Affluent Americans are committed to building a legacy both by using their wealth in positive ways and by passing their values on to future generations.
A U.S. Trust 2012 survey, for instance, found that majorities of high-net-worth individuals say that those who have achieved significant wealth have a responsibility to pass on a tradition of philanthropic giving and create positive social change.

Indeed, many of the wealthy families my colleagues and I work with in our role as philanthropic advisors share these goals. The challenge is to help them achieve these goals in an effective manner while ensuring their continued financial security.

Recently, we had a conversation with a couple about incorporating philanthropy into their financial and estate plans. Let’s call them Mark and Jackie. They met in college, married and settled in suburban New York, where Mark became a successful corporate attorney and Jackie worked as a teacher, taking time off to raise their daughter and two sons.

Today, they are in their early 70s and live in an exclusive community in Florida. Their middle-aged children have six children of their own and are struggling with their careers, the demands of raising a family, diminished income and a variety of expenses, including their children’s education. The children range from 10 to 21 years old.

Mark and Jackie were at a point in life where they had attained a measure of financial security, with a net worth of more than $13 million and an income of several hundred thousand dollars annually—substantial, although less than they had while Mark was working. While they enjoyed their lives, they felt that something was missing. They wanted to have a major impact on some of the causes they are involved in, while ensuring they had sufficient assets for their retirement lifestyle and lifetime care costs.

The couple also had another goal: Bringing their family closer together. Their children had become distant, and rarely saw or spoke with one another. Mark and Jackie felt that they had failed to convey the values and sense of family they themselves had been raised with. Whatever course they chose in building a philanthropic legacy, they wanted to once again connect as a family.

We then walked the couple through a 10-step process designed to help them realize their goals and carry them out. It is intended to engage clients, their families and their financial advisors and other professionals, in collaboration, to create the legacy they wish to achieve. It consisted of the following:

1. Identify What Inspires – Determining what inspires clients will help them implement giving strategies that fulfill their personal vision. Mark and Jackie, for instance, made it clear that their focus was on family and on pediatric cancer. “Jackie and I love our family very much,” said Mark. “We have done well in our careers and see the struggles they are having making ends meet. Also, we have a special place in our heart for helping children and families who are going through the issues involved when a child has cancer.”

2. Create A Giving Mission Statement – Developing a personal giving mission statement helps clients communicate their intentions to others. As a personal and living document, it may change over time as the clients’ goals and motivations evolve. Mark and Jackie’s mission statement said, in part, “Our mission is to make the maximum impact we can for ourselves, our family and the cure and support of those inflicted with pediatric cancer, today, tomorrow and for future generations, until there is no need for funding.”

3. Review Giving History – We ask clients to reflect on why and how they have given in the past. Understanding their charitable history can provide valuable insights into their giving patterns, practices and interests. Mark and Jackie’s communities, in Florida and in New York, have many organizations that work in their areas of concern. As with many organizations, the ones they support have struggled to fulfill their missions since the financial crisis and recession.

4. Engage The Next Generation – Family giving presents a significant opportunity to pass down values across generations and to teach valuable lessons related to wealth and inheritance. For these reasons, it is important to involve all family members in philanthropic efforts early on. Mark, Jackie and their family got together for the first time in years and spoke about their individual goals and dreams. The process also brought out important information that had not been shared before. For instance, none of the children wanted their parents’ house or artwork, which collectively were worth several million dollars. That simplified the planning process—possessions could be leveraged rather than divided among the heirs.

5. Research Non-Profit Organ­izations – Nonprofits are considered part of the public trust and must follow strict operating guidelines. This makes it easy to research, evaluate and monitor the activities of the nonprofits that interest clients. Mark and Jackie already were familiar with some organizations, and additional research identified others for them to consider. For example, Mark and Jackie wished to contribute also to groups that feed the poor and educate impoverished children, and we found some with excellent reputations.

6. Form A Client-Focused Team – Effective charitable planning requires the collaboration of a set of advisors—from wealth managers to accountants to attorneys. This gives clients the ability to be more strategic in their giving, generate more leverage by focusing their contributions, be assured that their intent will be followed and align their lifetime and legacy giving with their passions. Following our first meetings within the family, we arranged for Mark and Jackie to hold a larger gathering with their advisors—the first of several such meetings.

7. Decide Where To Give – The personal mission statement helps clients select causes to support. This may mean continuing, expanding or re-evaluating relationships with organizations or groups they have supported in the past. Based on their preferences and the research we conducted, Mark and Jackie chose a select group of organizations to which they could give, targeting their contributions to generate the greatest impact.

8. Build The Strategy – Understanding and expressing what clients hope to achieve with their gift is a crucial step in building a personal giving strategy. The couple’s advisors were especially important in this step, identifying types of gifting that maximized value—to the charities and to the family’s finances. We wanted to not only ensure Mark and Jackie’s long-term finances, but also generate current income for them to enjoy their lives and help their children.
9. Present Customized Recom­mendations – In collaboration with the clients’ advisory team, we presented options to consider. We always seek unanimity that will enable clients to implement their program effectively and with confidence. The family reviewed the final set of detailed recommendations with their advisors, making minor tweaks here and there, and gave their approval.

10. Implement The Strategy – Once full agreement has been reached, we work with clients and their advisory teams to implement the chosen actions, adjusting as necessary based on changing goals, circumstances and needs. After Mark and Jackie signed off on the strategy, their advisors began taking the needed actions—arranging for delivery of contributions, setting up trusts and other steps.

After setting goals and strategy, a plan was put in place that eliminated the couple’s estate tax and increased their income, while allowing for about $50,000 in charitable donations per year.

The couple, for example, took out a line of credit on half of their $3.5 million stock portfolio, part of which went toward the purchase of an immediate annuity with a 20-year period certain that created about $122,500 in annual income. This also generated enough income to allow the couple to gift $10,000 to each of their children.

They also took out a reverse mortgage on their home, creating a $375,000 line of credit growing at 4% per year. That growth, amounting to $15,000 per year, went toward their annual charitable contributions.

Their artwork, valued at $3 million, was put in a charitable remainder unitrust (CRUT) with the intention of liquidating the collection slowly and distributing 5% to their children annually. This plan could be immediate or deferred so Mark and Jackie could enjoy their art for as long as possible.

What can advisors learn from this process? First, take a moment to find out what truly inspires your clients. Then combine that with philanthropic strategies that help advance their vision. Giving back is about linking passion with action, and it does not have to be complex—but it does have to be well thought out to be effective.  

Jon Sahn is president of Ascendant Planned Giving in Boca Raton, Fla.