Articles & Cases
Charities, Professional Advisors and Planned Giving Committees
May 24, 2006
Professional Advisors have an important role to play in assisting charities with their planned giving programs.
Planned giving involves trying to assist people with their philanthropic desires and goals in a way that is consistent with their estate planning objectives. Some of the objectives include: providing for family members, minimizing taxes, having enough liquid assets to support oneself during one's lifetime and carrying out a plan that is consistent with the donor's values and interests and including in some cases leaving a legacy for future generations. Some of the most common planned giving methods include a donation under a will (Bequest), gifts of life insurance, creation of private foundations, as well as gifts of marketable securities or real estate.
In this article I will review various ways in which charities, especially those responsible for planned giving, can involve professional advisors in their planned giving efforts.
In the planned giving context, professional advisors include lawyers (especially those in the estate planning and tax area), accountants, private bankers and trust officers, financial planners, insurance agents, and investment advisors. Other professional advisors may include funeral directors, real estate agents and certain service providers, such as Legacy Leaders, that support planned giving programs.
Veteran and succesful planned giving officers work closely with professional advisors, understand their value and have extensive networks of professional advisors to draw upon. I have tried below to itemize some of the benefits a professional advisor can offer a planned giving officer or a charity and why is it important to involve professional advisors in planned giving?
1) Professional Advisors often have very strong and deep KNOWLEDGE of certain important aspects of planned giving and have the ability to IMPLIMENT the gifts. For example estate lawyers can draft wills, obtain probate and assist with bequest management. Insurance agents can advise and arrange insurance products. Accountants have strong tax knowledge and knowledge of their client's affairs and can assist with estate planning. Financial planners also deal with clients and estate planning and have knowledge of their client's assets and goals. Investment advisors can remind clients that are interested in philanthropy of the benefits of donating certain listed marketable securities that have appreciated in value and then facilitate the transfer. Banks and trust officers have considerable expertise with private foundations, endowments and trust services and have proximity to those who would be considering planned gifts.
2) Professional Advisors have close PERSONAL CONNECTIONS to individuals who may be interested in philanthropy. Professional advisors are in a good position to raise issues of philanthropy with their clients, for example during estate and will planning or while a client is considering how much life insurance he or she will require. In general accountants are particularly close to understanding their client's financial affairs and motivations as the accountants have regular and indepth contact with their clients, typically more than most other professional advisors.
3) Some planned giving officers have complained that professional advisors have scuttled a gift planning opportunity for reasons that they don't consider legitimate. As sometimes egos unfortunately play a role in people's actions it appears that by involving a donor's professional advisors in gift planning at an early stage you strengthen the likelihood of SUCCESS because the advisors will be part of the process, and advise as to potential pitfalls in a helpful way instead of using their position and knowledge to torpedo a gift planning idea.
4) Professional advisors provide advice and services to their clients which can be VALUABLE. By involving professional advisors in the planned giving process you are likely to get some advice without charge, which may help in avoiding problems that would require significant expense to rectify. Furthermore professional advisors can provide assistance with tapping into the network that many professional advisors have as to who can most efficiently and economically deal with a particular issue. If you are trying to save money, selecting the right professional advisor in terms of knowledge, temperament and commitment can make a big difference. Maintaining contact with professional advisors is a useful way for charities to educate the professional advisors on what the charity is all about.
5) Professional advisors are often highly motivated and remunerated people who can subsequently be POTENTIAL DONORS or volunteers with a charity.
6) Involvement of professional advisors, especially those with a high profile, will give greater CREDIBILITY to a gift planning program and could be useful in terms of assisting in convincing the management of charities of the importance of gift planning, especially in times of financial need when more immediate concerns are considered paramount.
7) Professional advisors can be a useful RESOURCE in understanding many of the challenges facing charities and their planned giving officers. Many professional advisors may have been involved for a long period of time with a charity, and can provide useful historical information that can assist a new planned giving officer in understanding their position, which will help them avoid mistakes and make them more successful at their jobs.
Why are some planned giving officers reluctant to involve professional advisors to a greater extent in their planned giving programs?
Some of the concerns I have heard include 1) professional advisors charge too much, 2) some professional advisors have difficult personalities and 3) some professional advisors are interested in the limelight or their own personal agenda and unrealistically hope to meet all of the charity's top donors with little regard for the needs, sensitivities, privacy concerns of the charity, its donors or employees.
While a small minority of advisors may conduct themselves in such a fashion the majority of professional advisors do not possess these negative characteristics and it is in the interest of the charity to involve those professional advisors who believe firmly in philanthropy and planned giving.
In some cases planned giving officers use rules of thumb to understand for example legal fees which may be appropriate in many estate matters but not necessarily in the particular case at hand. Many of the criticisms of professional advisors fees come from planned giving officers who have never provided advisorial services and often have not even taken the time to review the accounts in question. Additionally, professional advisors are prepared to discuss compensation and hourly rates or flat rate fees for certain projects. With respect to the amount professional advisors charge it is highly correlated with overhead of the professional advisor. Large national firms tend to have national reach and far higher overhead. If you choose a large national firm to do a project you can expect that they will have capacities that other firms may not have, but that you are going to be charged a higher amount for the completion of the project. Donors and professional advisors should not expect to be wined and dined by a major Bay Street firm and then billed like a sole practitioner in Barrie. To expect professional advisors who spend a large amount of time in estate work or planned giving and have invested a large amount effort to understand the area to do such work on a pro bono basis is unrealistic, just as professional advisors don't expect that full-time planned giving officers will work on a volunteer basis.
With difficult personalities there is no question that some professional advisors, like some people, are difficult to stomach. They are sometimes constantly negative (nattering nabobs of negativism), or pushy or at times plain rude. My suggestion again with dealing with this issue is interact and/or provide work to professional advisors who do not exhibit these qualities - it is amazing how planned giving officers can both criticize their own professional advisors but they continue to use these people in a 'professional' capacity. There are so many knowledgeable, caring, altruistic advisors out there and dealing with the difficult advisor is both a challenge for the charity and for the other professional advisors.
With the self-interested advisor the example is often given of the investment advisor who scuttles philanthropic plans because a substantial gift will lessen the portfolio they are managing and their own remuneration which is based on the size of the portfolio. In this example of the investment advisor it is better for charities to face the issue and tackle it head on - many enlightened investment advisors realize the importance of philanthropy to their client and by sharing this interest they are more likely to strengthen their bond with their client and keep the client. With the recent changes introduced by the Harper government to allow gifts of marketable securities to charities in Canada to be given without the donor having to pay the capital gains tax, it is even more important to interact with investment advisors, and remind them of tax planning opportunities to donate highly appreciated stock instead of cash. Another example of the narrow advisor is one who is solely motivated by tax savings and their ability to provide "value" to their client and if those savings are not present to the extent they had thought their interest in the donation evaporates. These advisors do not understand non-tax reasons for philanthropy such as making a difference and leaving a legacy, attachment to a particular issue or organization, encouraging involvement with their children, religious reasons, and the tremendous personal satisfaction that philanthropy can bring. It is important to encourage these advisors to enjoy philanthropy, even if only vicariously through their clients. Another example is the advisor who attends a charity meeting, has little interest in what the charity wants to discuss or the intended reason for the meeting but is very interested in handing out brochures, cards and discussing in detail how their firm can solve your alleged problems.
Some planned giving officers are constrained in that only certain "approved" professional advisors are used by the charity and these advisors may be very knowledgeable about employment or health law but may know little or nothing about estate planning or planned giving.
How can a charity effectively involve professional advisors in gift planning?
There are a number of different ways - everything from informal discussion with professional advisors to "pick their brains" to highly structured planned giving committees with a large number of professional advisors that have regular meetings.
I find it strange but some planned giving officers that I have met do not know a stock broker, estate planning lawyer, insurance agent or accountant who they can approach for informal advice. At a minimum every planned giving officer should have a network of at least one professional advisor for each area of expertise who are knowledgeable about planned giving and prepared to spend a few minutes discussing issues and answering questions. This approach may avoid many of the common pitfalls, involves little expenditure of time and resources on the part of the charity. The problem is that if you are fishing for free advice professional advisors are more receptive than many but at a certain point they are running a professional business and there are limits to the energy they will spend on your charity's problems unless they can justify to themselves or others in their firm the lost revenue.
Another approach is the highly structured approach as used by SickKids and Princess Margaret Hospital Foundation in which they have planned giving committees that have members who are professional advisors and who have regular meetings. They are able to get professional advisors to volunteer more time because, in addition to them being fine institutions, they are giving formal recognition to the professional advisors and an opportunity for the professional advisors to network - ie. professional advisors are getting something back. Professional advisors are treated with respect and invited to events in a similar way that donors are treated. The criticism of this approach of using planned giving committees primarily stems from the cost of maintaining the committee and the events which can be substantial in terms of time and energy. Other issues include which advisors are picked and how to remove advisors who are undermining the work of the committee and alienating others. However, this needs to be offset against the benefits which may be substantial including the professional advisors learning more about the charity, professional advisors learning from each other, the charity learning from the professional advisors who because of the recognition they receive are prepared to spend considerable time assisting the charity which is not receipted, but tremendously valuable.
A further approach is the occasional lecture geared toward professional advisors in which they are invited to the charity's offices or facility and told about the work of the charity. This can provide valuable information to the professional advisors. Many professional advisors, for example lawyers involved with legacy gifts, are not aware of the planned giving profession and that many charities have full time planned giving officers who can assist with planned gifts. Programs such as these are ideal to introduce these lawyers to planned giving. However, the lecture approach is limited in terms of making a lasting connection between the two or providing feedback to the charity.
Another approach to involving professional advisors which is in between the informal network and the highly structured formal committee is to retain advisors on an ad hoc basis as needed in terms of type of advice or geography. If you have an estate issue in BC you may want to hire a BC estate lawyer to handle it. If you are trying to understand a tax issue you may wish to retain an accountant. This approach gives the greatest flexibility and the true professional relationship is typically preferred by professional advisors who are remunerated for their work. However, cost can be an issue. As well the advisor picked to work on a particular project may know little about the charity and its overall needs and probably will not provide either proactive or strategic advice with respect to the charities needs that you may obtain from professional advisors who are regularly meeting as part of a planned giving committee.
It is not easy for many professional advisors to initiate discussions with clients around philanthropy for many different reasons including a perception that some client are uncomfortable with the subject or disinterested; some professional advisors are unsure of their technical knowledge in this area; there are so many different issues that professional advisors need to cover as part of estate planning process that they are often rushed or feel pressure to move on to the next issue because the client is needing to go to another appointment or is concerned about the time involved because they are being billed by the hour. It is important that charities engage professional advisors not only in terms of innovative ways to raise the 'philanthropic question' or to discuss the latest technical issues with certain charitable 'vehicles', but also to provide encouragement to professional advisors to overcome their inhibitions in order to benefit some very worthwhile and appreciative charities.
As charities become larger and more complex, the ramifications of planned giving increases it is important that charities pick a model of working with professional advisors that works for them. Perhaps it is one of the models above or a combination like involving a professional advisor in a planned giving committee for strategic advice which is free and then retaining that same professional advisor to undertake certain discrete tasks on a professional basis. It is very important for charities to encourage professional advisor to raise philanthropy with their clients and to involve professional advisors in the process.
Many Canadian charities find that between 80-90% of the funds raised by planned gifts come from bequests left in wills. Planned giving officers who work for charities cannot prepare wills for potential donors or provide detailed tax advice on the estate. Lawyers typically are involved with preparing the will and obtaining probate while accountants are involved with tax planning and tax compliance for the estate. Many planned giving officers benefit from the involvement of lawyers and accountants also in wrapping up the estate and providing the distributions to charity.
If you are interested in reading more about this issue of involving professional advisors you should review "How to Involve Professional Advisors" by Kathryn W. Miree at the Planned Giving Today website and an interesting article by Stephen P. Johnson entitled "Involving Advisors in Philanthropic Planning: Recommendations from Research" published by the NCPG in The Journal of Gift Planning, Vol 9., No. 1.
For further information on legal resources for Canadian Non-Profits and Charities please visit http://www.blumbergs.ca/non_profit.php
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This article was written by Mark Blumberg. Mark is a partner at Blumberg Segal LLP, a law firm in Toronto and practices in the estates, non-profit and charity and corporate commercial areas. He can be contacted at mark@blumbergs.ca or at 416-361-1982 x. 237. Mark is also the Chair of the Professional Advisors Committee of the Canadian Association of Gift Planners GTA Roundtable. The Professional Advisors Committee of the Canadian Association of Gift Planners, Greater Toronto Roundtable, is responsible for increasing the profile of the CAGP amongst Professional Advisors, encouraging Professional Advisors to join CAGP, increase involvement of Professional Advisors who are already members of CAGP and encouraging networking and information sharing between planned giving officers and professional advisors. The opinions expressed in this article are his personal views.