Working in the charitable giving area has great rewards for planners: It helps them build better relationships with clients while aiding their local charitable institutions. But in order for agents to get into this market, they first must address the idea of charitable giving with their clientssomething many planners fail to bring up.
To broach the topic of charitable giving, planners need to get in touch with their clients values, explains Michael Brink, a planner with Nease, Lagana, Eden & Culley Inc., Atlanta, Ga.
“Ask them if theyve been actively involved with any specific charities, or are there causes or institutions that theyve supported and been involved in. There may be some causes they would like to get more involved inget them talking about it,” says Brink. “To do charitable planning you really have to go to the heart of the matteryou have to go to the values.”
Getting to better understand the values of your clients will naturally lead to a discussion about leaving a charitable legacy in your clients name, Brink notes.
“Everybody wants to be remembered,” adds Ed Philips, president of Philips-Cox Insurance Services in Virginia Beach, Va.
To get a sense of whether clients are charitably inclined, Philips will ask if they would like to leave 5% of their estate to a favorite charity. “Its an enormously powerful lead in,” he says, “5% isnt going to make or break anybody.”
This gives him some insight as to how his client feels about giving to charity and then presents an opportunity to do some planned giving as part of the estate plan.
While there are a number of tax benefits donors receive when making charitable donations, the tax benefits are never the primary reason for giving, according to Gary Rathbun, president of Private Wealth Consultants, Toledo, Ohio. In fact, determining a clients charitable intent is critical in the planning process, he says. If the donors intent isnt genuine, then there may be an ulterior motive behind the gift.
For example, Rathbun says one case he was involved in appeared to be a textbook charitable giving case. A privately owned business had appreciated greatly and the owner had an informal buyer lined up. The plan was to place the business in a charitable trust, where it would be sold to another companythus avoiding the large capital gains tax.
Thinking that this scenario sounded too perfect to be true, Rathbun did a little investigating on the business owner. It turned out that the owner of the business to be sold was also the owner of the business that was making the purchase. This business owner was running from a number of creditors and had planned on putting the company in a charitable trust and then filing for bankruptcy. “He was trying to run a scam to avoid losing everything,” Rathbun says. “There was no charitable intent.”
Getting involved with charitable institutions also will help agents identify with their clients. “I think everyone ought to have a favorite charity, whether its a community, a church or a school,” says Philips.
Brink agrees, but he warns that agents new to this market shouldnt look at working with charities as a “business development tool,” or a way to find new prospects. “If youre not committed to philanthropy as an ideal, people will see through that. Its going to be difficult for you as an advisor to be intimately involved in the process,” he says.
Often, when clients suggest different charities theyre interested in donating to, many planners feel its a good idea to research the organization. “I think its critical to know the charity youre working with,” says Rathbun. If not already familiar with a charity, he will look into its old tax returns and learn as much as he can about the organization.