Often we hear advisors and families alike remark about how challenging it can be to start a conversation around giving. In reality, studies show that individuals want their advisors to discuss charitable giving. While charitable giving is a different conversation for advisors, Renaissance has developed some trigger questions to help you get the conversation started. Advisors play a critical role in starting these conversations and introducing solutions like Donor-Advised Funds (DAF) to charitable families. A DAF is the perfect tool for a family to support a tradition of giving and for an advisor to employ tax-smart strategies to enable the family to give more over time.
How does a DAF create a tradition of family giving?
A dear colleague of mine recently shared their family tradition to allow each of their children the opportunity to recommend a $100 grant from their family Donor-Advised Fund account. The Thanksgiving holiday is when they sit down as a family to discuss their desired grants and each child is responsible to answer the following questions about their charities:
- What is the organization?
- What do they do?
- Why did you choose it?
- What will your donation be used for?
Not only has this allowed for a regular and rich conversation for the family to share their values and interests with one another, but it also has given the children an opportunity to learn the value of responsible giving. The daughter chose a Battered Women’s Shelter, which resulted in a fairly heavy conversation-- - but one that was open and highlighted the compassionate, aware girl she is. The son chose his soccer team’s scholarship program. He knew their star goalie wasn’t going to be able to return in the upcoming season because of financial reasons. Perhaps his choice was a bit self-serving (he really likes to win!), but again it demonstrated a real awareness and compassion for others that may be less fortunate. Both children broached topics of conversation that might not otherwise have surfaced for this family.
For advisors, DAFs offer a great avenue to engage the next generation because philanthropy is a key area of their focus.
“Younger generations share knowledge about philanthropy with their peers in a way their parents and grandparents never did, thanks to social media and other tools. The next generation of donors are “driven by values, not valuables…They often say they have learned those values from parents and grandparents…They seek a balance between honoring family legacy and assessing the needs and tools of the day. They fund many of the same causes that their families support and even give locally, so long as that philanthropy fits with their personal values.”
Source: Wealthy Donors Differ by Generation, Pamela Yip, 2015
Using a Donor-Advised Fund as the family’s charitable giving vehicle allows for quick set-up, family engagement, and simplicity. What busy family does not crave simplicity these days? A DAF streamlines all giving from one source that can be managed on-line. Some families even create separate DAF accounts for children or grandchildren as gifts.
Setting an example of giving back is a privilege and one we hope both clients and Advisors can come together more often to achieve.
Interested in learning more?
Watch our webinar from last October where we discussed best practices for helping families communicate across generations. We also will shared what’s driving the increased use of donor-advised funds and specifically how advisors and their clients are using them to meet philanthropic and tax objectives.