Advisors are also needed to look at where the gift is going, according to Peter J. Klein, managing director and partner at HighTower’s Klein Wealth Management in Melville, N.Y. Klein is the author of A Passion for Giving: Tools and Inspiration for Creating a Charitable Foundation.

“Financial advisors need to get into the heart and head of the client who is funding a foundation and see what they are passionate about,” Klein says. “The client can feel good about giving to many charities, but maybe it would make more sense to donate to one or two that he is really passionate about rather than have haphazard giving. Then the client can feel like he is moving the proverbial needle in the community. This is the kind of thing an advisor should be mindful of.”

The type of vehicle used for giving is also open for debate, and an advisor can help a client make that decision, says Jean Gordon Carter, a partner in the law firm of Hunton & Williams in Raleigh, N.C., which deals with charitable giving issues.

“Advisors need to step back and make sure the giving vehicle makes sense for the client,” she says. “There is a lot of interest in charitable lead trusts, charitable remainder trusts, donor-advised funds and foundations as giving mechanisms.”

“For instance, the standard rule for a foundation is that you need $1 million to start it, but I doubt the paperwork is worth it at that level,” Carter says. “You might want to swing back to a donor-advised fund, which has less paperwork and the donations go straight to the charity of the client’s choice.” The recipients can be decided as time goes along.

“In any instance, you have to pay someone to make the plan work, but the expense is worth it to make sure the client’s goals are fulfilled,” she adds.

There are also different trusts to pursue, and sometimes clients must decide between a charitable lead trust and a charitable remainder trust. Both can be useful, depending on the client’s needs, says Scott Bishop, an advisor with STA Wealth Management in Houston.

Charitable lead trusts pay a charity for a certain period of years, and then the principal reverts back to the donor or to beneficiaries at the time of the donor’s death. These trusts are advantageous to the donor while interest rates are low, because the trust’s income is limited.

Charitable remainder trusts are the opposite. From these, the donor receives an income for a number of years and the remainder goes to the charity.

“There is also the option of donating to a community foundation,” Bishop says. “The donor loses control of the money once it is contributed, but there are many community foundations that work on specific community needs, such as education, the environment or religions.

“There are other techniques that a person can use,” he continues, “such as putting cash in mutual funds and then donating the appreciated account to charity. The donor gets full value for the donation but does not have to pay capital gains tax.”

Amy Danforth, president of Fidelity Charitable, says there is a misconception that donor-advised funds are for those people making midsize gifts and that foundations are for the very wealthy, but notes this is not always true. She says some Fidelity families are giving through both.

“One client had a family foundation, but the children of the founders had different interests, so he opened four donor-advised funds, one for each child,” Danforth says.

“It is important for advisors to incorporate philanthropy into their practices. The ultra-high-net-worth and high-net-worth clients want to give, and they would welcome the advisor’s involvement in choosing the right vehicle, who to give to and how much to give,” she adds.

Some changes are happening as a younger generation takes over the gifting, note advisors. “There is an increase in multiple generational giving that is a true trend and not just a fad,” says Chris Page, executive vice president at Rockefeller Philanthropy Advisors. “The younger donors also are taking a more long-term approach. They want to find the leverage points where they can make a real difference.”

Rockefeller helps financial advisors and their clients direct their philanthropic ideas. “We talk about motivations with the advisors and their clients and where they want to make social changes,” Page says. “Younger donors seem to have a deeper engagement in the larger world. They are using bigger, bolder donations for specific purposes.”

One of his clients helped fund an organization providing water to people on the Texas-Mexico border, but then she felt there was an even bigger need for housing. She gave a substantial sum through a grant and loans to use local labor to improve housing conditions.

In order to help with these types of donations, the advisor needs to know the client extremely well, says Wistar Morris, a principal at Signature, a wealth management and financial company in northern Virginia. “An advisor has to understand what is most valuable to each client. An advisor who knows his clients well will use a technique for giving that makes sense to them. The tech generation is more hands-on and more interested in having a direct impact.

“From a practice perspective, helping clients reach their philanthropic goals is one of the most fun and rewarding things an advisor can work on,” Morris says.
 

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