The Terror of Giving Up (2006)

We're always told to address the donor's objections. It's a natural part of the gift-planning process. First we listen; then we assess; then we present a thoughtful, appropriate plan meeting the donor's aspirations and needs. But occasionally the process grinds to a halt. Paralysis hits, and the donor becomes incapable of implementing the gift.

Now admittedly, the paralysis is often temporary-the donor has merely stalled to try to gain greater understanding of the proposed gift. Planned gifts can be complex beasts, particularly if you are 81 years old and a lifelong CD investor. It is not so much a matter of addressing objections, a term that always implies to me a dismissive wave of the hand in pursuit of a sale but a process of providing the donor with greater understanding and comfort.

But for some donors the retreat from the gift proposal is akin to terror, the terror invoked by the thought of giving up life savings. The idea of making a large gift of assets is simply too irrational, too much at odds with all of their experience and habits of life. They view the sacrifice as too large to contemplate during life, no matter how many rational benefits are offered: increased income, reduced taxes, and the satisfaction of a gift during life. No wonder so many people opt for the bequest, the lowest common denominator default planned gift.

Sometimes Logic Fails

There is a whole school of sales literature on the client who says "no." At one extreme there is the coercive and manipulative school that recommends the salesperson play on fears, sell features, impose a deadline, play games, and apply unrelenting pressure. Fortunately, this type of behavior is not common among gift planners. 

Most financial-planning literature is better. The best planners use knowledge, logic, and integrity to pierce through the client's objections. One excellent planning book I recently read observed that "an incalculable amount of opportunity, benefit, good work and even peace of mind has been lost due to some people's tendency to form emotional attachments to or fears about inanimate objects like investments and assets." A wise and true comment, but the same chapter ends with a rant about ending "irrationality." 

If only we could. Impatience produces this hectoring tone of superiority. The good planner aspires to excellence, and human frailty stands in the way. Sometimes we get so enamored by the beauty of our planning suggestions that we forget who we are dealing with. That doesn't mean we should just throw in the towel and give up on these donors, but it does mean we need some humility and compassion.

Giving the Farm

Although being attached to an asset or type of asset is very common, donors who inherit wealth and have never made active decisions about management are a particular challenge. I once had a donor who was in her mid-80s with a net worth of approximately $4 million. Three quarters of her estate was in a single stock that she had inherited from her parents. Her parents had acquired the stock in the 1920s, when they worked at a company that was later bought out by a big concern. She had no children, and was interested in giving the majority of her estate to charity.

That stock was a sacred trust to her. It was her parents incarnate. It had grown and produced dividends, and this being the late 1990s, it had reached a dizzying peak. It had never let her down, and she repaid this loyalty by defending it from all those sharpie ("men") stockbrokers who wanted her to diversify. She even had instructions in her will that it would not be sold.

Looking at her situation, it became clear that she would die with millions of dollars in unusable tax savings. She didn't have enough income and capital gains (this being Canada) to claim the full gift. 

Hence, I proposed a charitable remainder trust to begin to implement her plan and salvage significant tax savings at the peak of the stock market. It was a rational plan. But she reacted as if I had proposed amputation of a major limb. I was taking away too much. The rationalist part of me was stunned, but it was easy to understand her reaction. I needed to give her something back. Her parent's legacy of stock was fragile, but through a gift to establish a scholarship program, it could become secure. We spent time talking about her life and her parents' influence. 

Slowly, gently I wanted to help her get to see that the scholarship was a more meaningful replacement for the stock. Well, it turns out we established an excellent relationship, but she didn't complete the CRT. Giving during life was beyond her. She gave through her will, saw the value of the stock drop, lost hundreds of thousands of dollars in tax savings, but she was, oddly enough, psychologically comfortable.

So, I always remind myself to not let the perfect be the enemy of the good. It is easy for us to underestimate the terror that the act of giving a gift of one's life savings can have for certain people. Terror is often invoked by the thought of giving up the details of a comfortable life. We want to wave our wands of planning rationality and help them achieve great things. But sometimes they are impervious to our outstanding advice.

May we have the wisdom to advocate for the best, but also the compassion to accept human frailties.