How We Do It
The Process
In the individual and family market as well as working with a nonprofit’s donors or an advisor’s clients, we have developed a process over time that works especially well. It draws out what a philanthropic person really wants to achieve. The process consists of five steps of planning that are approached sequentially while all the concepts in all five steps are interrelated. Our clients have told us this process brought into focus what they need to do for their philanthropic plans to come to fruition.
Step One
We start by discussing the process of planning itself and what to expect during the process. The five steps begin with exploring the fundamental motivations of the donor. In this part of the process, the client often does not know his, her or their basic motivations for engaging in this type of planning. Fuzzy concepts are brought clearly into the light and sharply focused. Motivations for philanthropy can be positive, such as fulfilling needs, wants, hopes, goals, and dreams or negative, such as expressing the fear of outliving one’s assets or concerns for self and spouse, children and grandchildren. When these are understood by both the client and the planner, the second step will take form—how to design and structure the best solution to achieve what the client wants.
Step Two
Designing an effective philanthropic strategy for the client can only be accomplished if it is based on and fulfills the motivations discovered in the first step of planning. A thorough examination of issues is undertaken—family, income, assets, selection of charity, selection of trustees, role of various planners, and much more can be brought to light in this second step of the planning process.
The goal of the second step is to find the right tool or combination of tools that will work for the donor. Often several possible designs are presented. Once the client and planner settle on the design and strategy, the next step is drafting to meet that design.
Step Three
In the third step, drafting the plan documents is often where a breakdown in communication occurs. If the first two steps are done by a planner who is not also the drafter, a loss of information can easily happen, resulting in documents that do not reflect the choices and expectations of the client. In other cases, if the client was not given all the alternative techniques from which to select in steps one and two, the drafted documents cannot fulfill the intentions of the client. Design must follow motivation and proper drafting must follow the selected design. Once the documents are drafted, the plan needs to be funded to launch it.
Step Four
Step four is the act of transferring the assets as required by the chosen gift structure. What asset or assets will be used will have been discussed and selected in the design step. In this step, the nature of the assets to be transferred, the title to the assets, any concerns in the law about using the assets in question and other asset issues must be addressed and resolved. When the assets are successfully transferred to the entities, trusts, annuities or funds chosen, the final step in the process is operation and administration of the plan.
Step Five
The last piece of planning, step five, involves checking to ensure that all facets of operating the plan will work as planned. This includes details of administration such as relations with a trustee or finding a trust administrator, securing the right investment manager, and contact where desired with the charity or charities that will benefit from this gift to make sure the gift is properly documented in their records. This is especially important where the strategies used include endowment funds, donor advised funds or other restricted purpose gifts that take effect now or in the future.
All of this process is discussed in advance for a thorough and complete understanding by the client/donor before acting on the plan. We have witnessed too many cases where this did not happen and the donor is upset, disappointed, or downright angry enough to file a lawsuit against the planner and/or the charity. The donor regrets getting involved in the irrevocable techniques at great cost to him or her. We work to ensure this does not happen.
We have created this logical process of planning to avoid potential nasty surprises and to ensure that the client/donor creates the best plan and that such plan operates as intended. Clients frequently express their gratitude for the education this process provides and the direction it offers them in making the necessary decisions to find and implement the best strategic design for their philanthropy.
