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Charitable planning: 10 tips to help clients

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There are over one million registered charities in the U.S., and for many clients, deciding which ones to support can be a challenge. But helping clients through this process, and developing a better understanding of clients' charitable interests, can be a valuable way to strengthen the advisory relationship.

Here are 10 ways to help clients identify and support the charities that are in agreement with their goals:

1. Encourage clients to "listen to their heart and find the causes and organizations that have a mission that resonates with them," says Eileen Heisman, chief executive of the National Philanthropic Trust.

2. Ask clients which of their past donations has provided them with the greatest amount of satisfaction and pride, says Ken Nopar, a Chicago-based consultant who advises wealth managers on philanthropic matters. Clients want to feel their contribution goes to an organization that truly has done good work.

3. Most advisors don't have in-depth knowledge of philanthropic issues. On the other hand, their local community foundation does. Connecting your clients with a local community foundation will help deepen their knowledge of philanthropic work being done in their community.

4. "Think about where [the client's] money is going and where you can get the most leverage for your dollars,” says Larry Luxenberg, managing partner and chief investment officer of Lexington Avenue Capital Management in New City, N.Y. "A client may not have the wealth of a Bill Gates, but he or she can distribute the money just as effectively."

5. Once clients have started to narrow their choices, research their favorites to learn about the organizations' activities, leadership and financial health. "Look at their websites, review them on the watch dog sites like Charity Navigator, and read the IRS 990s or tax returns," suggests Heisman.

6. If you're not familiar with the organization under consideration, an onsite visit might be appropriate. You may suggest that clients in a position to make a large donation meet with the organization's leadership or members of its board.

7. Advisors should ask clients what types of assets they have currently and expect to have in the future, says Clare Golla, a wealth advisor with Bernstein Global Wealth Management in Chicago. For example, does the client own low-basis stocks? An IRA? If so, who are the beneficiaries? Are there opportunities within the client's portfolio for particularly efficient ways to give?

"The types of assets clients held now and in the future," says Golla, "will help determine what form a charitable contribution might take and when."

8. If donors want to give noncash or so-called complex assets, find out if the organization has the capacity to accept noncash assets. Not all organizations do, says Golla.

9. Does the organization appreciate the client's donation? When clients are making substantial contributions, they should always feel that they are appreciated and treated well by the staff of the charities, according to Nopar. On the other hand, they should be aware that often charities have limited staff, budgets and resources to devote time or energy to extensive requests for information.

10. After a donation has been made, request a follow-up to the gift, a report on where the dollars went, and the efficacy of the gift, says Kalita Blessing, CAP, a wealth manager and principal at Quest Capital Management in Dallas.

While advisors can help make sure gifts are made wisely and in a tax-efficient manner, the bottom line is that clients with charitable dollars should, in the end, follow their hearts.

Bruce W. Fraser, a New York financial writer, contributes to Financial Planning.

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