The overwhelming public support to help victims of Hurricane Katrina and the Asian tsunami demonstrated again that when the need to reduce suffering is great, charitable giving is even greater. But for millions of people, charitable giving extends far beyond helping in the wake of a catastrophe; it is found every day in their on-going commitment to the thousands of large and small causes that perennially benefit their community and their world.
So it is surprising that despite the fact that life insurance and other financial services can be very useful in helping people create or augment their charitable giving, fewer than 1 in 10 insurance and financial advisors broach the subject with their clients–even affluent clients, according to a current LIMRA survey.
These discussions need to take place more frequently. Baby boomers will be transferring an unprecedented amount of wealth in the next 40 years. And many will want to complement their estate planning by making contributions to causes they care about. Advisors can play a critical role in making this happen.
Doing more with clients one-on-one
The first step is to include a discussion of charitable giving into a routine dialogue with clients. Advisors help clients plan for retirement and preserve their wealth for the next generation. Charitable planning meshes with this preparation, yet it may be overlooked simply because no one brings it up. That’s the role of the advisor.
Many clients realize that their success is based not only on ability and hard work, but often on good fortune, too. They want to give something back to help other people or causes, but they may be unaware of techniques that could make their giving go even further. The advisor can help clients devise ways to leverage current assets to do more for the world. Think of how much more could be done for the world if every advisor had this conversation with every client.
That’s an opportunity that advisors and their clients should not miss during the planning or review process, especially since there are so many ways to make a client’s giving go further. Among them:
? Charitable IRA Rollover 2006-2007. Within the Pension Protection Act of 2006 is a provision (ending after 2007) allowing people age 70-1/2 or older to make gifts of up to $100,000 per year directly from an IRA to a charity. The IRA distribution is tax-free. This new law gives advisors a great chance to present a much improved charitable giving opportunity to qualified clients.
? Charitable Remainder Trusts. A trust is set up (often using life insurance) that provides a payment to a donor or designated beneficiary for a period of years or the donor’s lifetime. After the donor’s death, the remaining money in the trust is distributed to one or more charities selected by the donor.
? Charitable Lead Trusts. Property providing a payment stream to the charity for a period of years is placed in trust by the donor. After the payment period ends, the remaining trust property is transferred to a non-charitable beneficiary.
? Charitable Gift Annuity. The donor transfers cash or an asset to a charity, which in turn pays the donor a fixed income stream from an annuity for life.