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Getting Involved In Charitable Planning

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For the last 15 years I have worked with life insurance producers all over the United States on philanthropic strategies for affluent clients. Rather than give you sales ideas or technical knowledge, I will discuss why and when you might want to get involved in philanthropic planning, and how to get involved without derailing your day- to-day business.

Why should life producers invest time in charitable planning?

Think about who you are in the community and what you and your family do outside of work. Yes, you are a “life producer,” or a “financial advisor,” or an “independent business person,” but you are also, very likely, a parent, a good citizen and a member of any number of civic organizations. Your spouse is probably also involved in the community, and you likely encourage your children to volunteer.

So the first and most important reason to get involved in charitable planning is because it fits with who you really are. Just as you volunteer your time to, say, lead a troop of Scouts, coach basketball or lead a class at your house of worship, so you also sow your talents as a financial advisor back into your community to help others give back in a way making most sense to them.

Whether you give a lot of money yourself, or a little, almost all good life insurance producers are “givers” in the sense of being active as community leaders. So for you to get involved in charitable planning is part of who you are as a person and as a financial professional.

If you look at charitable planning as a civic activity–a way of doing the right thing for “givers” and the causes and organizations they love–then charitable planning will come into focus for you as a wonderful marketing opportunity. Instead of seeing it as product-driven or driven by tools and techniques, view it as a way to help interesting civic-minded people make the biggest possible impact on their community while having little or no negative impact on other financial goals.

Seen in that light, your skills as a planner or financial strategist are the key element. What tools you will use will depend on the situation, but the guiding light is helping people be effectively generous while also taking care of themselves and their families.

When you take this “idealistic” focus–when you connect with the idealist in yourself–you become an important asset to your community and to the civic organizations in which you participate. They no longer see you primarily as a life agent or financial advisor, but as a giving person who has the expertise needed to help other givers. You stand out as special. You will find that people treat you differently, and they may even seek you out for that “something extra” you provide.

Organizations to which you belong become “nests” of prospects. The leaders of civic organizations begin to turn to you for advice on how to help their organizations by assisting their donors in being more generous. You will be asked to speak on these topics. And, in time, you will stand out as a uniquely important resource, one to whom wealthy people are drawn.

When should you get involved?

Charitable cases often do take longer than cases with a more immediately self-interested buying motive. So charitable giving may not be the best focus for you if you are new in the business or still struggling to make ends meet. Typically, producers begin to get serious about charitable planning as their practice and clientele mature. They will have mastered the basics of sales, products and planning, and will have gotten to the point where they are successful.

They begin to spend more time with fewer and wealthier clients. They assume leadership roles in the organizations in which they belong. Using their skills to advance philanthropy becomes a natural extension of taking care of their clients’ wants and needs. Clients in their 40s may be generous. But when they reach an age when they say, “when I die,” rather than “if I die,” they begin to think about ultimate things. They ask themselves:

How much is enough for me? How much is enough for my children? How well does the government use my dollars for social good? How much more good could I do with those same dollars for society? What kind of life do I want to live, now that I “have it all?” What impact do I want to have on the community? What legacy in the lives of others do I want to leave?

When clients and advisors ask themselves bigger questions like these, philanthropic planning can become not just a business, but a passion.

How should you get started?

I will list some approaches, starting with the simplest and ending with the most comprehensive. I will try to give you a sense of how hard or easy it is to make each option work from a sales perspective.

Personally Owned Life Insurance

The client buys and owns a policy and makes a charitable organization the beneficiary. This is a simple sale for a client who is interested in helping a charity, but does not want to let go of the money in case it is needed in an emergency. The client can access cash values subject to the terms of the contract. There is no tax deduction for premium, and the charity gets the money at death.

Personally Owned Deferred Annuity

The client pays for and owns a single premium deferred annuity and makes a charity the beneficiary. This is again an easy sale and will appeal to older persons who may or may not need the money someday, but who like the idea that the annuity will pass (if it is not used up) to the charity.

Charity Owned Life Insurance

The charity applies for and owns the policy. The client makes a gift and the charity pays the premium. These sales do happen, but they may require a disproportionate amount of work. The key question to be decided with this approach is whether the charity is willing to introduce you to people who might consider a significant size policy.

Charitable Remainder Trust with Life Insurance to Replace Gifted Asset

The client gives property to a charitable trust and replaces the property or a portion of it with insurance. This is a great concept, but sales don’t often happen, and so the technique is not one on which you would want to build a career. There has to be a strong charitable motive or the numbers will not convince most prospects. As one excellent tax attorney once told me, “I have never met a person who got rich giving money away.”

Zero Tax Planning

If you do estate planning, consider learning more about the zero tax concept. You essentially use gifts during lifetime and at death to give to charity to eliminate the estate tax, while using insurance plus gifts and bequests to give heirs “enough” money. Any real case can involve many techniques, but the idea is always to reduce taxes in favor of charity, while keeping the children in good shape.

Zero Tax Planning with Family-Owned Business

Ben Feldman used to say to business owners, “The IRS does not want bricks and mortar; they want cash.” The same can be said of charities: They don’t want a bakery, a dry cleaning establishment or a warehouse–at least not as a going concern. They much prefer cold, hard cash.

Yet the family may want the business. What you will need to get a gift to the charity and the business to the children will very likely be a big infusion of cash. Insurance is the tool that makes the client’s plan succeed, getting the right assets to the right heirs and cash ultimately to the charity.

Values-Based Planning

Here, we do not start with taxes as the end all and be all. We ask the client open-ended questions about the life the client wants to live; the way children will grow up; the values the family has; the contribution they want to make in their business, personal and civic lives; and the impact they want to have on their community.

Planning and products then become means to those ends. Each life plan or estate plan or charitable plan then becomes uniquely adapted to each family. This is the kind of “high end planning” that sets you apart in the ultra-affluent market. It can be time consuming, and it draws on all you have-not just your professional skills, but your wisdom and “heart.” When this approach is done right, agents can and sometimes do lead their carriers in life sales.

The simplest place to start is at the top of the list. But even if you are a new producer, you probably know someone who needs an advanced approach. You may have a relative, a former business associate or a family friend who qualifies for a more advanced plan.

The key to these cases is good facts and clear goals. If you can help potential clients clarify what they want for their lifetime, their children’s lifetimes, and the kind of community they want to leave behind, you can then enlist the assistance of other professionals, including your company’s advanced planning people, to help make the client’s dream a reality.

Your next steps

Ask yourself:

? What nonprofit organizations do you belong to?

? Where do you give?

? Where do you, your spouse or children participate or volunteer?

? Who are the leaders of civic organizations who have a stake in the generosity of people in their organizations?

Rather than approach these people or organizations with a proposed transaction, express your own desire to do more and to help others do more for the community. Present yourself as a caring person who can help others have a significant and positive impact without sacrificing any of their other personal or financial goals.

When people see how much you care, they will care how much you know, and sales and gifts will result. The end result will be a more satisfying career for you and a better world for us all.


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