Wealth Advisory & Planning
May 12, 2020
Philanthropy is an integral part of the American DNA. Today, individual and family donations exceed corporate and foundation grants by a factor of four. Yet, despite their generosity, less than half of U.S. donors have a formal giving plan.1
A purposeful approach yields more tangible results
While “checkbook philanthropy” is an intuitive and altogether acceptable means of supporting a cause or charity, a planned approach guides you to think more boldly and broadly about what matters most to you, the impact you want to have and the degree of direct family involvement you want to achieve. It means having a strategy to reach your full potential — and derive the greatest satisfaction from giving.
Before creating a plan, it’s essential to have a clear understanding of your passions, values and philanthropic vision. Whether it’s supporting an educational institution, global cause or community initiative, you should carefully assess the benefits, practical outcomes and even the scope and scale of giving — local, national or global. You should also consider the legacy for which you and your family want to be known.
The power of a plan
Like a business plan, a philanthropic plan articulates future objectives and the means for achieving them with sufficient nuts-and-bolts detail. A practical working document should incorporate structures, guidelines and governance roles and responsibilities, as well as procedures for ongoing monitoring, assessment and refinement.
Any decisions should reflect the long-term strategy. For example, donors need to consider whether giving should be concentrated with a single organization, cause or geography or spread out among many. While donors may stipulate the way their gifts are to be used, it isn’t necessary for each dollar to be earmarked for a specific purpose. Unrestricted gifts can play a vital role, helping organizations to cover essential operating expenses.
Nor do plans need to be set in stone. Indeed, a sound plan may evolve over time. For example, a donor might decide to support certain charities for three to five years, allowing the recipient organizations to budget accordingly, then opt to support different organizations in the future.
Financial and tax considerations
Philanthropy is first and foremost an expression of your values, ideals and the difference you want to make. But it also should incorporate broader financial considerations. How much can you afford to give in the long term, or in any one year? How should tax considerations figure into your giving? These are critical questions that should be carefully addressed during a well-orchestrated goals-based wealth review.
GLENMEDE’S PHILANTHROPIC ADVISORY SERVICES
There are many tax-efficient philanthropic investment vehicles for donors to consider. Once you formulate your giving plan, you can evaluate appropriate tax and estate planning strategies, again in the context of your overall wealth plan.
Engage the family
Involving family members yields a range of important benefits. It provides a means to pass on core values, create a larger pool of assets to amplify their impact and preserve a founding mission across multiple generations. Family foundations, donor-advised funds and volunteering as a group are especially suited to optimizing family-based philanthropy — and bringing family members closer together.
For families with existing plans, it is important to remain flexible and open to the ideas and priorities of younger generations. For example, a broad theme, such as conservation, can allow different generations to support their own initiatives, such as preserving open spaces, supporting wildlife or fighting climate change.
From vision to reality
For those who have achieved financial success, one of the great dividends is the pleasure of giving back. Giving strategically with careful planning enables thoughtful allocation of assets for greater impact.
As the following case study demonstrates, the process of creating a plan can help families and individuals think through their goals with heightened clarity. With professional support and guidance, the planning experience becomes a journey of self-reflection and discovery. This ultimately can lead to a giving strategy aligned with a goals-based wealth plan that turns a philanthropic vision into reality.
UNDERSTANDING PHILANTHROPIC VEHICLES: SEVEN APPROACHES
CASE STUDY: UNCOVERING THE WHY
The philanthropic planning process is often triggered by a life-changing event or transition. That was the case for a client who recently sold her business and was contemplating her next chapter.
The proceeds from the sale of the client’s company exceeded her lifestyle and legacy needs. When her Glenmede advisor inquired about her giving strategy, she acknowledged that she had no formal plan. While she contributed annually to a number of charities, she had given little thought to maximizing the impact of her gifts.
Now, with more time and capital at her disposal, she was feeling overwhelmed by all the philanthropic options available. Our Glenmede advisory team, including a specialist in philanthropy, recommended reframing the conversation around a simple but thought-provoking question: What was the “why” of her philanthropy?
With warm memories of volunteering as a Big Sister in college and, more recently, donating career-appropriate apparel for women returning to the workforce, the client connected with a cause close to her heart: helping women succeed. Based on a series of conversations, a formal mission statement took shape: to empower women to lead more meaningful, independent and productive lives by supporting programs that foster long-term change in education, health and economic security.
After reviewing the available giving vehicles, the client determined that a private foundation best met her objectives. Over the next year, Glenmede worked with her to develop giving guidelines, formulate a budget and research organizations that provide skills training for women returning to the workforce.
1. 2018 U.S. Trust Study of High Net-Worth Philanthropy.