Breaking through client procrastination, what's new with closely-held stock gifts, and tips to stay current

Charitable planning can help ease client procrastination

“Nothing is so fatiguing as the eternal hanging on of an uncompleted task.”

–William James

Procrastination is a drain in ways that go far deeper than the incomplete task itself. We know this intellectually, but it can be so hard to break the procrastination habit. It seems that the more daunting the task, the harder it is to tackle. This surely is a major reason some of your clients routinely put off important planning discussions. And of course, many of those discussions are tax-sensitive, which means year-end can get very hectic and stressful for clients who wait until the last minute.

As the year begins to wind down, consider tapping into your clients’ philanthropic interests as a catalyst to motivate them to start addressing year-end planning items right now rather than waiting until November or December. You may discover that the uplifting topic of philanthropy makes it easier to at least start a conversation. Then, the conversation can evolve to include not only charitable giving topics, but also other tax planning topics that need attention.

Here’s how this could work with a client:

– Review the charitable components of the client’s estate and financial plans, including provisions in wills and trusts, beneficiary designations, donor-advised funds, prior years’ tax deductions, and historical gifts to favorite charities.

– Reach out to the client to suggest that you meet–or at least jump on a call–to check in on 2024 charitable giving plans and other items.

– Open the conversation by briefly recapping the charitable planning components already in place and the client’s history of giving. Then ask the client about their plans for 2024.

– As you talk with the client about charitable intentions, bring up various charitable giving tools and opportunities that match those intentions. In each case, use the charitable discussion as a springboard for general tax planning items that need to be addressed before year-end.

– For example, if a client who is over 70 ½ mentions wanting to support a particular need or organization in the community, you can suggest that you loop in our team to potentially establish a field-of-interest or designated fund, which can then receive distributions from the client’s IRA up to $105,000 annually per spouse. This, in turn, opens the door to discuss Required Minimum Distributions and other elements of retirement planning in general.

– If the client mentions that they are already dreading gathering tax receipts for 2024 charitable donations, suggest that the client consider setting up a donor-advised fund with us to serve as a convenient and rewarding “hub” for charitable giving. Going forward, the client can conduct the bulk of their giving using the donor-advised fund and avoid the mad scramble for receipts. If the client already has a donor-advised fund, make sure they know how to use it most effectively, and reach out to our team for help. What’s more, discussing charitable donation receipts presents a nice opening to remind a client about other paperwork that may need to be gathered or completed to meet overall estate and financial planning goals.

– When your client talks about charities they plan to support before year-end, remind your client not to automatically reach for the checkbook. Most of the time, highly-appreciated marketable securities (or other highly-appreciated, long-term assets) are ideal gifts to a client’s fund at the community foundation or other public charity because the client is eligible for a tax deduction at the assets’ fair market value, and the proceeds from the sale of the assets will flow into the client’s fund at the community foundation free from capital gains tax. That means more funds are available to support the client’s favorite causes. Conveniently, the conversation about highly-appreciated stock can segue naturally into a conversation about overall stock positions.  

– Philanthropy topics can naturally lead into even more topics that are sensitive to year-end timing, such as annual exclusion gifts, estimated tax planning, and updating wills and trusts before the extended family gathers for the holiday or travels together overseas.

We're here to help you serve your charitable clients every step of the way, every month of the year. We understand that late-December transactions are often unavoidable. The net-net is that we’re happy to work with you according to your clients’ schedules, whether that means getting a jump on a new year and processing stock gifts in February, helping you plan in September for year-end, or preparing fund agreements in December. It’s our pleasure to assist!

Closely-held stock is having a moment

Giving stock is an important strategy for any private business owner to explore. Not only can these gifts help implement a business succession plan that calls for transferring the business to the next generation if that is your client’s goal, but gifts of stock can also help your business owner client achieve charitable goals and avoid estate tax.

In light of recent legal developments and pending tax law changes, more and more financial and estate planning advisors are encouraging their clients to consider implementing gifts of closely-held stock to a fund at the community foundation or other public charity. Notably, two developments could have a big impact on your work with these clients:

1. The estate tax exemption sunset set to occur at the end of next year continues to loom large. Without intervening legislation, a lot more of your clients will need to wrestle with the reality that their estates likely will be subject to a hefty tax, causing many clients to rethink both the timing and methods to transfer business interests. Making gifts of closely-held business interests to a fund at the community foundation is likely to become more attractive to a broader cross-section of your client base.

2. Valuation has always been a critical factor in any type of tax or estate planning. This is certainly still the case with substantiating the value of closely-held business interests that your clients transfer to a charity, such as a fund at the community foundation. And now, the additional wrinkle presented by the Supreme Court’s decision in Connelly v. United States makes things even more interesting. The Connelly decision impacts the way business interests are valued for estate tax purposes. In Connelly, the Supreme Court held that life insurance proceeds indeed ought to be included in the valuation of a company without offsetting the redemption obligation. This could translate to higher taxable estates for your business owner clients, creating further incentive to leave a portion of closely-held stock to charity. The decision is also a reminder that careful planning can potentially avoid pitfalls.

Please reach out to us to learn more about how our team can help as you work with your business-owner clients to navigate legal and tax developments that could significantly impact future plans for their privately-held companies.

Looking ahead: Charitable planning techniques on the horizon

Our team keeps a finger on the pulse of current events and legal developments that could impact the way you work with your charitable clients. Below are three notable items that you’ll likely want to keep in mind this fall.

Election year implications

Naturally, as a financial, legal, or tax advisor, you’re very interested in how the results of the November elections could impact tax laws. What you might not know, though, is how significantly an election cycle can impact nonprofits’ fundraising efforts. Keep this dynamic in mind as you meet with clients who serve on nonprofit boards. These clients will appreciate the fact that you’re aware of the challenges. They’ll also be glad to know that you’re happy to loop in our team as a resource to structure and accept complex gifts as charities double down on fundraising efforts this year.  

Snapshot of giving trends

If it feels like more clients are asking about giving techniques such as crowdfunding, using appreciated stock to support charities, and setting up donor-advised funds, you are not imagining it. These trends are real! It’s smart to stay up-to-date at a high level so that you’re generally aware of what’s going on with philanthropy. Beyond that, the only information you need is our phone number. Our team is here for you! We are honored to be your first call anytime a client mentions that they’d like to launch or update a charitable giving plan. In most cases, we can provide tools and services that will help your client achieve their goals. In any event, we’ll help you figure out a solution, whether or not we ultimately plays a role.

For your calendar

If you’re in search of tools to help motivate clients to move forward with financial and estate planning, be sure to note that National Estate Planning Awareness Week is coming up. October 21 - 27, 2024 is this year’s designated timeframe to help the public understand the basics of estate planning and the reasons it’s so important. The original House of Representatives resolution includes key points that may spark messaging ideas for your client outreach. And of course, on all things related to charitable planning, please reach out to us. We’re happy to share best practices for encouraging clients to get serious about planning all aspects of their estates, including the legacies they’d like to leave to their favorite causes and the community they love.

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Our team is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

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