Name that Charity!
“Name That Charity” sounds like a failed 1960s game show. Instead, it is an approach to estate planning that paradoxically may discourage charitable giving. This is an observation made by Kathy Hawkesworth of the Edmonton Community Foundation in a recent presentation to the Society of Estate and Trust Practitioner (STEP).
Kathy’s point is financial advisors and estate lawyers often put their clients on the spot. Do they have charitable interests? Would they like to include charities in their will? Which ones!?!
To lawyers or other advisors, these seem like reasonable questions. To draft a will, you a need the charity’s legal name and a gift amount. Just the facts, please. To clients the process may not be that simple.
Inquisition Planning
Identifying family beneficiaries is easy, but it is less so with charities. Not everyone – especially these days – has a trusting, close relationship with individual charities. The question can be a stumper, although they could indeed be inclined to give.
To the client it may feel like an inquisition. Without an answer at hand, the client may stammer. They declare disinterest, or resort to the evergreen excuse that “charity begins at home.” Matter closed. But is it a failure of charitable intent or a failure of process? I agree with Kathy that it is a failure of process.
A Charitable Giving Paradox
In this historical moment process is especially important. We are living a charitable giving paradox. Ordinary, regular giving is declining, at least in terms of the taxpayers who claim donations on their taxes. In 1990, 30% of taxpayers claimed donation; in 2019 it was 19%. Yet, exceptional donations – including planned and estate donations from assets – are at an all time high.
Regular giving is sustained by greater community involvement and organized religion. Without these underpinnings there are fewer regular donors. We may have more shallow connections with charities. In the current context, name that charity become more difficult.
Planning Ideas
What can lawyers, estate planners and advisors do to make the conversation about estate donations more productive? Here’s some thoughts:
Before sitting down with clients to take instructions prepare them for the “charity” question. This may be via a pre circulated checklist or questionnaire.
Ask clients to think about causes are personally meaningful. What has affected their life or will have an effect on the lives of future generations? What gives them joy or nightmares? Open up the concept of charity through discussion and then look for charities that align with their interests.
Inform clients that an estate donation has significant tax savings in Canada. Tax isn’t a reason to give but it is an intellectual alibi for an altruistic act. It opens up a different, deeper planning discussion.
For clients that want to support a number of charitable purposes with their estate donation, consider a legacy donor advised fund at a public foundation.
Do some charity research for the client. Encourage the client to speak to charities in which they are interested. A big donation decision calls for extra due diligence.
Some of these ideas are standard practice and others not. Each estate planner will have their own style and method. If supporting philanthropy is part of your value-set and practice, moving beyond “Name that Charity” is a must.