparate goals at once, especially when those goals were initially thought to be mutually exclusive. “I’ll run into an advisor who will say, ‘Well, I can’t advise this client on what to do here, because they have conflicting goals: they want to preserve these family businesses for the family, but they also want to make major gifts to charity. They need to make up their minds, because we can’t do both.’ Well, those are exactly the challenges I like to see,” he says. “There’s nothing more satisfying than allowing people to really dream about what they want to see happen, and then finding the mechanisms that allow those goals to be met.” With the right tools in place, what appeared to be an “either/or” situation may actually be an “and/and” situation: Sometimes you can have your cake and give it away, too.
Seventy-six-year-old Marvin Soiland, a client of Legacy Solutions, has more energy than most people half his age. A real estate developer, quarry-industry entrepreneur, and father of seven adult children, he’s the kind of guy who’s in the office raring to go at 7 a.m., and thinks that starting the day late (i.e., anytime after 8 a.m.) is as bad as sleeping until noon.
He pursues philanthropy with the same vigor and attention that he devotes to his business ventures: He’s given away land, an office building, a medical center, and other buildings in the Santa Rosa area. And when he takes a stroll across the campus of California Lutheran University, he can stop by and check out the latest art exhibit in the airy atrium of the Soiland Humanities Center, a classroom and faculty-office building that he and his wife made possible.
It’s all part of a comprehensive plan overseen by Soiland’s seven (count ‘em, seven) advisors: he’s got two attorneys, a CPA, a psychologist, an estate planning/charitable giving advisor (Harris), plus two other professionals. Fortunately, Harris likes working as part of a group. “This kind of work always requires a team,” he says. “This is not a competition about who knows more and who can show up the other professions, it’s about bringing to the table multiple possibilities that would not otherwise be there.” The complexity of Soiland’s charitable and estate plans should be more than enough to keep Harris busy. As just one example, when Soiland recently donated a building to charity, part of the proceeds from the sale of the building went to his church, part went to start up a new Lutheran church in another town, part went to California Lutheran University, and part of it will go into a charitable remainder trust scheduled to be set up five years from now to benefit Soiland and his wife. (And that’s just for one donation!)
Where Are We Going?
While it’s easy to get caught up in the flowcharts and arrows depicting the flow of money into and out of different charitable giving and estate planning vehicles, Harris says it’s crucial to tackle what he calls the “above-the-horizon” issues before even mentioning specific tools. “The process of uncovering what people’s values and missions are, and what really makes them feel satisfied, and gives them a sense of accomplishment–all of that has to happen before you start talking about the vehicles and the dollar amounts and the mechanics,” he says. You need to be very clear about where you want to go, he says, before you can even think about how to assemble the right kind of vehicle to get you there.
The process shouldn’t happen behind closed doors, either, because estate planning, charitable or not, profoundly affects a client’s entire family. “The gut reaction from many children is, ‘Hey, if they’re [bequeathing] things to charity, that’s coming out of my pocket,’” he says. “Ultimately, [at the heart of such reactions] is the root human question of ‘Who loves me?’ ‘Do my parents really love me?’ It’s far better to have that conversation when your parents are still alive, because you can’t have it afterward.”
Harris works to help both generations identify their values and goals, and then share them with each other. Every family needs this communication, and it’s all the more important when significant assets are in play, he says. While the family members’ goals may not match precisely (or at all), the important thing is for everyone to begin understanding each other’s motivations. “It’s not a question of right and wrong; it’s being able to communicate with each other about their values and goals, and, more importantly, why those are their goals,” he says.
Sometimes the realizations reached during these sessions can be surprising. When Harris, with the help of a personal coach, was leading Marvin Soiland’s family through the process, one of the sons realized that he didn’t really want to work in the family business anymore; he instead wanted to become successful in his own right, independent of the family company. “Sometimes people have a mismatch between wanting to prove themselves on their own, but also feeling that they should stay in the family business, at least until the parent is gone, because that’s ‘the right thing to do,’” says Harris. “But who knows when that’s going to be? And if they wait, will they ever accomplish the goal of accomplishing their own success?” Harris believes honest communication on these important topics is the first step toward transforming parent-child relationships, and sibling relationships, into meaningful, adult relationships.
That’s a Very Good Question
So how does Harris broach these imposing, intimidating issues? One of the first steps every client takes is to fill out a questionnaire. If the client is a couple, each spouse fills it out separately, and then meets with Harris separately to discuss the answers before meeting together. “Once they’ve filled it out separately and we’ve met, we put their responses side by side and begin the process of drafting the couple’s financial philosophy. It’s an iterative process, and they’re encouraged to be frank,” he says.