Here are the steps and items you can discuss with them:

  1. Review donations they have already made this year, and look back at what they did at the end of last year.

  2. Discuss what assets they intend to donate, and whether any investments that you control should be sold, the sale of which may create a large capital gain and subsequent tax bill if not donated to charity.

  3. Ask if there are other assets they no longer want or need or plan to sell that can be used as a donation, such as a vacation home, business (donate a portion or all of the privately held stock), art or collectibles, farmland or other real estate, life insurance, etc.

  4. Discuss if they have a donor-advised fund or other charitable vehicle, or whether it makes sense to open one. If you do not manage those assets already, determine if you can since most clients want their advisors to manage their charitable assets to get the optimal performance. The American Endowment Foundation (AEF), enables advisors to manage at any amount, Fidelity and Schwab allow a $250K minimum and others including community foundations allow at typically higher levels. Some DAFs allow more control and offer more investment options than others.

  5. Are there new charities that they intend to support this year? For any substantial donation, donors should meet with the charity they intent to support. Non-profits are very busy during December, so this visit can be scheduled earlier.

  6. Clients should also be encouraged to talk with charities they regularly support to discuss if they have any special needs or other ways in which they can help them.

  7. Should clients make a large donation now to a donor-advised fund that can enable them to make grants over a number of years to one or many charities? Some donors don’t want to give too much to one charity at one time, or they have a complex asset that a charity cannot accept, so they can donate it to a DAF from which it can make numerous grants that will be easy for a charity to accept.

  8. If clients want to get their children involved or seek the advice of other friends or family members, start the process now instead of rushing the process when everyone is busy with the holidays. Suggest a Thanksgiving meeting with the family to discuss this if it can’t be done before.

  9. If clients know that they need to make a donation for tax reasons but just cannot or will not decide where to donate before the end of the year, establish a donor-advised fund so they get the full tax donation that they are entitled. Though nearly all donors who establish DAFs intend to make grants at some point, encourage them to start the process to identify charities they will support.

  10. Include your clients’ other advisors when possible and appropriate. For example, attorneys who recommend that their client set up a DAF should engage the wealth advisor to ascertain whether one DAF would enable the clients to achieve their goals and also allow the advisor to manage the assets.

By having the conversation now, your clients will thank you, and the charities your clients support will thank your clients. It is the ultimate win-win-win!

Ken Nopar is the principal of Nopar Consulting, a firm that advises wealth management and other professional firms on how and why to have the charitable giving conversation with clients. The firm's website is www.noparconsulting.com.

 

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