Bring more value to your clients with charitable planning

Strengthen your practice and build deeper relationships with your clients by offering charitable planning services.
By Susan M. Tillery, CPA/PFS

Charitable planning
Photo by Paul-Daniel Florea/iStock

The role of the CPA is evolving. Clients are increasingly looking for a "one-stop shop" where they can receive all of their financial and tax services from one firm or individual. Because of this shift in consumer sentiment, many CPAs are looking for ways to expand their service offerings and increase both their competencies and the amount of trust they engender. Charitable planning is one such opportunity.

CLIENTS VALUE GIVING

As research indicates, charity is a concern of many clients and potential clients. In its 2016 Charitable Giving Statistics, the National Philanthropic Trust noted that approximately 91% of high-net-worth households give to charity. In 2016, giving by individuals and families reached an all-time high of $389.05 billion.

What's more, many clients, especially high-net-worth clients, expect their advisers to discuss charitable planning with them. Fully one-third of high-net-worth individuals surveyed in the 2017 U.S. Trust Study of the Philanthropic Conversation said that the topic should be raised during their very first meeting with an adviser, and 90% stated that the discussion should occur within the first several meetings.

However, CPAs may be missing out on an opportunity to provide the charitable planning advice clients need. The 2016 U.S. Trust Study of High Net Worth Philanthropy found that in 2015, only 24% of high-net-worth individuals had discussed charitable giving with an adviser — and, of that 24%, only 11% said they had spoken with an accountant.

BUILDING RELATIONSHIPS WITH CLIENTS

With automation on the rise, the human side of advising is taking on increased importance. Many CPAs are looking to differentiate their firms by offering their clients services they can't get from software. Charitable planning can be one part of such a strategy.

When done right, charitable planning goes far beyond discussing the amount a client should give to maximize his or her tax deductions. It involves conversations that evoke your clients' most deeply held values. This type of discourse enhances your role as a trusted adviser. In fact, the 2017 U.S. Trust Study of the Philanthropic Conversation states that three-quarters of advisers find discussing philanthropy with clients to be an excellent way to deepen and establish new relationships. This can benefit your practice as well: Clients who have strong relationships with their advisers are more likely to stay loyal to them, as well as refer them to friends, family, and business connections.

CPAs ARE WELL-POSITIONED TO ADVISE ON CHARITABLE PLANNING

Clients want to talk about giving and will seek out advisers who are willing to assist them in strategically thinking through their charitable planning goals. Many will naturally turn to their CPA for this kind of advice.

CPAs are well-positioned to help clients achieve their charitable giving goals because they possess both technical expertise and a deep knowledge of their clients' financial situations. The CPA is equipped to understand both the tax benefits of giving as well as how charitable strategies can be interwoven with the other important areas of the client's financial picture, ensuring a client's charitable giving is in line with his or her other financial goals.

Charitable planning can be a rewarding experience for both the client and the CPA. Encouraging a client to discover, explore, and act on opportunities to help his or her community, country, or world is assisting the client in the stewardship of his or her financial resources. This type of conversation with a client is profound, and the opportunity has never been greater or needed more.

OPPORTUNITIES TO BEGIN OFFERING CHARITABLE PLANNING

CPAs have many opportunities to begin the discussion about charitable planning with a client. Discussions of topics that CPAs already have with their clients, such as about budgets, year-end tax planning, estate planning, retirement, the sale of a farm or closely held business, or the sale or disposition of highly appreciated stock, can all naturally lead to a conversation on giving (see the sidebar, "Opening the Charitable Planning Conversation").

As one example, say a client asks you about her budget or spending plan. You could open the discussion by reviewing her income tax return and determining what percentage of her budget is directed to giving. If the client is indeed giving, you can then thank her and ask her about the charities she contributes to during the course of the year. You may even wish to share a story about your giving and your favorite charity. Then, you can ask her if she has goals for giving and, if not, mention your willingness to help her with her goals for charitable planning.

A word of caution: Though tax deductions will naturally form part of a conversation on charitable giving, they should not be the sole topic of discussion. Frame any current or future income tax benefits as the result of giving, not the reason for giving. Research shows that clients' giving is motivated less by tax breaks than by a desire to give back. In the 2017 U.S. Trust Study of the Philanthropic Conversation, only 10% of high-net-worth individuals stated that they give to charity to reduce their taxes. They were far more likely to donate money for reasons such as encouraging the next generation to be charitable (30%), religious or spiritual motivation (23%), and a sense of obligation due to their wealth (22%).

Charitable giving, when motivated by donative intent, brings a deep sense of satisfaction to the client. However, CPAs will not know if their clients have this donative intent unless they are willing to engage in meaningful charitable planning conversations.

GIVING BACK THROUGH CLIENT SERVICE

Clients, particularly high-net-worth clients, are looking to their advisers to help them fulfill their philanthropic mission, involve the next generation in giving back, and leave a legacy. Clients are also seeking a deeper level of value-based discussions about charitable giving — conversations that go beyond tax considerations and include life goals, values, and passions. Few advisers are better positioned to have these types of conversations than CPAs. Furthermore, what could be more rewarding for a CPA, whose career is about helping clients become better stewards of their resources, than seeing clients changing the world for the better?


Opening the charitable planning conversation

Other opportunities to begin a discussion of charitable giving with your clients include:

  • Beneficiary designations on IRAs and/or qualified plans. Review a client's beneficiary designations on IRAs and/or qualified plans. If a client has no family or heirs, or currently has his or her estate listed as the beneficiary, suggest designating a charity as the beneficiary. Regardless of who the primary beneficiary is, suggesting a charity for the secondary beneficiary is a valuable recommendation.
  • Beneficiary designations on life insurance. If a client has an existing life insurance contract, you can discuss the beneficiary designations and have a similar conversation as you would around qualified plans and IRAs. A client may no longer have an immediate need for the insurance, but if it is paid up, or is in the premium offset mode, having a conversation about a charitable beneficiary may open up opportunities the client had not considered.
  • Qualified charitable distributions. If a client has an IRA and is close to receiving, or already receiving, required minimum distributions, a discussion about qualified charitable distributions (QCDs) is appropriate. A QCD is a direct transfer of funds from an IRA payable to a qualified charity. QCDs can be counted toward satisfying required minimum distributions for the year, as long as certain rules are met. In addition to the benefits of giving to a charity, a QCD excludes the amount donated from taxable income. QCDs can be a significant tax-saving tool.
  • Investment planning. If a client mentions that an investment adviser is performing a year-end rebalancing of his or her investment portfolio, you may discuss the tax benefits of gifting appreciated stock to a charity, private foundation, community foundation, or donor-advised fund (DAF). This opportunity will enable a client to amplify the gift to the charity because any potential capital gains taxes on the gifted assets are eliminated.
  • Estate planning. Upon the year-end review of a client's estate plan, you may want to discuss the zeroing out of potential estate tax with a gift to a private foundation, community foundation, or DAF or directly to a charitable organization. This strategy may even be accomplished postmortem using the unlimited charitable deduction from the gross estate.

About the author

Susan M. Tillery (stillery@parakletefinancial.com) is president and CEO of financial planning firm Paraklete Financial Inc.

To comment on this article or to suggest an idea for another article, contact Courtney Vien, senior editor, at Courtney.Vien@aicpa-cima.com or 919-402-4125.


AICPA resources

Articles

Publications

  • The Adviser's Guide to Financial and Estate Planning, Volume 1, aicpa.org
  • Essentials of Personal Financial Planning (#PPF1701P, paperback; #PPF1701E, ebook)

Webcast

  • "Charitable Giving: The Latest Trends and Strategies," aicpa.org (free for PFP Section members or PFS credential holders)

Personal Financial Planning Section and PFS credential

The Personal Financial Planning Section is the premier provider of information, tools, advocacy, and guidance for practitioners who specialize in providing estate, tax, retirement, risk management, and investment planning advice. Visit aicpa.org/PFP. Members with a specialization in personal financial planning may be interested in applying for the Personal Financial Specialist (PFS) credential. Information about the PFS credential is available at aicpa.org/PFS.

The Tax Adviser and Tax Section

The Tax Adviser is available at a reduced subscription price to members of the Tax Section, which provides tools, technologies, and peer interaction to CPAs with tax practices. More than 23,000 CPAs are Tax Section members. The Section keeps members up to date on tax legislative and regulatory developments. Visit the Tax Center at aicpa.org/tax. The current issue of The Tax Adviser is available at thetaxadviser.com.

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