Though each client situation may be a bit different, some of the questions that advisors can ask clients in order to determine the best path forward include:
- Are you involved with any charities now as a board member, donor or volunteer?
- Looking forward, do you feel that you will become more or less involved or change the amount that you will donate to charities?
- Did the 2017 tax law change the way or how much you give?
- Do you prefer to give during your lifetime, at death, or for many years after death? If after death, who will make the decisions?
- Do you anticipate leaving any bequests to charities or to a charitable vehicle? Are you planning on making donations from your retirement accounts during your lifetime or upon death?
- Who is involved in making the charitable giving decisions? Have you included your children or others or do you plan on doing so?
- Is a charitable legacy important to you, and would you want your children or others to continue giving in the future?
- How do you feel after making donations? Do you always feel satisfied and pleased or are there any frustrations with the giving process?
- How do you decide how much to give each year?
- How do you decide which charities to support?
- Do you donate throughout the year or is there a rush to give at the end of the year?
- Which types of assets do you typically donate each year? Do you have any assets that you are looking to sell or that nobody in the family is interested in receiving?
- Have you established any charitable vehicles such as a private foundation or donor-advised fund (DAF)? Did you set these up recently? Are these working well for you or do you have any concerns with them? How are these assets invested?
- Do you prefer to give publicly or anonymously? To big organizations or small? To many charities or just a few?
- Do you have confidence in knowing that your donations are having an impact?
Because nearly all high-net-worth clients are active donors, the conversation is very comfortable and natural and will often enable clients to have a greater impact on the causes and charities that are of most importance to them. Though the tax benefits are not the reason they give, clients also want to learn how they can donate most efficiently so they can give more or keep more.
Some may be struggling with the complexity of running a foundation or of transitioning the family giving from one generation to another. Others may not know that they can convert a burdensome foundation to a simpler donor-advised fund, and some may not be aware that they can usually transfer a DAF from one sponsor to another so their advisor can manage the assets or they could have more granting or succession flexibility.
Clients are glad to talk since they are often passionate about their giving and involvement with nonprofit organizations, and especially when they understand that the conversation will enable their advisors to provide them with the best possible legal, investment and tax advice. Since clients’ interests and plans change over time, this discussion should take place on a regular basis.
Because these conversations are regularly taking place throughout the year instead of just at the end of the year, it is important that advisors and clients implement any new strategies earlier than in the peak giving season in November and December. This will lead to a greater sense of donor satisfaction and accomplishment, and the charities the clients support will appreciate earlier donations since their needs exist throughout the year.
Ken Nopar is the senior philanthropic advisor for the American Endowment Foundation, the country’s leading independent donor-advised fund since 1993 with over $2.75 billion in assets. AEF works with donors and their wealth, legal and tax advisors in all 50 states.