For Advisors: Talk with Clients Now About Charitable Plans and Avoid Year End Stress

Many clients traditionally make many of their donations to charities at the end of each year, or rush to set up donor advised funds or other charitable vehicles in December. This creates unnecessary pressure upon the donors, the charities that receive the donations, and especially the financial, tax, and legal advisors who have to set up the accounts or donate appreciated securities and other illiquid assets.

 

Advisors can review their clients’ recent charitable giving history now, before or shortly after the beginning of 4th Quarter, to determine whether they should try to move the timeframe up and alleviate some of the last-minute end-of-year requests and frustrations from previous years. This proactive approach will provide many benefits to the clients, advisors, and charities.

Clients will welcome the conversation now. Some of the reasons both clients and advisors (and charities!) will benefit include: 

  1. The best charitable giving decisions are made in advance. Without year-end pressure, clients and their advisors can determine whether to create a charitable vehicle or donate directly to charity, terminate a charitable vehicle that has become cumbersome and possibly open another, decide how much and which assets to donate, identify which charities to support, and involve other family members. When rushed at year-end, donors often feel less satisfied, while donors who plan ahead feel a greater sense of pride and accomplishment.
  2. Some donations take longer than expected. When donating illiquid assets, or even appreciated securities, some donors are not able to receive their tax deduction in the year that they want because custodians or charities are not able to process these quickly at year-end.  Making contributions early can often avoid this situation.
  3. Some donors want to create a DAF or other charitable vehicle and make grants from their account before year-end. Establishing and funding a new account during the first ten months of the year can be very quick, but during the last few months it can take longer, especially if the assets donated are more complex.  For those clients who also want to make year-end grants, setting up the account sooner will enable them to support their favorite charities this year. DAF sponsors need to first vet and approve charities, so late grant requests may not be approved and sent if grantees are closed between Christmas and New Years’, or their staffs are so busy and are not available to answer questions.
  4. Non-profit organizations prefer to receive donations throughout the year. They have bills to pay throughout the year, and their development staff can be overwhelmed during December. Earlier donations can also enable the charities to better engage and thank their supporters.
  5. Many donors wish to include family and friends in charitable decisions. Should advisors initiate the charitable planning discussion earlier, this will enable clients to engage others and determine a mission, the charities they wish to support, and the assets that should be donated. (Maybe nobody wants that farmland or vacation home and these can be donated……). This is also a great way for advisors to get to know other family members as well.
  6. The ideal time to donate stock may be now and not at the end of the year or in 2018. Many stocks and other assets are at their peak now and can or should be donated to enable the clients to create the biggest charitable impact now or in the future. The value of some of those assets may decrease if they are not donated until December. Because of pending tax legislation which may result in lower tax rates, many advisors are recommending that clients donate appreciated assets now instead of next year.
  7. Enjoy the holidays! By encouraging clients to make their donations, establish their donor advised fund accounts, and make their grant recommendations from their DAF accounts earlier in the year, advisors will be able to decrease their work and stress level during December. When advisors look back at previous years and see that clients asked them to donate stock to many different charities in November and December, it may make sense to look for a simpler solution to save both them and their clients much time and aggravation. One annual tax-receipt letter from a DAF sponsor is much easier to keep track of than many different letters from numerous grantees. Clients love to be able to go online at anytime to their DAF sponsor’s website to quickly make grant recommendations to different charities, or ask their advisors to do this for them, rather than having to bother their advisors to tell them to make separate stock donations to the many charities. And of course it is easier for advisors to be able to donate all of the stock holdings to the one DAF sponsor than to the different 501(c)3 organizations.

The most important aspect is to begin the conversation now. Clients always welcome this conversation when they understand how it benefits them, the charities they support, and even how it benefits their advisors. The charitable discussion often is a key factor in bringing in new clients as well as retaining existing ones. 

(This article originally appeared in FA: Financial Advisor, September 12, 2017)