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Charitable giving: What to ask first

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When Lynn McIntire initiates discussions with clients about charitable giving, she pursues two lines of inquiry. With one category of questions, McIntire, an advisor at Cadent Capital, an independent affiliate of Raymond James Financial Services in Dallas, asks about the clients' charitable objectives: Do they know how they want to give or give back, and why? Do they want their name on a building? Do they want control of exactly how the money is used?

Then McIntire explores the tax benefits that clients seek to gain as a result of their donations. Do they want to maximize long-term tax savings or to reduce the taxes heirs will pay on an estate? If they have sizable incomes, do they recognize the limits of the donations’ deductibility in their tax brackets?

With the answers to these questions, McIntire can help clients structure a planned and systemized charitable giving plan to best meet their tax and philanthropic goals. If the primary reason they are giving is for tax reasons, McIntire says, she makes sure the clients understand that if they are in the upper-level income brackets, they will only maximize their deductions by scheduling contributions to take place over multiple years.


If, however, they "want their name on that building," says McIntire, she explains that more modest yearly gifts may not satisfy the organization in a way that will prompt them to deliver high-profile recognition. Clients, however, can sometimes still get their name on a building if they pledge part of their estate, and pass the tax savings on to their heirs, she says. "Are you wanting to make a difference on your income taxes today or for your estate later on?" she asks clients. "It is hard to accomplish both with one shot," McIntire.

When drawing up charitable contribution plans, McIntire frets little about over-committing to a charity with their pledges. "Charities are pretty savvy. They know that people think they are going to do something and then are sometimes not able follow through. Not all funding promises have to be carried out," she says.

That flexibility disappears when clients commit to a nonprofit organization through an irrevocable trust. Under those circumstances, McIntire stresses to clients that they may only plan on parting with money that they can afford to never see again, and she reorganizes their portfolio assets accordingly.

Gregory Erwin Crawford, a financial planner at Alliance Trust Company in Reno, Nev., agrees that it's smart to clarify clients' tax and charitable goals at the outset. Crawford adds another tip: Talk to both spouses at the same time. "People weigh their motives differently, and you've got the best chance of finding common ground if they are both in the same room," Crawford says.

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

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