Tag Archives: Legacy Planning

Families and Wealth

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Advisors are who people turn to for guidance about charitable giving. A recent study from U.S. Trust and The Philanthropic Initiative found that advisors sometimes fail to put more emphasis on an individual’s or family’s experience with their wealth, and overestimate the importance of tax benefits as their motivation for giving.

Albeit the survey included not just wealth advisors, but also trust and estate attorneys, accountants, and other tax professionals, it is still notable that clients care about their advisor’s ability to discuss personal values and how these values affect their personal investment, giving, and charitable goals.

wisely-invested money growingClients want their advisor to give advice based on personal motivations for giving, a passion for a cause, the effect that their giving has on their community and a strong desire to give back.

Clients want to be connected to nonprofit organizations that share their passion, and they want to know their gifts are being used wisely. We believe that not spending time exploring a family’s experience with their wealth—and digging deep to find motivation to help nonprofits whose missions “connect” with an event or situation personally experienced—can mean missed opportunities for donors to do good in areas that are important to them.

At the Stewardship Foundation, it’s clear that we are passionate about our four tenets: respect for life, marriage being between a man and a woman, religious freedom, and rights of conscience. We believe that it’s our responsibility to care for the poor, the sick and the disadvantaged, and for every woman, man, and child whose life is impacted with lack of education, opportunity and freedom.

We believe in transformational giving, the kind that comes from the heart, and that changes lives in our community and in the greater world. We are firm in our commitment to knowledge about structured giving—charitable trusts, donor-advised funds, and the rest—but in practice, we believe it starts with a balanced conversation between the technical tools to reach financial goals and the personal reasons for doing so.

If you’d like to explore your family’s experience with wealth to better charter your giving, please call us at (614) 800-7985 and please share this with someone you believe might benefit from our balanced advisory services.

Case for Philanthroinvesting

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touchdownIt’s football season. The season when, after investing over two hours in front of the TV, we go crazy when one team makes some remarkable adjustment to its game plan and pulls out a win in the last minutes of the 4th quarter. Depending on whether our favored team won or lost, we collectively scratch our heads and wonder why the team waited to the last minute to make a difference!

Nonprofit financial managers also scratch their heads wondering why so many donors wait to the last minute, aka, end of tax year, to write that check.

If you’ve seen our website’s “If you believe in…” slideshow, you may have noticed that the final slide is labeled “…transformational giving”. The image is of a young woman on the edge of a lake, disturbing the water just enough to create outward ripples. It is a symbol for transformational giving – the kind of giving that not only transforms the giver in a spiritual way, but that also transforms the nonprofit receiving the gift because the gift itself is large enough or designed well enough to grow and sustain the charity’s mission over time.

An excellent example of transformational giving comes from Paul T. Penley, the director of research for philanthropic advisory firm Excellence in Giving. Penley calls it “philanthroinvestments – real opportunities for philanthropists to realize returns and then relinquish the benefits of those returns to charitable organizations they trust.”

Penley discusses the concept in the article Smart Gifts Keep on Giving – how a philanthropic investment of $600,000 is on track to more than quadruple, generating $2.5 million revenue from the original gift.

This investment is neither an impact investment (a socially responsible form of investing that creates measurable social or environmental impact alongside a financial return for the investor) because the financial returns do not come back to the investor; nor is it a normal grant or annual cash donation needed every year to run the same programs. The grant is, however, one that invests in a revenue-generating, job-creating project so that the organization doesn’t need additional grants to run its programs.

This model will not work for all charities (for example, it won’t work for disaster relief), but for most, it enables a gift to keep on giving and attracts high net worth charitable investors.

If this type of long term thinking fascinates you, inspires you, challenges you… or if you are a major gift or development officer, or you know someone who is, we’d like to lead the conversation about philanthroinvesting.

Donor Advised Funds and why Private Foundations need them

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A donor-advised fund (DAF) is a separately identified fund or account that is maintained, operated, and legally controlled by a section 501(c)(3) organization like The Stewardship Foundation. In this month’s article, we list why owners of private foundations may want to covert to DAFs with The Stewardship Foundation.

Man working in home officeReason #1. Save time and money

Private foundation owners pay for lawyers, accountants, and office supplies, but with a DAF, owners advise how the funds are used, yet avoid the administrative cost. In some cases, as much as 50%. Cutting costs makes the money go further.

Reason #2. Less hassle

DAFs relieve philanthropists of the hassles of running a foundation. No more tedious paperwork or fact checking potential recipients. For larger foundations, no hiring, firing, or worrying about staff.

Reason #3. More privacy

DAF funds are relatively anonymous because there are no requirements to disclose as much information about their charitable giving. Privacy ensures that philanthropists can support causes that operate within their personal value system, ethical standards, or call to Christian conscience. Private foundation tax forms are public information, exposing operational details and even personal information.

Reason #4. Smaller donor investment fees

Small foundations often pay relatively high fees to the firms that handle their investments. On the other hand, donor funds work with a much bigger pool of money from all the accounts we administer, so fees are lower.

Reason #5. More generous tax deductions

Donors get an immediate tax deduction when they contribute to a fund from their private foundation, but with a DAF, deductions are more generous – instead of a limit of 30% to a private foundation, donors can deduct cash contributions up to half their adjusted gross income each year. There are other tax advantages for appreciated-security donations, and investment gains are generally tax-free (no excise tax).

Reason #6. Protected legacy

DAF funds protect the original intent of the founder. After a founder’s death, family members may disagree on the direction that the private/family foundation should take. They may begin to direct funds to causes contrary to the founder’s moral or ethical values. To protect the legacy intent of the founder, the foundation’s assets can be split among several accounts at donor-advised funds, and those accounts can then be used for different purposes.

If you are interested to learn more about converting from a private/family foundation to donor advised funds, we recommend a recent Wall Street Journal article by Jillian Mincer where she raises the question whether it is time for private foundation owners to convert to donor advised funds.