Who Owns This Donor Anyway? A Presentation to the 14th Annual NCPG Conference by Ashton & Henry

Who Owns This Donor Anyway? A Presentation to the 14th Annual NCPG Conference by Ashton & Henry

A preview of an NCPG Presentation at the 14th National Conference on Planned Giving in Indianapolis, IN

I. Introduction:  Commercial Professionals and Planned Giving Officers are often at odds with each other, leaving the donor caught in the middle. The challenge in today’s estate planning environment is to find ways to put round pegs and round holes together, and match up client/donor needs, advisor skills and demonstrated charitable intent.

Individuals who may be approaching the estate planning or gift planning process from a one-sided perspective generally have self-serving interests that must be balanced in order for the donor to achieve his or her true objectives.

A charity appeals to the emotional needs of the donor, suggesting creative gift-planning strategies that, one hopes, will serve both the charity and the donor. A commercial professional appeals to the pragmatic and practical needs of the client suggesting strategies that achieve tax-related goals, often without the driving force of the emotion that would link these goals to philanthropy.

In all of these dealings, the element of control shifts from the charity to one or more commercial planners, or to other family members, and can create a sense of confusion, lack of clarity, and, ultimately, indecision.

Who owns this donor anyway? Perceptions, lack of communication, and distrust abound between charities and their donors’ advisors, between family members and charities, between donors and charities. Somehow, in the midst of much chaos, philanthropy is alive and well. However, some gifts being proposed and implemented are wrong for the donor. Some gifts that ought to be happening are aborted or languish indefinitely.

This is not to say that donors/clients are free from some of the blame. Reluctant clients might start the planning process with appeals to their tax averse nature, but without being motivated to finish by emotional or values driven needs, the construction of an elegant plan gets stuck on the drawing board. Procrastination abounds for many reasons including lack of knowledge, too much information to process, fear of making errors, and simply the discomfort about dealing with death. So, too, latent donors start a gift planning process with appeals to their emotional nature, but without early involvement by their financial advisors, they find themselves being advised against the charitable plan, much to the chagrin of the charity.

This brainstorming session examines some of the considerations and perceptions affecting the gift planning profession both from the perspective of the charity and from the perspective of the commercial planner. Each side perceives problems or concerns with the other. Many of these are legitimate, on both sides. Nonetheless, the frustrations being felt across the industry cannot be eliminated until the charities and the commercial professionals understand and appreciate the underlying reasons for these frustrations, take responsibility for their own faults, errors, and self-serving interests, and adopt a more comprehensive approach.

Following are a series of opposing viewpoints that we will discuss during this session.

II. Considerations and viewpoints

A. Competency

1. Commercial planners find charity representatives often inexperienced in dealing with sophisticated estate planning techniques. Many planned giving officers have little or no tax experience before taking their position with the charity or are promoted from within the organization from such departments as annual giving or major gifts. Also they too often have little knowledge or understanding of an entrepreneurial business owner’s concerns and the capitalist systems workings.

2. Planned giving officers find commercial professionals often inexperienced in dealing with sophisticated charitable giving vehicles. Many commercial professionals who are advising the charity’s donors are general practitioners who have never specialized in charitable giving tax law, and thus, are ill-equipped to advise their clients properly on planned giving options.

B. Drafting

1. Commercial planners are often asked by their clients for blanket approval of boilerplate documents provided by the charity when these documents may not provide the full range of options available. The boilerplate documents are grossly inadequate to serve the best interests of the client. In addition, the planned giving officer is guilty of the unauthorized practice of law.

2. Planned giving officers, wishing to facilitate the gift process and to help the donor avoid excessive legal expenses, provide to their donors, sample documents that have been approved by both their legal counsel and their fiduciary trustee. In the vast majority of cases, there is no need for the donor to pay his or her own attorney to reinvent the wheel at a very steep hourly rate. The donor’s attorney should be willing to review the charity’s sample documents without feeling put off.

C. Continuity

1. Commercial planners who are committed to helping their clients do the right thing are often frustrated by the fact that planned giving officers stay only a short time at any one charity before moving on for a higher-paying position somewhere else. The lack of continuity and stability among fund raising professionals gives rise to a general distrust of all fund raisers. The constant job changing does a disservice to clients who come to trust the fund raiser as well as doing a disservice to the charity. In addition, planned giving officers often take the hit-and-run approach to donors. After getting the gift, the planned giving officer has little time for stewardship leaving the donor feeling used and abused.

2. Planned giving officers, as a general rule, are extremely committed to their donors and to their institutions. Nonetheless, the structure and culture within a fund raising operation proves limiting in terms of advancement. Once hired in good faith, a planned giving officer is trapped in a noncompetitive environment that rewards its employees with cost-of-living increases at best, provides inadequate budgets to accomplish unreasonable fund raising goals, and changes job responsibilities without notice. Such conditions are not conducive to longevity.

D. Orientation

1. Commercial planners are accustomed to working with clients who have a high net worth, complicated business considerations and multi-faceted concerns while the planned giving officers have never experienced the challenge of running a business or dealing with the economic factors involved in making decisions about significant assets. Commercial planners often find the approach of a fund raiser one dimensional. If there is not a gift, there is no reason to suggest other non-charitable planning strategies to help the potential donor.

2. Planned giving officers spend years working with a donor, involving the donor in the work of the charity, and building a relationship with the donor. Over a long period of time, the donor develops an emotional commitment to assist the charity with a significant gift. Unfortunately, as so often happens, the donor’s advisor, who is critical to the process, cannot believe the donor wants to be charitable, throws up objections to the plan, and eventually kills the gift. Commercial professionals approach a charitable gift as merely a tax-driven solution without considering the emotional benefits the donor seeks. They have little or no commitment to a charitable outcome.

E. Disclosure

1. Commercial professionals are being paid to watch out for their clients’ best interests. That includes presenting the risks, cautions, options, and appropriate disclaimers so as to ensure that the client knows the potential downside of a charitable plan or the options the charity neglected to discuss. Especially important is the fact that these plans are irrevocable. Often, the planned giving representative neglects to present the full picture to the donor or is overly optimistic about what the plan might accomplish. Thus, the commercial planner comes into the picture at the end of the process. Often, the commercial planner is put in a position to mob up after the planned giving officer and, in playing a devil’s advocate role, is perceived as the bad guy. Nonetheless, if the commercial professional approves a plan that has undisclosed consequences to the donor, the commercial professional who is highly regulated is exposed to malpractice or errors and omissions problems.

2. The planned giving officer is interested in providing the best possible plan that serves both the charity and the donor equally well. The charity’s relationship with the donor will continue for the life of the donor, and its best interests will be served when the donors are happy. While tax-related objectives can be achieved with a smart charitable gift, the donor’s primary motivation for the gift is emotional. Planned giving officers would love to involve the donor’s advisor(s) in the early stages of the process, but are frequently prevented from doing so because the donor does not want to incur legal expenses, the donor does not have an attorney experienced with charitable tax planning, or simply does not want the charity to know the full extent of his or her asset ownership.

F. Design

1. Commercial professionals prefer to give their clients as many options as possible. Donors change their minds about charitable plans for many reasons. For example, a donor may lose interest or become disenchanted with the charity’s mission or practices. The donor’s philanthropic interests may expand or mature over time. A charity might merge with another. Or, the donor may lose respect for charity representatives including fund raising staff, trustees, or the charity’s president or executive director. This is why it is always appropriate to reserve the right to change the charity when the gift method allows such flexibility. While the charitable gift transfer can be irrevocable, the charitable beneficiary need not be and should not be.

2. Planned giving officers frequently are working within the context of a capital campaign. Donors who have become involved and interested in the charity’s work appropriately wish to participate in the campaign. In this common context, the donor’s desire to be listed with other major benefactors requires an irrevocable gift to the charity. Otherwise, there can be no gift credit for the creation of a charitable plan. Within this context, if the donor reserves the right to change the charitable beneficiary, he or she cannot be deemed to have participated in the campaign. And, from the fund raiser’s perspective, there is no gift and the life blood and job security of the fund raiser is lost.

G. Conflict of Interest

1. Commercial professionals consider fund raisers to be extremely opportunistic. Fund raisers have quotas and goals to meet; therefore, they pressure donors to make gifts that may not be in the best interests of the donor or the donor’s family. Their entire approach is manipulative and they prey on people, especially on older individuals who are vulnerable to the lure of special attention, visits, or charity perks. Planned giving officers are simply interested in meeting a quota, regardless of how they achieve it.

2. Planned giving officers frequently are approached by donors to evaluate massive financial packets involving product-driven solutions provided by commercial professionals. The financial illustrations prepared by advisors are intimidating to donors who cannot possibly understand the breadth and meaning of what is being shown. There is usually a formula approach involving the purchase of life insurance, even when there is clearly no need for the purchase of this asset. When a financial professional depends solely on commissions, he or she proposes the kinds of plans and management options that provide commissions, management fees, or other bonus compensation. These commercial planners prey on vulnerable people, especially older people and widows who have no way of evaluating properly the unnecessarily complex plans being proposed.

III. Talking Points

A. Is it ever appropriate for a Planned Giving Officer to present a proposal without considering the donor’s complete financial plan?

B. What do Planned Giving Officers need to do to get a place at the table?

C. Under what conditions would a Commercial Planner recommend a gift that removes assets under management or that provides no billable hours?

D. What should a Planned Giving Officer do differently to gain greater trust from the Commercial Planner?

E. What can a Commercial Planner do to be more effective at approaching a fund raiser for referrals?

F. Under what conditions is it appropriate for a Planned Giving Officer to provide sample documents?

G. What does the client have to do to prove to the Commercial Planner that he or she has legitimate charitable interests?

H. How can a Planned Giving Officer avoid unauthorized practice of law when the position involves extremely complex areas of estate planning?

I. What should the Planned Giving Officer do when the donor does not want to pay for his own legal fees to get the charity’s proposal reviewed?

J. What do Commercial Planners recommend to young or inexperienced Planned Giving Officers so that the PGO’s will have credibility?

K. Is there a conflict of interest if the charity provides legal services?