Legacy planning: a necessity not an option

Betsy Brill

In the 13 years since Strategic Philanthropy, Ltd was established, philanthropic advisory services have become a more familiar professional resource for donors and an increasingly respected professional ‘partner’ for their legal and financial advisers. The topic of philanthropy has moved from the human interest or social sections to the front pages, business pages and financial sections of publications. Despite this, legacy planning remains a badly neglected area.

Our work with philanthropic families and individuals most often begins with their advisers. Our core business model has always included helping the adviser community become more comfortable with introducing philanthropy to the conversation with their clients. This conversation is more and more important as we near the end of the first wave of the largest intergenerational transfer of wealth in history, both in North America and in Europe. The parents of baby boomers are passing away and the wealth they amassed is going to the next generation.

But what we have found is that successor generations are often unprepared to manage their inheritance, not from a financial planning perspective but from a philanthropic perspective. Financial and legal advisers to wealthy individuals and families too often focus on the tax planning aspect of philanthropy and not the role or value of philanthropy in their client’s life. A donor’s charitable giving should be seen as a holistic activity. Charitable giving activity during a donor’s lifetime and the charitable intentions after death should be considered as a philanthropic continuum. Together, they produce a deeper, more robust philanthropic plan that represents the interests and passions of the donor and the footprint he or she wants to leave in their defined ‘community’ for the generations that follow.

What do we as philanthropic advisers to HNWIs and families need to do to ensure that our client’s legacy is acknowledged and protected? First and foremost, ensure that clients are successful in their philanthropic endeavours both during their lifetimes and in their legacies. By working together, with the client as the common denominator, we can assure that all aspects of the financial, legal and philanthropic interests of the client are integrated into estate plans and other documents.

Financial and legal advisers need to ask questions [1] to better understand their client’s intent and interests. Inquire about time horizon when a vehicle is created. Make sure that named charities in estate plans are financially healthy and that there has been at least some relationship built with the organization during life. Prepare successor trustees, don’t simply name them. It doesn’t matter whether they are commercial entities such as banks or advisers or your client’s children, colleagues or extended family members. They need to know what is expected of them, what the parameters or guidelines for giving are, and why this is important. Create legacy giving guidelines and attach them to the estate plans or, if there is an existing foundation, incorporate them into the minutes as policy for the board and future trustees to review.

Don’t ignore family dynamics. Can the next generation work well together to fulfil their parents’ or grandparents’ philanthropic desires? Do they have philanthropic interests of their own and how do these relate to, or conflict with, what their parents want to do?

Philanthropy is one of the ways in which the values and history of a family are passed down. It can be a bridge between generations but only if there is a clear understanding and documentation of mission, focus and giving ‘guidelines’. Without direction, the intent of post-death philanthropy gets lost.

Despite global economic insecurity, wealth is growing. The most recent Giving USA report says that total giving in the US grew by 4 per cent in 2011. According to a new report by Credit Suisse and Forbes Insights,[2] wealth is expected to grow by 12.1 per cent a year in Latin America for the next five years. In Asia, the population of HNWIs  is expected to exceed that of the US by 2025. Amidst all of this growing wealth, philanthropy ranks increasingly higher on the list of ‘use of funds’. It is incumbent on all of us who advise HNWIs to ensure that they have the resources they need to protect and communicate their legacy. This is the best way we can help achieve meaningful philanthropy that is perpetuated from one generation to the next.

1 See Strategic Philanthropy, Ltd’s Charitable Planning Desk Reference™ for Advisors.

2 Next Generation Philanthropy http://www.forbes.com/forbesinsights/credit-suisse

Betsy Brill
is president, Strategic Philanthropy, Ltd. Email betsy@stratphilanthropy.com

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