Sound Advice with Elizabeth Green

November 14, 2017

Sound Advice is a charitably-minded series from BCF by professional advisors in Baltimore. Do you have advice to share with colleagues? Contact Rosemary Calderalo today.

Elizabeth Green Elizabeth Green is a Member in Pessin Katz Law’s Wealth Preservation Department.

Starting a conversation about charitable giving should not be uncomfortable. After all, you are not asking the client to give you money or even asking the client to give money to a charity you support (or at least you should not be as their advisor). What you are doing is giving the client the opportunity to evaluate his or her own desire to leave a charitable legacy – of any size – to help one or more institutions which are meaningful to that client.

As advisors, we ask our client who is important to them and how they want to benefit their friends and family. Failing to ask them if there are charities that are important to them deprives the client of the ability to benefit those charities. The question then becomes how to bring up the topic.

One question that opens the discussion is “Are there any charities that will miss your gift when you are gone?” When a client has supported a charity regularly over a period of years, enabling the client to specify an amount of funds to leave to the charity allows the client to continue to make an impact on the charity. Conversely, failing to ask the question may leave the client in the position of not providing for an institution that was very important to him or her simply because no one thought to ask. If the gift is not memorialized, there usually is no mechanism for making it.

Another way to begin the conversation is a little less directly. Every Will or Trust should contain a “failures clause.” Sometime referred to as the ‘catastrophe clause,’ this clause fills in what should happen if no one mentioned in the document is alive when the time for distribution occurs or if a particular gift should lapse. This is an easy place to begin the discussion of charity. The typical default for a failures clause is either to the testator’s heirs or half to each spouse’s heirs. While some clients like that result, others do not want to see sometimes distant or estranged relatives benefit in any situation. When asked, many clients like to insert a favorite charity to be the recipient of any assets that are subject to the failure. Once discussing the failure, sometimes the clients respond that they want to make an outright gift to charity at their death – something that the client had not previously considered but enjoys.

In having the discussion about gifts to charity, some clients will ponder whether it is “fair” to take money away from their children. An appropriate response to that is that once everything is liquidated, carving off small amounts (or large amounts for a larger estate) will not have a real impact on the children but would have a very large impact on the charity. There certainly are times when charitable giving is not appropriate due to the size of the estate and the needs of the family but in many cases, when you consider the amount of money available when all of the assets are liquidated, that amount far exceeds anything the client realizes he or she had. 

Beginning a conversation about charitable giving is important. As advisors, we owe it to our clients to share with them the entire panoply of options. Charitable bequests are an important option available to every client. When we do not ask the question, the charities may not receive anything and our clients might not have the opportunity to leave a charitable legacy.

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