Providing practical methods for including charitable planning in your practice is the goal of this session, “The Best Charitable Planning Tool You Are Not Using in Your Practice.”
These methods include a discussion of donor-advised funds and why marketing them in your business is good for your business and your clients. I’ll also talk about the Global Gift Fund, the donor-advised service offered through the MDRT Foundation.
Questions to Ask
When meeting with clients regarding estate planning or retirement planning, I always ask if they have specific objectives, goals, personal desires or plans to be considered. After this discussion, I ask them how they would like to be remembered by their children and grandchildren.
What type of shadow do you want to cast for your children and grandchildren to follow? What is it you want them to remember most about you? This last question usually causes a pause in the conversation, and then I ask if they can give me the first name of their great-great grandfather. I then remind them that, in a few decades, their grandchildren may not remember their name either.
Following this I share with my clients how I am using donor-advised funds to pass on to my children, grandchildren, and great grandchildren what my wife and I believe in, our work ethic and the causes we care about. Let me share with you some information.
Donor-advised funds are a great alternative to a private foundation and are designed for families and individuals who want flexibility in charitable giving. They provide greater tax advantages than a public foundation, freedom to name unlimited successor advisors, the benefits of a public foundation’s administrative, financial and grant-making services expertise, and leave the donor free to enjoy philanthropy.
You receive an immediate tax deduction when contributing to your DAF. And grants from the fund can be made on your own timetable. Depending on the organization administering your fund, you may have the freedom to appoint the investment manager. The foundation performs all required reporting. And no Form 990F is required.
Donor-advised funds are the fastest growing form of charitable giving. Grant-making is primarily U.S.-based and is offered primarily by financial companies and community foundations.
I use donor-advised funds in estate planning. They can own life insurance with no income or estate tax on proceeds. They create excitement, joy and happiness. At Thanksgiving, when my family is together, I offer my children grant forms for them to make grants from our family foundation to charities of their choice.
Donor-advised funds enable you to support your favorite charities for generations to come. They provide simplicity, flexibility, superior tax benefits with virtual, if not ultimate, control. You can contribute cash, appreciated securities and life insurance. Donor-advised funds can be the beneficiary of qualified plans, charitable remainder trusts and retirement fund assets. Closely held stock (only with a plan), limited partnership interest (only with a plan), and real estate (subject to a plan and MIA approval) can be donated to your fund subject to approved planning.
The administration of your fund is made simple because the fund handles all transactions such as gift acceptance, in-processing and account establishment, contributions, distributions, investment and transaction accounts, as well as compliance and reporting.
In establishing a donor-advised fund, there are some basic guidelines to follow:
? The IRS requires that control rest with the foundation’s board.
? The donor serves as an advisor to the DAF.
? Family members cannot be employed by the fund.
? The foundation manages investments.
It is hard for me to talk about donor-advised funds without mentioning our own Global Gift Find through the MDRT Foundation, which was established in 1959. Foundation assets under management now total $25 million, of which donor-advised funds make up $8.6 million. The total number of donor-advised funds is 110. Foundation grants last fiscal year totaled $2.8 million. Of this amount, Global Gift Funds came to $2.1 million.
We call our donor-advised fund the “Global Gift Fund.” Our volunteer board is made up of your peers, all members of MDRT. We encourage family participation; it is multigenerational, and you can get paid.
A donor-advised fund is easy to establish. With a simple application and a $75 fee, you become a donor advisor and receive a manual. There is another application to establish your foundation and determine the type of fund. These include:
? Donor-advised fund
? Designated fund
? Field of interest fund
You choose the name of your fund and name successor advisors. The set up fee is $125. The minimum gift is $25,000 to establish a fund, excluding those funded with a planned or deferred gift.
If properly licensed, you may manage the account (minimum account of $100,000). Otherwise, we have an approved list of fund families for use by registered reps (series 6 or 7), with required reporting procedures and a letter on file from the donor requesting a specific broker.
In-force or new life insurance can be donated. However, if you have a DAF only for life insurance, a minimum policy of $100,000 is required, and 5% of the death benefit must be named as an unrestricted gift to the MDRT Foundation.
In closing, family giving prepares families to manage wealth. Leaving a legacy has 2 parts:
? Affluence–the finances of wealth transfer
? Influence–the leverage of wealth transfer
We need to learn to use both.
Leaving a legacy is a blessing for the children and brings honor to the parents. The blessing changes how parents view their children. They become adults. Honor is a gift from children to parents.
What is our mission? To encourage, enhance and support donor advisors worldwide in fulfilling their clients’ charitable goals and dreams. What is our vision? To be the premier global provider of support and services to donor advisors and their clients.
In conclusion, donor-advised funds offer a great opportunity. They are user-friendly. They earn the respect of our donor advisors and clients and encourage accountability. We want to make sure that our advisors are educated, trained and accountable.
Allan G. Hancock, CLU, ChFC, is president of The Hancock Group Inc., Altoona, Pa. This is an abridged version of a presentation he gave at the MDRT annual meeting in Toronto.