Start with the 'why': Sharpening clients' charitable missions

Now that the year-end scramble has passed, the first quarter of the new year is the perfect time to get your clients thinking about their philanthropic resolutions.

How will those resolutions differ from those in 2023? It depends on the client. In your discussions, you may find your client's charitable purpose is shifting — not unlikely, given the social, economic and political headwinds in the U.S. and globally. Or perhaps this year's giving levels need to be informed by their financial circumstances as well as current tax planning opportunities available to them. Before you talk is complete, encourage your client to think about sharing their philanthropic journey with family members.  

Values in action

With a fresh year comes the chance to reassess what is most important to clients and how, in turn, they can honor these values through action. Begin by discussing the mission behind their giving — in other words, the why. Articulating or redefining a mission not only creates an intentional expression of values but can also help families create and sustain a philanthropic legacy.

For instance, a family foundation we work with initially made a broad range of grants in education and health. After reflecting on which grants were most impactful and felt most fulfilling, the donors realized that the challenges the foundation wanted to solve most began in early childhood. The donors deeply value inclusion and equity, and their mission has evolved to be the creation of equitable opportunities that help children and families thrive. Focusing on early childhood has allowed their grants to improve educational and economic outcomes and help remedy some of the systemic inequities they see in their community. While the donors' values did not change, they sharpened their focus to have more impact.

Beyond the "why," external factors can also play a role in shaping a mission. For example, during the COVID-19 pandemic, many philanthropists were moved to address the urgent needs of their communities. Encourage your client to consider whether there are pressing needs that might impact your client's mission and reshape their philanthropy.

How much and in what form?

The next question clients should consider is how much they want to — and can wisely — give this year. Not only will settling on a specific amount inform the annual financial plan, but it will focus their thinking and help them to be strategic in their efforts and properly allocate the amounts they are most comfortable with to the appropriate causes. 

Clients should also think about what form these charitable gifts will take, with options including cash, securities or complex assets. Appreciated public securities are often efficient instruments to maximize the amount given to charity while reducing your income tax liabilities. For example, if you contribute stocks, bonds, or mutual fund shares directly to a charity, you may avoid paying capital gains tax on the appreciation, and you also may get a charitable income tax deduction. If your client has other types of highly appreciated assets (such as property, real estate, or cryptocurrency) or plans to sell their business this tax year, there could be other opportunities to explore.

Think generationally

A client of ours, a first-generation American, benefited from a full college scholarship, which in turn led to a successful and lucrative career. As a result, her charitable mission was centered on access to education. To honor this charitable intent, she started a scholarship fund at her alma mater, one that she and her family continue to fund each year.

Philanthropy doesn't have to be a solo activity; it is an opportunity to engage others and bring people together, especially within families. In addition to creating tax benefits and engendering a sense of satisfaction, philanthropy creates a platform for teaching the next generation about values that are important to the family as well as learning how to evaluate philanthropic opportunities. 

When involving their children in philanthropic efforts, it is important that clients be mindful of their approach. Encourage them to start these conversations at an early age and to keep in mind that the next generation's ideas about giving may differ and that they might not have the desire or capability — yet — to meaningfully engage. 

Meaningful conversations on giving and establishing structure around family philanthropy can make charitable giving a vehicle for unity in the long term. Engaging in these meaty discussions helps families communicate their passions, financial goals and personal values — a process that is essential in establishing familial transparency and trust.