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Financial advisors and professional fundraisers (aka: Directors of Development) have a lot in common. Both seek out wealthy people. They start with a business relationship that transitions into a social relationship, later on developing into a really big business relationship. the advisor wants managed assets under one roof. The charity fundraiser wants contributions supporting a worthy case. Both seek long term relationships. As a financial advisor, how can you help your client when they are approached?
Why is this a problem? Because of the pandemic, the Spring Gala Season for your local charities never took place. Concerts were cancelled. Museum exhibitions were postponed. Meanwhile, these organizations need money to keep the doors open. If your client supports a dozen charities, twelve people are knocking on their door. Fortunately, both you and they think long term. They will be happier with a bigger check tomorrow vs. a small one today.
Here are some ideas to talk over with your charitably minded client:
1. Donating appreciated securities.
Many people thing of charitable contributions as putting money in the collection plate. When asked for big sums, especially for capital campaigns, your client is better off donating appreciated securities instead of selling them, incurring the tax liability and sending them a check.
2. Paying over time.
Your client loves the cause. They want to make a major gift to the hospital’s capital campaign. As their advisor, you see the stock market isn’t cooperating. They can pledge a certain amount of money, paying it off over time. The typical time period is three years.
3. IRA beneficiary.
Your client might have some orphaned IRAs. Perhaps some insurance policies. Consider naming the charity as a beneficiary. There’s no taxable event. The charity “knows” they will be getting money when the client passes away. If something calamatous happens and your client needs the cash after all, it’s still in their name.
4. Gifting Required Minimum Distributions.
Some well off clients must take RMDs but prefer not to have the additional taxable income. Look into qualified charitable distributions. According to Fidelity, clients 70 ½ or older can contribute distributions up to $ 100,000 from their IRA to a charity without paying taxes on the distribution. (1)
5. Setting up a donor advised fund or private foundation.
Requests for charitable contributions can ebb and flow like the ocean. Sometimes the seas are calm. A regular annual gift is fine. Other times, several favorite causes embark on building projects and capital campaigns at once. Your client might plan ahead, setting up a donor advised fund r private foundation. They can put money aside every year, then with big checks to favorite causes for big projects when they come up in the future. (2)
Your client might be torn between supporting worthy causes and keeping assets available for emergencies. You can help them find the middle ground.
Related: Coronavirus and Your Christmas Card List
(1) https://www.fidelitycharitable.org/guidance/philanthropy/donating-retirement-assets-to-charity.html
(2) https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html