Several years ago I posted an article based on thousands of conversations with donors about planned gifts as a part of their overall estate plan. From Helping Donors Answer Their Most Perplexing Questions:
“Anyone who has ever toyed with the idea of making a planned or testamentary gift to charity knows that before any significant giving decision could be made, he/she has to answer two very important questions: 1) How much will my spouse and I need to live on for the rest of our lives? And, 2) How much should we give to our children and grandchildren?…
Question two is far more complex because it’s not just a matter of how much we can give, but when and how much we should give to our children.”
In my work with Thompson & Associates, we find out a lot about planning clients in the first couple of meetings, listening to them talk about their hopes, dreams, and values. Even so, when the topic of inheritance to children comes up, occasionally I’ve seen couples look at each other in a way as to indicate that there are some unresolved issues. “The look” could suggest that it’s been an ongoing discussion between them. Sometimes it’s been a strictly avoided topic, and it’s my specific question that brings the issue to the forefront again.
Planning clients may have reservations about a large portion of their assets going to their surviving children for several reasons.
1) Sometimes donors’ children are already more successful than their parents and don’t need the money.
2) Often, one parent wants to give everything to the kids while the other wants them to learn from experience.
3) Others are reluctant because they don’t want to take away their children’s incentive to be productive individuals.
4) Commonly, donors are concerned about the spouses, blended families, or children they’ve already had to bail out of various situations.
And if your fundraising background is that of an annual-fund or major-gift solicitor, you need to find another gear and shift into it quickly.
My first and best advice to you at this point would be to listen carefully and speak cautiously. If you agree too readily with a parent’s critical assessment of extended family members, no matter how irresponsibly or how badly they’ve behaved, those same parents may begin gearing up to defend their children or grandchildren. You can go from trusted advisor to a perceived threat in a few careless sentences.
And if your fundraising background is that of an annual-fund or major-gift solicitor, you need to find another gear and shift into it quickly. You don’t want donors to sense that you are pushing the process—especially since they know the conversation about a chartable bequest is coming. This is more about listening and allowing them to work out what THEY want to do—especially when it comes to limiting or eliminating gifts to anyone for any reason.
DEFENDING YOUR PROCESS
I think the success of Thompson & Associates is primarily the result of how we define it. Success is not driven or defined by current-dollars raised or deferred gifts promised. We measure success by two questions: “Do the donors understand their plan and do they feel really good about it?” Simple as that.
One of my best experiences in charitable estate planning was with a couple who decided to give $3.6 million of their estate to charity. They set up a subsequent meeting with their children to explain the what, how, and why of their estate plan. The son came in and sat down with crossed arms, clinched teeth, and a fixed frown on his face. He said nothing, but his body language was screaming.
This was not my meeting and beyond introducing myself, I had little to say. As his parents went through the plan, he began to soften his defiant posture. Then he began asking questions. By the time his parents were finished with their explanations, he was leaning over the table, talking enthusiastically about how their family was going to change the world, and wondering how this could be passed onto his own children. By definition, that’s what I call a success. See: DEFINING SUCCESS: The Starting Point in Charitable Estate Planning.
NOT IF BUT HOW
My advice is to always focus on HOW to give to their kids in their estate plan, not IF to give. Below are a few simple inheritance priorities and how donors can have a positive impact on future generations.
My advice is to always focus on HOW to give to their kids in their estate plan, not IF to give.
1. Relationship Priorities: A common desire among parents is that their children and grandchildren would continue on as a close, loving, extended family for generations to come. Some choose to transfer assets to fund a family gathering place to facilitate ongoing relationships. It’s important to note that values, relationships, and shared interests can be facilitated by inherited assets but rarely created by them.
2. Educational Priorities: Way back in the day, when the population was largely farmers and ranchers, inheritance was about land. Inherited land didn’t relieve children of the need to work but provided them with something to work. Without it, the next generation “didn’t have a row to hoe.” As society became more industrialized, inheritance took the form of tools and a trade. Farmers and tradesmen still follow in their parents’ occupations. However, the inheritance priority in the information age is more about education than anything else. Many donors invest in the next generation, creating a tradition of higher education through educational trusts.
3. Vocational Priorities: Many have worked hard, invested wisely, and retired to begin lower-pay but higher-purpose careers. With their own experiences in mind, they create career-enhancement opportunities—the ability for future generations to purse their highest occupational dreams and passions, even if they don’t pay as much as other careers. They are provided with the financial resources to become teachers, artists, nonprofit leaders, or philanthropists.
4. Character Priorities: Our chief concern is that our kids become productive, thoughtful, and virtuous individuals with great families and great grandchildren. That’s something no amount of money can provide and too much inherited wealth can destroy. In our interview process, we ask several questions regarding inheritance to children:
Do you already know what percentage of your assets you would like to give to your children?
What percentage of your children’s total inheritance would you like to give outright at death, to give as an ongoing income stream, or to give as lump sum payments over a period of time?
THE FIRST PRIORITY
There’s a multitude of legal and technical aspects to an estate plan that enhances rather than detracts from children’s character. The first priority is getting donors to begin thinking through their values and the priorities of their inheritance. The worksheet below is a way to begin that process.
Inherited wealth cannot create the best things in life; it can only help facilitate them. There are no guarantees. However, decisions by default rarely turn out for the best. Encourage your donors to think though the potential impact of inheritance on their children, as well as the impact on society through a gift to your organization.
Here’s the best part. Having focused our attention on the needs and wishes of donors and their families, when the question finally comes up about a gift to charity in their estate plan, the overwhelming response is YES.
Eddie Thompson, Ed.D.
Founder / CEO
Thompson & Associates, LLC
Copyright 2016, R. Edward Thompson