Mr. and Mrs. Jones are at the pinnacle of their wealth accumulation. They are passionate about charitable giving and have already funded a couple of scholarships but want to do more. They find it hard to strike a balance between funding philanthropic pursuits and setting aside assets for their children. In addition, Mrs. Jones has health issues that could require expensive treatment down the road. Can they afford to give more, recognizing that the welfare and well-being of Mrs. Jones and their heirs comes first?

Does this question sound familiar? There is certainly a lot of talk about charitable giving among the affluent. Well-intentioned and well-heeled clients who have spent years working to amass considerable wealth want others outside of their family and heirs to share in its rewards, but are unsure of how to go about setting up a formal, sustainable program for doing so. Many advisors are faced with questions from clients such as: How do I manage my charitable giving? Should I set up a foundation? What other alternatives are available? How do I assess my capacity for charitable giving-both during life and after? Will my family have enough?

Talking with your clients about their philanthropic pursuits and how they go about them-for instance, whether they set up a foundation or donor-advised fund-should take place in the context of a larger discussion about their overall long-term desires for their wealth. Advisors can encourage conversations in which clients clarify what their charitable ends are and then develop and implement integrated strategies to achieve them. As they go through this process, clients often realize that their ability to contribute money to philanthropic causes or important issues is much larger than they imagined.

The process generally involves four phases: 1) A discovery phase in which we try to determine what we want to accomplish; 2) the development of creative solutions that would allow us to do this; 3) an implementation phase in which we find vehicles for carrying out these wishes; and 4) sustaining this work and keeping the philanthropy alive.

The initial discovery phase seeks to answer one question: What are we trying to accomplish with our life and our wealth?

On the surface, this seems like a very straightforward, if open-ended, question. But since there are no right or wrong answers, the question forces couples to look inward and assess their values. To facilitate the discussion and arrive at an answer that will serve as the mission statement for the clients' charitable endeavors, advisors should help their clients work through a series of foundational questions to help crystallize their priorities.

Questions to ask clients during the discovery phase include:
What are your most important personal values at this time in your life?
To what or whom do you attribute your wealth?
To whom do you feel a sense of obligation when it comes to the distribution of your wealth?
What are your priorities for wealth distribution between children, other heirs and charity?
Money sometimes creates special opportunities. Name five that would be important to you.
There are many ways to transfer your family financial values to your children and other heirs. List the three that are most important to you.
If you were given $5 million and were required to give it to charity this year, what charitable causes or organizations would you support?

These questions allow the Joneses to clarify that they want to leave enough to their children for security, but not leave so much that it diminishes their self-sufficiency. They also want to leave enough for their grandchildren's education. The rest should go to important causes, specifically to institutions that helped Mr. and Mrs. Jones become who they are.

Clients often cannot determine how much they really have to create a social legacy, even if they are rich or have great passion for the undertaking. That is because everyone, even the very wealthy, needs to be certain that his own personal financial security needs have been met first. Unless otherwise directed, it is the advisor's first job to preserve and protect the financial independence of the wealth holder. Only when this has been assured can you begin to address your client's family and social legacy.

When you've invested significant time on the discovery phase, helping clients form a clear vision of what they want to accomplish with their wealth, then it's easier to identify appropriate solutions.

Creative Solutions: How Can We Do This?
One way to talk about options for using charitable capacity is by making a graphic representation of the clients' current wealth portfolio. You can then integrate additional strategies, tactics and tools into the plan to illustrate how new philanthropic concepts enhance the financial plan they already have in place. This is a step-by-step approach that shows the clients how their philanthropic aspirations can become realities with the wealth that they have.

Once the Joneses see how their personal values can translate into a charitable giving program that also allows them to provide for their family, they can move forward in two steps. First, let's say, they could establish scholarships at their alma maters, say one for the Boy Scouts or Girl Scouts and the other for minority women. Second, they could set up a private foundation, where they intend to direct the remainder of their estate upon their death.

One cardinal rule: Keep the design of the giving plan as simple as possible. Complication can lead to confusion-and confusion leads to inaction.

Securing Charitable Capacity
Using various tools, a client can decide how much charitable giving is feasible while also preserving his personal financial independence and family inheritance. The common tools used to establish programs are charitable remainder trusts, charitable lead trusts, life estates, family limited partnerships and life insurance trusts, to name a few. Some clients may wish to expand their giving by using leveraging tools such as life insurance owned in their foundation. But the more exotic items should be approached with care-and perhaps introduced at a later stage in the planning process.

Whatever the level of charitable capacity, a fundamental question arises: Should I establish a foundation or use a donor-advised fund? The tax deductions for these two contributions differ, but a bigger issue in choosing them is knowing how much control the client wants in the giving process.

It's simple and uncomplicated to establish a donor-advised fund, which is a personal charitable gift fund, and there are many fund options available through local community foundations and other larger financial institutions. In this arrangement, the donor sets up the fund and recommends donations to different charitable organizations, and the sponsoring organization is responsible for all administration. As long as the recipient organization meets the 501c(3) requirements, the donation is processed and the gift delivered to the ultimate beneficiary.

The private foundation, on the other hand, offers the donor much greater control, though it comes with the cost and complications of any legal entity. For many donors, control is the paramount issue. For some, it is important to integrate family members into the giving process and school them in the business of living and giving. The foundation itself may become an integrating tool for the family, around which a philosophy of shared philanthropy may evolve.

The appropriateness of choosing either a private foundation or donor-advised fund is most often discerned during the discovery and creative solutions phases. Having the clients think through their values, attitudes and preferences about the right use and control of wealth and about the role of family will logically steer them to the right choice for themselves.

Once they have clarified their vision and mission and chosen the right vehicles for carrying out their philanthropic aims, clients should be able to automatically implement their choices. Unfortunately, not all plans are implemented, and even when they are, they're sometimes done incompletely. Yet the implementation phase is critical to achieving great results for the client.

Advisors must collaborate closely with other professionals to make sure the client's charitable aims come to fruition. The advisor manages a team of professionals including CPAs, attorneys, insurance agents and others (such as foundation benefactors), who must all work together seamlessly to ensure that all aspects of the plan are fully implemented and documented appropriately.

Sustainability: Keeping Philanthropy Alive
Once your clients start seeing their charitable contributions at work, expect them to exude a new confidence, and many times identify more funds they can put to work.

Sustainability is not only about a client's current charitable giving capacity but about the whole of their wealth management strategy-and the likely changes that will occur as life offers up new challenges, obstacles and opportunities. For the advisor, the "discovery phase" should be an ongoing process in the relationship with the clients and their heirs as life events dictate a fresh look at the results of the client's philanthropic plans.