Jessica L. Gibbs, CFP® [00:00:52] Hi, everyone Welcome back to Off the Wall. It’s Jessica. We’re going to switch things up today, and I’m actually going to pass the host microphone to Emily Harper from Monument, and she is going to interview me today.
Jessica L. Gibbs, CFP® [00:01:04] So, hi, Emily!
Emily M. Harper, CFP® [00:01:05] Hi, Jessica. It’s a lot of pressure. I hope I live up to the expectations.
Jessica L. Gibbs, CFP® [00:01:10] You’re going to be great. I feel more nervous, I guess. Being the guest.
Emily M. Harper, CFP® [00:01:13] Well, you have nothing to be nervous about. I’m really excited about this episode today because as a lot of monument clients know and anyone who listens to Off the Wall, Jessica is such a wealth of knowledge when it comes to philanthropy and charitable giving, and that’s going to be the focus of our episode today. It’s the end of the year, a time where we’re thinking about maybe pie family time, but also charitable giving. You’re probably thinking about taking advantage of the charitable deduction on your tax return before December 31st. But you may also be thinking about ensuring your giving has an impact. Jessica has been so personally helpful to me and thinking through my own charitable strategy, that I wanted her to share her knowledge with our listeners today. So, I’m excited to interview her. We’re going to talk about two types of charitable giving vehicles, a donor advised fund and a charitable trust. And as always, you should talk with your wealth advisor and accountant to determine if setting up a charitable giving vehicle is right for your personal situation. But hopefully this will serve as a helpful way to start that conversation. So, we’re going to go ahead and get started. A lot of us are familiar with giving to charity on a regular basis, but when should you consider establishing a dedicated vehicle for a charitable giving?
Jessica L. Gibbs, CFP® [00:02:40] One indicator could be you want to move beyond checkbook giving. And what I mean by that is it’s when someone asks you for a donation and you say, great, sure. And you break out your checkbook, you write a check and maybe that is fulfilling. But also, maybe you want to have more strategy to your giving. Maybe you want to hone in a little bit more as far as what your philanthropic goals are, but also leveraging different tools that are available to you to make that strategy more effective. I also think establishing a charitable giving vehicle can make sense if you want to potentially have more funds to donate to charity. And so, by that I mean potentially growing money within a charitable giving vehicle so that not only your initial contribution can be donated to charity, but any sort of appreciation that happens within the vehicle can also then be used to further your philanthropic goals. And also, I think it’s a great time to think about establishing a charitable giving vehicle if you’ve had a large income year. So, for example, do a business sale or you’re exercising stock options or vesting RSU’s, or you have other high compensation, and you want to maximize a potential tax deduction in this year where your income is higher than usual.
Emily M. Harper, CFP® [00:03:55] We’ll dive into all of that because that is a lot. But one other thing I think is interesting when it comes to establishing a charitable giving vehicle and the intent that you have behind your giving something I’ve been talking with a lot of clients about recently is being able to sustain a certain level of giving throughout their life as their life stage changes, particularly in retirement. If you’re used to giving really regularly at elevated amounts and you want to keep that going, but you’re worried about where is that income going to come from, how am I going to keep doing that when I don’t have this income that I have right now? Setting up some kind of source for future charitable giving can be really powerful and helping you maintain that.
Jessica L. Gibbs, CFP® [00:04:41] That’s a really great idea to think about it that way of that transition from when you are making money and accumulating to that transition. Then when you are retired and you’re starting to take money from your portfolio, it’s a really hard transition to begin with. So then to think about, okay, I’m used to supporting my organizations of choice in this certain dollar amount and I obviously don’t want to stop that in retirement. I may even be looking to do more. That’s a really interesting way to think about a giving vehicle set up while you’re still working, could be a way to support your philanthropy later in life.
Emily M. Harper, CFP® [00:05:11] Nothing feels worse than getting those envelopes in the mail-
Jessica L. Gibbs, CFP® [00:05:14] Right.
Emily M. Harper, CFP® [00:05:15] For all of the charities that you donate to.
Jessica L. Gibbs, CFP® [00:05:17] Yeah.
Emily M. Harper, CFP® [00:05:17] I’m thinking, man, I might not be able to continue doing that. Or maybe personally, I like to see all of the fun little symbols next to my name with business.
Jessica L. Gibbs, CFP® [00:05:27] Right.
Emily M. Harper, CFP® [00:05:27] Or giving of you give it this level consistently every year. I think that is a big motivator. So let’s talk a little bit more about some of these specific vehicles. And let’s start with talking about a donor advised fund. Could you just explain a little bit how they work?
Jessica L. Gibbs, CFP® [00:05:45] So, donor advised fund, which I’m going to shorthand and call a D-A-F. It’s sometimes called a DAF, so you may hear. Ways. But here’s how it works. It’s like how the name sounds. It’s a fund where you, the donor, advise what charities should receive the money. So donor advised funds, they’re administered by five of 1C3 organizations. So the act of putting money in a donor advised fund is the act of donating to charity for purposes of receiving a charitable tax deduction. But a big benefit in my mind is that it gives you that flexibility to decide who gets what, grants in what amounts, and you’re able to do it on your timeline.
Emily M. Harper, CFP® [00:06:26] You said DAF’s are administered by 501C3 organizations. I just want to clarify that when you give money to a donor advice fund, you’re not giving it to one specific charity necessarily. It’s a vehicle where you can give to multiple charities of your choice.
Jessica L. Gibbs, CFP® [00:06:43] Yeah.
Jessica L. Gibbs, CFP® [00:06:43] Think of it this way. Let’s just say hypothetically, you sold your business and as part of your wealth plan, you wanted to make a large charitable contribution in the year of your business sale. So rather than having to hurry, figure out what specific organizations, universities, hospitals, whatever are going to get your donation this year, in what amount, and having to rush to make that decision before the end of the year. You can put it into a giving vehicle. Like in this instance, a donor advised fund and get the charitable deduction in this year. But then you have that breathing room to be able to go out to the organizations that you’ve given to in the past to talk to their development staff about what their needs are, what their funding priorities are, and find I want to make a larger gift to my alma mater, for example. Let me have some time to talk with them about what their needs are, what my goals are, and find the best alignment there, rather than having to quickly go to them and say, Hey, I need to give you a bunch of money before the end of the year because I need the tax deduction this year.
Emily M. Harper, CFP® [00:07:42] Sounds like a really powerful way to give with intention, give with purpose and develop that broader strategy.
Emily M. Harper, CFP® [00:07:49] What are some of the other benefits associated with a donor advised fund?
Jessica L. Gibbs, CFP® [00:07:55] There’s quite a few.
Jessica L. Gibbs, CFP® [00:07:56] So first, there’s no legal or accounting fees to set up a donor advised fund. But just as an FBI, you will likely pay an annual fee to the DAF administrator. Startup is immediate, which means, you know, as soon as the account is open and money is in the account, it’s very quick in order to be able to either start making distributions or invest the money within the donor advised fund. You can fund a donor advised fund with a lot of different types of assets. So, cash publicly traded securities, but also certain complex assets such as privately held C Corp or S Corp shares, restricted stock, and private equity and hedge fund interests.
Jessica L. Gibbs, CFP® [00:08:38] Interesting idea. If, for example, you own a business and you potentially are thinking about it’s an S corp, for example, and you want to donate some of your holdings in the business because you expect some significant appreciation and you’re trying to maybe cut down on the tax bill on the sale. There’s also no distribution requirement. So I think this is a really important one to be aware of, particularly once we start talking about charitable trusts. It’s a little different there. What I mean is that you can put money into a donor advised fund. You can let that money sit for years and just keep accumulating and growing and investments. You can do annual distributions. You can decide this year I’m going to do a small amount and next year I’m going to do a big amount. You really can do whatever you want each year. There’s no minimum or maximum amount that you need to distribute. It’s also very easy to change what charities receive grants. Typically, you’ll just go into your donor portal and you’ll just submit the organizations that you want to make distributions to. If it’s a new organization to them, they’ll just verify that yes, it is a qualified charity that can accept the grant, but otherwise it’s very easy for you to make changes as new charities come into your sphere, or if there’s a certain charity that you no longer want to support. And I think also I talked about how you can make different distributions over the years. You can also make multiple contributions to a donor advised fund. So potentially, again, back to our scenario where it’s maybe it’s a high compensation year for you as you can make a larger contribution to your donor advised fund. And that year the fund making additional contributions for a while and then years later say yeah I want to add more money to it for whatever reason. Lastly, I think an important benefit of donor advised funds is that the full amount that you put into the donor advised fund is eligible for a tax deduction and there’s also no tax on investment income in the donor advised Fund. I think a really interesting strategy to consider taking advantage of that. No tax within a donor advised fund benefit is if you have, let’s just say, highly appreciated stock in your portfolio with stock that you’ve held for a long time. It has a large embedded gain in it. Rather than selling the stock, paying the taxes, capital gains taxes on that and donating the cash to charity. You can transfer the stock directly to the donor advised fund and then sell it within the donor advised fund. Reallocate it, however, makes sense for your charitable giving goals. And because it’s a 501 C3 technically nonprofit entity, you do not have to pay taxes on selling the stock within the donor advised fund. So it can be a really powerful tool if you want to fund your donor advised fund with a highly appreciated asset.
Emily M. Harper, CFP® [00:11:18] That’s something that we’ve seen a lot of clients take advantage of and really see a lot of success with in terms of eliminating some amount of tax obligation on their investments that have done well. We’ve talked a lot about the logistics of a donor advised fund, how simple they are compared to other potential vehicles. We talked a lot about the tax benefits, which I’m always a fan of talking about the tax benefits. But I want to shift gears a little bit on some other ways that donor advised funds may be beneficial as part of your broader legacy strategies, something that we talk to people a lot about, and there’s a lot of research on how charitable giving philanthropy can be a really effective way to instill values across generations of a family and deepen those connections within those family. Could you talk a little bit about how donor advised funds can be a powerful component of family legacy planning?
Jessica L. Gibbs, CFP® [00:12:22] We’re often talking with clients who are high net worth. They have children. And one of the really big concerns that always comes up when you talk about creating their estate plan, for example, is my kids are actually going to inherit this money one day. It’s actually going to be a really substantial amount of money. And particularly if you’re a self-made person who you didn’t come from money, you created this wealth. You’ve done something that grew beyond maybe your imagination of what was possible. You’re going to have concerns about how am I going to transfer this wealth to my kids in a way that’s not going to ruin their work ethic or it’s going to make sure that they understand the value or the origins of this money and also so that they know those lessons that they can pass it on to generation three so that generation three isn’t in a position where they are potentially squandering an inheritance.
Jessica L. Gibbs, CFP® [00:13:15] One way to effectively try to build an understanding amongst the next generation of family wealth and values is to get them involved in charitable giving. And a donor advised fund is a really great way to do that. It provides an opportunity for the kids to start to understand a little bit insight as far as what type of wealth does my family have, how do we approach using this? And that can be community contribution or helping certain communities or certain organizations, or what is it that your particular family values and what do you see as the purpose for this wealth? And also, I think it’s a really good exercise in helping kids get involved with looking at how do you evaluate a charity in terms of is this a good organization to donate to or not, how to make grant distributions and also how to see and evaluate what was the impact of those grants. So it’s a way, I think, to get them involved in the family conversation and get them involved in an aspect of managing money. And also I think that creates more connection within the family because I’ve also seen often where family will come together towards the end of the year, they’ll have a family meeting and say with the kids, What organizations do you want to support this year and why? And in what amounts? And it facilitates a nice conversation amongst parents and kids. If the donor advised Fund is a fund that the money has continued to grow over your lifetime and there’s still money in it, when you pass away, you can list successor advisors to your donor advised fund so that you can list your kids as successor advisors to your donor advised fund, and they can continue on the legacy of can being money from this donor advised fund after you’ve passed away.
Emily M. Harper, CFP® [00:15:06] Donor advised funds are clearly really powerful vehicles for giving both in the short term and the long term. Are there any downsides that we should be thinking about as we talk about donor advised funds?
Jessica L. Gibbs, CFP® [00:15:18] First and foremost, is just being aware that with a donor advised fund, you can’t take funds out for the benefit of an individual. You can only take it out for the benefit of a qualified charity. So someone who has a tax ID number with the IRS that shows that they are qualified charity. Also, I think it’s important to be aware that because donor advised funds are technically administered by a sponsoring organization, donors can only make grant recommendations. So that may sound a little scary of, if I put money in a donor of. I find I’m relinquishing control of it. And maybe I want to give money at distribution to an organization. And the administrator may say no. Hypothetically, yes, that could happen. But really in practice, again, as long as it is a qualified organization, we have never seen a donor advised fund administrator decline a grantors request for a distribution.
Emily M. Harper, CFP® [00:16:13] I think if anything, if it’s an organization they haven’t made a grant to before, there may just be a little bit of a slowdown in terms of vetting. And if you’re on a tight time frame for when you want that charity to get that grant, there may be a little bit of waiting time there. But I’m with you, Jessica. I have not really seen any donor advised funds reject a qualified organization in practice.
Jessica L. Gibbs, CFP® [00:16:38] And then I’d say the last downside to be aware of is that you cannot use donor advised funds to fulfill a pledge and buy a pledge. I mean, if you go to an organization and you say, hey, I’m going to give you $100,000 and I’m going to pay, it’s you over the course of four years, that’s a pledge where you’re going to say, over four years, I’m going to give you $25,000. Technically, you can’t use a donor advised fund to fulfill a pledge because of that reason. We were just talking about about how you technically are giving the money to the sponsoring organization, to the donor advised fund administrator to make those distributions. And the IRS’s view it, they’re a third party. You can’t use a third party than to fulfill your pledge. So that’s where technically, if you’re following the rules, that’s something to be aware of in practicality. This is my hot take, because I used to work in philanthropy, but on the organization side at a nonprofit and the nonprofit is probably going to want you to sign some sort of pledge letter that says, I pledge to donate $100,000 to be paid over four years because they want that sort of accountability within their records. But I think if you were to go to an organization, particularly one that you’ve had a longstanding relationship with, that this is a larger transformational gift that you’re going to be making. And you said to them, look, I’m not going to sign a formal pledge letter because I want to use my donor advised fund to pay for this. I’m good for the money. I’m committed, but I’m just not going to sign a pledge letter. I think they would understand, and they would still be happy to accept your donation from a donor advice fund.
Emily M. Harper, CFP® [00:18:17] We love a hot take, an unfiltered opinion here. So, you heard it here. Great. Well, it sounds like donor advised funds. There is a lot of benefits. There’s a lot of flexibility and how they can be used. There may be some downsides, but they’re pretty minor. It’s a pretty simple vehicle for charitable giving. Let’s talk about a vehicle that might be a little bit more complex. Jessica, could you just explain what a charitable trust is and really the two main types, how they’re similar, how they’re different?
Jessica L. Gibbs, CFP® [00:18:48] A charitable trust is kind of a different animal compared to a donor advised fund. Charitable trust can be a great tool if you’re looking to make distributions to both a person and a charity. It’s a trust written by an attorney, so it has a trustee and beneficiaries, just like in a revokable living trust that you may have for your personal assets. But it’s an irrevocable trust, which means you can’t take the money back. And it has its own tax I.D. number. There are two main types of charitable trusts. The first is a charitable remainder trust, often called a CRT. And a CRT is a type of trust where you’re first going to make distributions of annual income to a named beneficiary to a person for a specific period of time. And then at the end of that period, the remainder gets donated to a named charity. Charitable Lead Trust is the second type. This is often called a CLT. It’s conceptually the inverse of a charitable remainder trust in a charitable Leed trust. It distributes that annual income to a named charitable organization for a specific period of time. And then at the end, the remainder gets transferred to a named beneficiary. So that could be you or your heirs. CLT’s in my mind are largely an estate planning tool, and they’re used by high-net-worth individuals who do not need current income from a particular asset.
Emily M. Harper, CFP® [00:20:19] And when you say estate planning tool, Jessica, what do you mean by that?
Jessica L. Gibbs, CFP® [00:20:23] I think if you’re looking at a way for getting potentially an asset that’s going to appreciate a lot out of your estate and you’re looking for ways to reduce estate taxes, that’s what I mean by estate planning tool. But again, in my mind, it’s you’re at a level of wealth where you have sufficient assets and other places in order to fund your lifestyle. That’s why I say I view CLT’s mostly as an estate planning tool. Less so. As a charitable giving tool.
Emily M. Harper, CFP® [00:20:52] Well, let’s dive into some of the good things, some of the downsides. And let’s start with the charitable remainder trust. What are some of the benefits there?
Jessica L. Gibbs, CFP® [00:21:02] There are few, including that you have full control over grants. You do receive a partial tax deduction when you fund it. And that calculation is based off of the remainder interest. That’s left to charity. So, remember, with the terrible remainder trust, you got an income stream now and the remainder at the end goes to charity. So, there’s, as you can imagine, a complicated IRS calculation of figuring out what’s going to be the tax deduction that you get when you put money into a charitable remainder trust. There’s also no tax on the investment income in the trust. However, I want to make sure it’s important to note that non charitable beneficiaries, so people who are beneficiaries, they do need to pay tax on any income stream that they receive from a CRT. And then lastly, you can use a variety of different assets to fund a CRT. You can use cash publicly traded securities as well as complex assets, some types of closely held stock and real estate.
Emily M. Harper, CFP® [00:22:01] How about the downsides?
Jessica L. Gibbs, CFP® [00:22:02] So, this is probably the most important thing to know about CRT’s. CRT’s are not going to work if you are middle aged or younger. That’s the bottom line. But let me explain why that is. When you set up a CRT, you will need to choose how long you’re going to receive an income stream. And this term can last the length of your life or can last a certain number of years, but not to exceed 20 years. And you’re going to need to have a 5% or less chance of outliving the Trust’s assets in order to receive a charitable deduction. So, this is why charitable remainder trusts are typically set up later in life.
Emily M. Harper, CFP® [00:22:44] I don’t really want to think about how to determine if you have a 5% of resources outliving your trust?
Jessica L. Gibbs, CFP® [00:22:50] Yeah.
Jessica L. Gibbs, CFP® [00:22:51] Back to thinking back to when I worked on a nonprofit, the one time I saw this organization listed as the beneficiary of a charitable remainder trust, the donor was in his late 80s. So, you saw it as a hypothetical example of is this going to fit your needs or not? Another important maybe it’s not a downside, but it’s just something to be aware of is that with a charitable remainder trust, you are required to distribute at least 5% of the trust annually to the named beneficiary to the person during that term. That means you’re going to be meaning to do some potential calculations to make sure that that distribution requirement is met. And also, it’s important to note that you can’t change the non-charitable income beneficiary once the trust is established. So, if you set up the trust, you list a certain person as the beneficiary of income for that 20 year or less term. You can’t change that later. There’s also more administrative considerations than with a donor advised fund. So, you’ll incur a legal fee to set up the trust. You’ll have annual administrative fees to make sure that the trust is administered properly. And you’ll also have an annual accountant fee to file the trust’s tax return. Another little quirk with the arches is that you cannot fund them with S Corp stock. So, I know I called that out earlier as a possibility of putting S Corp stock into a donor advised fund, but you cannot find a charitable remainder trust with s corp stock. It’s not as easy to change what charities will receive the grants because again, you’re writing a charitable trust. It’s a trust document written by an attorney where you’re saying at the end of the term, this organization is going to receive the remaining amount. If you wanted to make a change to what charity is receiving, and I think you’re going back to a lawyer and adjusting the trust to reflect that. And lastly, whether or not you can make repeated contributions to a charitable remainder trust depends on the type of charitable remainder trusts you set up. There’s more acronyms and things, words to go into specifically related to charitable remainder annuity trusts, charitable remainder uni trust. That is way more than anyone possibly will want to know on this podcast. So that would be something to dive into further. If this feels like it might be appropriate to you dive into further with your accountant.
Emily M. Harper, CFP® [00:25:14] The point that you made, Jessica, about it not being easy to change which charities receive grants? That’s so important. I’ve seen in practice where even if you still care about the mission, you still care about the work that an organization is doing. But you don’t like the leadership that’s in charge in the organization or you don’t like how it’s being ran. And I have seen clients change their mind about organizations that are named as part of their estate plan and choose to prioritize their charitable giving in different ways and with different organizations. So that kind of flexibility. Is important for some people and they may not want to go back to their attorney to try to rework their trust. What about a charitable lead trust? What are some good things about a charitable lead trust?
Jessica L. Gibbs, CFP® [00:26:03] Couple things. You have full control over your grants. That’s a nice thing. Also, similarly, you have the potential to receive a partial tax deduction depending on how the trust is structured. There’s no required minimum or maximum payment to the charitable beneficiary. So, remember, with the lead trust, you’re making distributions first to the charity and then at the end of the term, any remaining amount goes to you or one of your heirs or another person. So, there isn’t a minimum or maximum amount that needs to be distributed to the charity. Just so long as payments are made, at least annually. Hypothetically, I think you could make a regular contribution and maybe one year make a larger contribution if they’re doing some sort of capital campaign, for example. You can also fund a city using variety of assets, as we talked about. Cash, publicly traded securities, complex assets, some types of closely held stock real estate. But I think CLT’s, as I was saying earlier, it’s especially great to fund a CLT with a highly appreciating asset which can be advantageous if you’re trying to get that future appreciation out of your estate. And then lastly, you can make multiple contributions to a CLT, similar to a donor advised fund.
Emily M. Harper, CFP® [00:27:18] And help out any considerations, anything that someone should keep in mind if they think a charitable lead trust sounds pretty good for what they’re trying to achieve.
Jessica L. Gibbs, CFP® [00:27:29] Really CLT’s are largely an estate planning tool, and they don’t necessarily provide the biggest bang for your buck as far as a charitable deduction. CLT’s also they’re not tax exempt, which means that any trust income is taxed either to you, the grantor or to the trust, depending on how the city is structured. An important distinction from the donor advised Fund as we were talking about, where that is a tax-exempt entity. So, allocation changes or income that’s generated within a donor advised fund is not taxed. And then also, just like the charitable remainder trust, you’re going to have legal fees to set up the trust. Annual administrative fees and annual accounting fees. And it’s also not easy to change which charities are going to receive the grants.
Emily M. Harper, CFP® [00:28:13] That was a whirlwind of information.
Jessica L. Gibbs, CFP® [00:28:17] Is it more than everyone wanted to know?
Jessica L. Gibbs, CFP® [00:28:17] A lot of technical information, but broken down very clearly. It feels like it’s been a while since we actually talked about what the donor advised fund is. So, just to summarize, if you’re thinking about charitable giving as something you want to put a little bit more purpose, intent, strategy behind, when should you consider a donor advised fund versus a charitable remainder trust or a charitable lead trust?
Jessica L. Gibbs, CFP® [00:28:45] I think you should consider a donor advised fund. If you want a turnkey option to only support charity but low costs, low complexity, and you want that potential to grow assets for charity tax free over time, you should consider a charitable remainder trust. If you want a customized trust that can generate an income stream for you now and pass the remainder on to a charity. And also, if you’re in a more mature phase of your life. And you should consider a charitable lead trust, if you want a customized trust that’s going to generate an income stream for charity, now pass the remainder on to you or your heirs in the future. And you have a very significant estate that you’re trying to manage potential estate taxes on.
Emily M. Harper, CFP® [00:29:31] I think those are three really clear use cases for these various charitable vehicles. What are some other takeaways that our listeners should have from this? Regardless of what giving vehicle they may choose or if they choose a vehicle for charitable giving?
Jessica L. Gibbs, CFP® [00:29:50] So, first and foremost, this is just like if you’re talking about your own personal retirement accounts, you need to make sure that you’re naming a successor. So, whether that’s a successor, donor or advisor in a donor advised fund or a successor trustee and a charitable remainder trust or a charitable trust, this is the person that can take over for you if you are hypothetically not able to serve any longer. So, just make sure that there’s continuity as far as management of these funds.
Jessica L. Gibbs, CFP® [00:30:18] This is my personal belief here. I believe that philanthropy should be your primary motivation in setting up these vehicles and that your tax deduction should be secondary. I think that if you are in a high-income year and you’re listening to this, you’re like, okay, one of these vehicles makes sense. I’m just donor advisor and I’m going to set that up just because I want to maximize a charitable deduction this year. But you don’t really have a philanthropic intent. You don’t really have charitable giving goals. It’s just not a priority for you, which is fine, but. You feel like you need to be doing it for the tax deduction? I just feel like that’s the wrong way to approach this, that you really need to be thinking about philanthropy first. Lastly, I would not dismiss two really important ways to support your favorite organizations, ways that I think maybe just don’t get talked about as much. Everyone wants to support a project or funding for a specific need, or potentially they want to support an endowment for an organization. But what is less talked about that is so important is general operating support. So, this is unrestricted money that you are donating to the organization for them to use how they see fit. Unrestricted money is critical to helping organizations keep the lights on, pay their staff and have that flexibility to pivot their funding as needs arise. Because potentially, let’s just say you’re funding a project and then all of a sudden, a sudden need comes about. The organization can’t take that money that was dedicated to a specific project and reallocate it to this new need, general operating support. They can immediately shift that money over to funding a new project or a new need.
Emily M. Harper, CFP® [00:31:59] Jessica, I’m going to put you on the spot just a little bit here. Because of the background that you have coming from the world of philanthropy, If a potential donor is maybe initially uncomfortable with the idea of general operating support or unrestricted money, are there some things that a donor should be looking for or indicators that may help them feel a little bit more comfortable that that could be a responsible way to give to that organization?
Jessica L. Gibbs, CFP® [00:32:29] So, if it’s a new organization to you that you’re considering, there’s great tools out there like Charity Navigator, where you can look up an organization and just see how is it financially managed. I also would encourage you, I think a good organization probably is doing some sort of annual report and hopefully that’s something that’s public on their website where you can go back and find all the annual reports. You can look at the program work that they’re doing. You can also look at their financials are usually published in an annual report. So that’s a good way to baseline look at a program. I think also if you’re considering this is an organization that I like, I’m growing more attached to potentially there’s a particular program within this organization’s work that I really gravitate to. Rather than general unrestricted funding for the whole organization, you can ask the development staff, “Hey, do you have an unrestricted pot of money for this particular program?”
Jessica L. Gibbs, CFP® [00:33:21] And that way within this particular program, they can kind of allocate things as they need. But it’s again, not pinpointed to a specific project that that program might be doing or a specific center or something like that, depending on the size of the organization. So, that can be a way for you to start to do unrestricted funding but maybe meet that balance of wanting it to go towards a particular angle. I also think it’s really great as you continue to give to organization is, as you said, develop those relationships with the leadership at the organization, develop relationships with the development staff. I just really encourage people to if, for example, you’ve been giving to your alma mater and you’re thinking about I want to kind of do something a little bit more, I want to have more of an impact. I want to go deeper. I want to make a larger gift rather than spinning your wheels on. I don’t know how much to give, how much that would cost. I don’t know what that would look like. Reach out to development staff. You will make their day. If you call them up and say Hi, I am someone who would like to give you money, they will be thrilled to talk to you. They’ll talk your ear off if you want. As far as what their all their funding needs are, what sort of their maybe strategic vision is for things going forward. They can connect you with subject matter experts within the program that you could talk to. If you want to better understand what the needs are on the ground, there are a tremendous resource. That’s their job is to help you donors connect with the organization and find the right way for you to give. That’s my advice.
Emily M. Harper, CFP® [00:34:50] Are there any other ways that you could support your favorite organizations that we haven’t talked about?
Jessica L. Gibbs, CFP® [00:34:56] I’ll just do a plug for considering serving on an organization’s board or even volunteering your time and talents. Highly skilled executives have a lot of skills to offer in terms of reviewing grants that the organization might be giving out or financial stewardship of the organization’s finances or executive committee, or there’s a variety of different options. I also think it’s worth considering if, for example, you have been working, you’ve been supporting an organization for a long time financially now you’ve transitioned to retirement you to find a way to sort of create that fulfillment that you found from work over the course of your career, Contributing time and talents to an organization that you’ve long supported financially, can be a really fulfilling thing for you to do in your retirement. So, don’t discount how you can donate your time. It can be big, and it can be small. So again, talk to your organization about what opportunities exist and what their needs are. And we do have a great Off the Wall episode that we’ll link to in the show notes about this exact piece. And it’s with retired I.t, professional turned philanthropists. Mira Pillai, I think she has a lot of really good advice for people who are maybe thinking about joining a board and want to know more about what does that look like, what’s to be expected of me if I do that.
Emily M. Harper, CFP® [00:36:18] That was a great episode. Highly recommend listening. Thank you for all of that Jessica. I mean, you just shared so much information that I know will be helpful to so many people. And if you haven’t been furiously scribbling notes, trying to compare and contrast these various giving vehicles, don’t worry. We have a great downloadable chart comparing donor advised funds and charitable trusts characteristics side by side, so we will link to that in the show notes. And if you like our podcast, be sure to subscribe to our free monthly newsletter. Monument Unfiltered by visiting monumentwealthmanagement.com/unfiltered. It’s packed with investing and wealth advice you won’t hear anywhere else on topics that founders, business owners and executives care about. Again, that’s monumentwealthmanagement.com/unfiltered.
Jessica L. Gibbs, CFP® [00:37:09] Thank you Emily. You did a wonderful job hosting.
Emily M. Harper, CFP® [00:37:12] Thanks Jessica.
