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Charitable Contribution Strategies to Build Your Philanthropic Roadmap

Intro

Andrew Thompson: Hello, everyone. My name is Andrew Thompson. Welcome to this webinar today. I’m a financial advisor here at Mercer, and it’s my pleasure to introduce a really terrific group today. But first, I wanted to provide a few instructions for everyone on how this webinar will go. Next slide, please.

As far as technical assistance, if you cannot hear the webinar sound on your device, check your speaker settings first on your computer. If there are still issues, send a request for technical help using the question tab and go to webinar control console. That console should have popped up for you when you joined the meeting.

We will be muting all of the audience for this webinar, but we do welcome your questions, and not only do we welcome them, we would encourage you to submit them because there will be a question-and-answer later in the webinar. Send those directly to our panelists via that questions tab in the webinar console, and then we’ll be able to see them and ask questions later. Please do not use the chat function.

This discussion will be recorded. A summary will be posted on the Mercer website later in March. Again, want to thank everyone for being part of this webinar today. Please reach out if there are any issues on the technical side or if there are questions for our panelists, and I will now turn it over to Josh, who will speak more to our topics today.

 

Introducing Josh DeForest

Josh DeForest: Excellent. Thank you, Andrew. First of all, welcome to all of you who are joining us today. We are really excited to be able to explore this topic in some additional detail. As Andrew mentioned, my name is Josh DeForest. I am the managing director for the northwest region here at Mercer Advisors, and we really prepared, I think, what is a really good agenda for our discussion for today.

 

How a charitable roadmap relates to your financial plan

We’re going to be talking about, how do we think about building this charitable roadmap as it relates to your financial plan, your tax strategy, and also your estate plan. It’s really my pleasure to be able to introduce the two speakers who you’re going to be able to hear from today who, are Renee Kurdzos and Colby Bircher.

So just to give you guys a little bit of background about who you’re going to be hearing from, Renee Kurdzos is the Executive Director of Planned Giving at Fred Hutch. She is a board member for the American Council on Gift Annuities. She’s also spent a lot of time working with the American Red Cross prior to working with Fred Hutch, and she’s a University of Washington graduate and holds a Master’s in taxation.

One of the things that I was really interested to learn about as I learned more about the Fred Hutchinson cancer institute is that they do a lot more beyond just cancer research, whether it’s things like bone marrow transplants, we’ll actually talk a little bit today about COVID-19 vaccine research and public health sciences, the work that Fred Hutch does and the work that Renee does inside of that is really pretty spectacular, so I’m really excited for you guys to be able to hear from Renee. So, Renee, welcome to the program today.

Also you’re going to get a chance to hear from Colby Bircher. Colby is the Vice President and Charitable Planning Consultant at Fidelity Charitable. She has been there since 2012, and I’ve actually had the unique opportunity to get to work with her directly with a number of our clients here at Mercer Advisors on all things from very simple charitable giving strategies to things that have been very, very complex, and so I’m really excited for Colby to be able to talk a little bit more about how they have helped our clients and others think through this topic of charitable giving.

Now, an interesting note about Fidelity Charitable is that, while they are related to the custodian that you are all familiar with, Fidelity Charitable is actually an independent public charity, and they received some notoriety recently when they surpassed the Bill and Melinda Gates Foundation in terms of their total giving, and they received a really nice letter from them sort of congratulating them on that milestone. So I’m really excited for you guys to be able to hear from the two of them today.

By way of kind of setting our agenda, the very first thing that we’re going to talk about is really to give you a deep look into the Fred Hutchinson Cancer Research Center, which as many of you guys know, is a well-known very reputable charity in our area, and you’re going to get to see the impact that giving and just general involvement can have on their organization.

Then we’re going to turn it over to Colby who’s going to talk a little bit more about, what are some of those practical ways that our dollars can go further to have a bigger impact. Whether that’s related to taxes or growth, or even considering some of these unique and different ways that you might not have considered related to charitable giving in the past, she really provides a really great amount of insight into this area.

And then finally we’re going to give you some practical ways that you can build some of these thoughts into your comprehensive financial plan, a tax plan, and also your estate plan.

We’re going to bring them up here in just a second, but just a little bit about Mercer Advisors. Mercer Advisors was started by a man by the name of Kendrick Mercer in 1985. We actually got our roots here in the Pacific Northwest. The firm was originally started in Eugene, Oregon as a law practice.

As we have continued to grow over the years, it’s been really amazing to see the work that we’ve been able to do for clients. As it stands today, Mercer Advisors has over 50 offices around the country. We manage over $27 billion in assets and get to work with over 16,000 different families.

One statistic that we’re particularly proud of is that over 45% of our client-facing staff are women, which is really a leading statistic in our industry.

One of the reasons we’ve been able to achieve the type of growth that we have is this focus on comprehensive wealth management. So whether it’s looking at somebody’s investment plan, their tax plan, or estate plan, incorporating corporate trustee, or reviewing insurance, what ties it all together is working with a wealth manager bringing in all of these different pieces of someone’s financial life into one holistic integrated plan.

Now, this is sort of a high-level view of what the financial planning roadmap can look like, and we’re going to come back to this a little bit later, but we’re going to particularly cover, later in our conversation, two of these areas that I mentioned.

  1. We’re going to talk a little bit about how we think about tax planning as it relates to charitable giving in the context of someone’s financial plan.
  2. How to create a legacy with your estate plan.

 

Introducing Renee Kurdzos

Before we get into some of those things, I’m really excited for you guys to get to hear from Renee. As I mentioned, Renee has had an incredible background and history within the industry, and so, Renee, just first of all welcome to this program.

Renee Kurdzos: Thank you so much. It’s really great to be here, Josh.

Josh DeForest: Awesome. I’d love it if you could just give some background. Can you just help us understand a little bit more about Fred Hutchinson and how it originally began?

Renee Kurdzos: Absolutely. Fred Hutchinson Cancer Research Center, or the Hutch as we affectionately call it here in Seattle, was founded back in 1975 by Dr. Bill Hutchinson. We like to say it’s the only cancer center that was founded by the love of one brother for another.

Fred Hutchinson, of course, was a very famous baseball player who passed away from lung cancer, throat cancer, that his own brother had to diagnose when he was visiting home during Christmas vacation.

So that was a sad story that has now turned into a standalone research. That is very rare, actually, in the cancer industry. Most cancer centers are attached to hospitals or universities, and we are a research institution that is part of a larger group.

We have five scientific divisions: Clinical research; basic science, which is science at the cellular level, so that type of science is what brought you the MRNA vaccine, not specifically from Fred Hutch, but it was basic scientists who did that; public health sciences, so those long-term studies that we do to see how things affect the population, one of our most famous is the women’s health initiative, which back in the early 2000s told us how women should be treated for post menopause and actually really reduced deaths from heart attacks and cancer by taking away estrogen as a standard form of treatment; vaccine and infectious disease division, which has been around since the early 2000s and is part of the reason we played a large part in the COVID-19 process in terms of tracking and tracing vaccine and treatment; and of course translational science, which is sometimes referred to as human biology, and that’s taking everything from the lab and putting it into clinical research.

Josh DeForest: That’s really awesome. And one of the things I think that people will find interesting is just operationally how an organization like yours works. Obviously, to do all of that incredible research, you need funding. Can you talk a little bit about how you go about getting funding at the Hutch?

 

Fubnding the Fred Hutchinson Cancer Research Center

Renee Kurdzos: Absolutely. The first column over there on the left hand side of your screen shows you where our funding comes from, and the largest chunk by far comes from government grants and. You might be able to say, “Okay, so the government’s taking care of this, that’s great,” and we are by far the largest recipient of every cancer center. We receive twice as much as the next recipient, which is Dana Farber.

That just means that other scientists, our peer-reviewed scientists at the NCI, the National Cancer Institute, and NIH, the National Institute of Health, think we’re doing great science, and so that’s what that means. However, that 19 percent gifts from philanthropic interests become the most important, because to get a government grant you have to prove that your science works, which is the worst catch-22 I’ve ever heard of in my life, but it’s why I always say that small gifts are what are going to cure cancer, because they’re the ones that enable us to do pilot programs and to get those crazy ideas out there such as bone marrow transplantation, which was pioneered at the Hutch.

Josh DeForest: So, obviously, you guys, speaking kind of to those individual donors, there’s a lot of different ways that you guys raise money. I think a lot of people will probably be familiar with Obliteride, but can you talk about the different sources of donations that you guys receive each year?

Renee Kurdzos: Absolutely. Our largest source of donations is actually from individuals, so folks like on this call, who have taken an interest in Fred Hutch, maybe because they know someone who received treatment at a clinical trial, or just because they want to support a local institution that they’ve chosen to donate to the Hutch.

We do get a lot of corporate grants as well, and we are the second largest recipient of funds from the Bill and Melinda Gates Foundation because of our vaccine and infectious disease research. And of course we get a lot of sponsorships from different corporations as well for things like Obliteride.

 

Expenses for non-profits

Josh DeForest: When looking at a non-profit, there are different types of expenses, of course, that you guys have to incur. Can you just talk about the role of those expenses as it relates to your mission at Fred Hutch?

Renee Kurdzos: Absolutely. You’ll see in the far right column there where it talks a little bit about those expenses, and I think this is the chart that most people tend to look for when they’re reading an annual report about a charity, and we’ll talk about this a little bit, too, in the following slides about how to evaluate charities, that sometimes we’re not really sure what’s the right number there, when we see program services and management, what’s the right mixture.

I’ll tell you a little story. Program services is the direct stuff, the researchers in the labs, the reagents for the tests that they’re doing, the equipment that they need, but sometimes the things that are really important are also in that overall facilities that comes from that management in general line. So, for example, we have about a thousand freezers on campus that are protecting science, and perhaps more than ever in the news you hear about freezers failing because of things like storing COVID vaccines, or maybe from an IVF institution that’s lost their freezers, and you hear about science being lost.

Bob Tallon, who’s retiring from our head of facilities after 22 years shared with us recently that in the last five years we’ve had 27 unplanned power outages, not to mention snowstorms and different weather events. We’ve never lost any science in the 22 years that he’s been at the Hutch because we’re investing in things that you wouldn’t necessarily think are the most important, but they support the science just like anything else.

Josh DeForest: Yeah, I think that’s fantastic. I was really surprised. When I first started talking with you, I didn’t actually realize the role that Fred Hutch actually played in COVID-19 vaccine research. I want to get into what you guys did with that here in a minute and provide some details on that, but first can you kind of talk a little bit about why Fred Hutch was selected to even play that role to begin?

Renee Kurdzos: Absolutely, it’s a great story. Dr. Larry Corey, who’s actually a former head of the Hutch but decided he wanted to go back into lab work because that’s where he was most happy, is the head of the HIV trial prevention network that is a global network that has been housed with the Hutch for about 20 years, and that’s really why we have the vaccine in infectious disease division that we do have.

Because we were so successful in putting that network together and managing, Dr. Fauci tapped Hutch to co-lead at the COVID VPN network, which was…parts of the groups that were out there to test treatments and other parts to test vaccines. So we were the ones to help design the vaccine trial to make sure we got enough participants signed up for each different vaccine that was being tested to make sure that they came from a broad scope of the population, which is actually very important when you’re trying to do something as quickly as we did.

On a related note, there was actually a Fred Hutch scientist on the FDA approval board, even though that wasn’t part of that process. Steve Pergram just happens to have that role already.

We also had 30% of our researchers who ended up working on COVID-19. Again, this wasn’t really a pivot, which as I know is such a word at the moment during the pandemic, but it was just an add-on to the work that they’re already doing since vaccine and infectious disease work is important to us. Another reason for that is because 20% of all cancers are caused by infectious disease, so this was already work we were doing.

And we also did lead the way in the treatment with monoclonal antibodies. We did have a testing facility on campus that’s still going strong, and as a matter of fact I think was just earlier this week the Wall Street Journal had an article about a drug that’s being approved right now that will be kind of like Tamiflu for treatment…a pill treatment for those who have COVID-19 but are not hospitalized.

Josh DeForest: I think that’s pretty amazing, just knowing the reach and breadth that an organization like yours can have, so thanks for sharing that. In thinking about helping our listeners, what are some of the things that should be considered when trying to figure out, hey, how can I help a charity in the best way possible?

 

How can I help a charity in the best way possible?

Renee Kurdzos: Absolutely. I love this question because it really helps me to answer honestly and to give some great feedback to donors who I really know want to help the charities that they care about the most. The thing I always ask folks to consider is, would you be able to do unrestricted support?

It’s so easy to get caught up in and love a project, and that might be what brings you to a charity to begin with, but it’s often those unrestricted dollars that allow us, in times of crisis, like happened this last year to so many charities, be they the arts that have been shut down for a year, be they healthcare organizations that, even though they were on the front lines of COVID-19, were having issues because they were having a drops in other patient care, which is part of their income as an organization, having that unrestricted support helps them to be nimble.

It also helps organizations like Fred Hutch invest in the research of tomorrow that we may not even know we need yet. As I mentioned, the MRNA vaccine was developed 17 years ago, or started to be, in basic science. I’m guessing most of the people on this call don’t know what basic science is. I certainly didn’t know what it was before joining the Hutch, and so it’s not something that’s a sexy topic someone would invest in at the Hutch normally.

I also encourage everyone to be ambassadors for the charity that you love the most to your community. Post about it on social media, tell your friends, invite them to events, let people know why it is that you care about that charity enough to write a check every year.

Open communication, I can’t tell you how much I appreciate when a donor calls me and says, “Renee, I love you guys, but this is what you’re doing wrong today.” And you know what? I appreciate that, because if you can tell me something, I can fix it. If I don’t know, I really can’t do anything to help out. Plus it’s also nice to get good feedback from time to time as well.

And, of course, your time and expertise. Any way that you can help out a charity, it doesn’t have to be limited at all to those dollars. We could always use help from individuals in the community.

 

How to get involved beyond just gifting

Josh DeForest: What are some of those ways that you think that you guys have that people can get involved beyond just making a gift that still does have an impact at Fred Hutch?

Renee Kurdzos: Oh, absolutely. Of course, near and dear to my heart, both you and Colby are members of our professional advisory council at the hutch, and so I use advisors in the community to help me answer tough questions on donations, which is wonderful.

We also have things like Obliteride that you already mentioned, where we need tons of volunteers to help us put on large-scale events of that nature, and even Seattle Cancer Care Alliance, an organization that we are closely related to, often uses volunteers to help with their long-term care patients. It might be serving breakfast or meals. Obviously, a lot of that’s not happening at the moment, but putting together care packages, stocking their pantries, that sort of thing, that really makes a huge difference.

Josh DeForest: That’s awesome. So what are some of the questions that someone should consider as they’re evaluating, is this an organization that I would want to be involved with?

Renee Kurdzos: I think there’s a lot of different ways to look at it, and I would say you don’t have to necessarily hit all the 10 on this list, and it does tend towards the quantitative versus qualitative.

The first one is, does this organization generally have a very good reputation? We look in the news at someone like Mackenzie Scott who’s given away a lot of money in a very short period of time, but she went to the leaders of those communities and said, “Who’s got a good reputation for the type of work that I want to fund and for the things that I want to change?”

How does an organization that you’re giving to measure its success? It’s not always going to be in, “We served this many people or we did X amount of things.” Some of it’s going to be a little bit more like, in science, how many risks did you take this year, and having really good open-ended conversations versus a checklist can be really helpful in having those conversations around success.

But on the places where they should be very transparent and very numbers-driven is that transparency around financial information. You should always be able to access third-party audit information. You can always do that, of course, through an organization like GuideStar, which is a third-party organization website where you can look up Form 990, which is the tax form that we file as a charity. But you can also get it directly from the organization as well, and they should be willing to provide that for you.

Is the charity…have limited funders, meaning is it someone’s pet project, has it really got legs that’s going to survive? And key staff members, who are they, has there been significant team turnover, can you talk to them and ask them direct questions? That’s really important.

Josh DeForest: Thank you. Just for the people who are listening, we will have a section at the end where you can ask Renee some questions, so, Renee, thank you very much for your time on this. We really appreciate your insight and helping us just get a little bit of a glimpse into what it looks like at Fred Hutch.

Renee Kurdzos:  Thank you.

 

Introducing Colby Bircher

Josh DeForest: Next, I want to bring up Colby Bircher. As I mentioned, Colby works with Fidelity Charitable and really is an expert in thinking through the different parameters around structuring some of the charitable giving. So, Colby, just to kind of start us off, could you just spend a little bit of time talking about the role that individuals play in giving to charities?

Colby Bircher: Absolutely, and thanks so much for having me today, Josh. Very excited to be here. To answer your question, individuals play such a large role in philanthropic giving your over year. What’s really interesting is generosity has been a long-standing tradition throughout America, and it will continue to grow.

What’s pretty amazing is per this chart that you see here, in 2019, Americans gave more than 450 billion dollars to charity. About 71% of that number was made up of individual giving.

We did some analysis recently on really what is prompting those individuals to give, and a lot of it has to do with the fact that they believe their gifts are making more of a difference. They think that they’re providing some type of an impact back to the community. Perhaps the charities’ missions align very much with the individuals’ values, and perhaps there are organizations they want to support on an annual basis as well, so a lot of different reasons there.

Josh DeForest: When you talk about those individuals, because that’s a large number, and you work with a lot of people who are doing charitable giving, are we talking about a couple of people who are giving multi-million dollar gifts, or what does that landscape of giving look like in your experience?

 

The multi-million dollar gifting landscape

Colby Bircher: That’s such a great question, and a really important one, because philanthropists come in all different shapes and sizes. We’re not just seeing really large gifts go out to charity from a couple of billionaires out there, although, as Renee pointed out, that is a really common occurrence right now.

What’s been really fascinating to see is the average donor that we work with at Fidelity Charitable actually funds their account with about $20,000 and gives out some of that over the course of one year or perhaps many years as well. We see donations in all sizes and forms, and I do think that that makes everyone a philanthropist.

Josh DeForest: Yeah, absolutely. Kind of speaking of that, there are a lot of different ways that people can give. I think a lot of people will be most common, obviously, with writing a check or making a donation directly, but can you help us kind of understand the landscape of, what are the different types of ways that people could use to make a gift?

Colby Bircher: Absolutely. I’ll start off by saying, Josh, to your point, an individual does not have to be an expert on this topic and can really look to lean on people like yourself and myself to help educate them on the different offerings. I think sometimes it can be a little bit overwhelming, so people go with what they’re used to, which is that checkbook or just cash giving to charities.

But more often than not, there can be a more strategic way for one to consider their giving, and that’s through the use of a planned giving vehicle.

 

Planned giving vehicles

When I talk about planned giving vehicles, some of the most popular options out there are donor advised funds, charitable trusts, and also sometimes private foundations. You have a variety of options, but planned giving vehicles are great in the sense that they allow you to front load some of your giving, receive an upfront immediate tax deduction in most cases, and then you can spread out that giving for future years to come so you’re not just doing your continual checkbook writing on a year-by-year basis, you’re thinking about how you can really maximize that giving and ultimately grant more to charities over the course of a year by using this type of vehicle.

Josh DeForest: To kind of drill into that a little bit and talk about the use of a donor advised fund, what are some of the reasons why donors should consider using a donor advised fund compared with some of the other of giving?

 

Why a donor advised fund compared with other of giving?

Colby Bircher: I would say that a donor advised fund’s a great option for all types of givers out there in the sense that it’s very simple, flexible, and an efficient vehicle. We like to refer to it almost as a charitable brokerage account, where somebody again can contribute things like cash, publicly traded appreciated stocks, and even some non-publicly traded assets to it, they receive an upfront tax deduction.

They can also reinvest those assets for future tax-free growth, which is really just more money to give to charity over time, and then they can tell the donor advised fund provider when they want to send their money out to charity and who to send it to, so they really do retain some of that control over the account and how to give their dollars out.

Josh DeForest: You mentioned that it’s sort of like a brokerage account. I think that’s a good analogy, but also there are ways that people can give more complex assets than, let’s say, stocks or bonds or mutual funds. Can you just touch briefly on what are some of those other things that might spark an interest for someone that has been used in the past to donate to their donor advised fund?

Renee Kurdzos: Absolutely. When I think about first and foremost what the important piece is to the puzzle when you’re thinking about your own philanthropic endeavors, is really identifying the best asset for you to give. In a lot of these cases for individuals that hold these very low-basis assets, which can sometimes take form in a non-publicly traded asset, that can often be the most tax advantageous option for them to consider to use for their giving.

A couple of examples of that, Josh, we work a lot with business owners who actually will contribute an interest in their closely-held business prior to a type of liquidity event. This can be a great tax solution for them, as it allows them to avoid capital gains tax that they would otherwise incur by selling the business interest themself and then gifting after-cash proceeds.

A couple of other examples, right now, Bitcoin is a very hot topic for a variety of different reasons, and a lot of people aren’t aware that they can actually use Bitcoin to fund their philanthropy, so I’m having many conversations with donors right now about that very topic.

And then occasionally we will get requests for things like gifting real estate, or perhaps raw land timber. We’ve even gotten an inquiry about a thoroughbred racehorse at one point in time, so people are getting very creative, but it’s just a really good reminder that cash is not always the best asset.

 

Evaluating the charities you’re giving to

Josh DeForest: Thanks, I think that that certainly expands the conversation around what types of gifts you even can make. This is a question that I get often, and I’m sure that you get, too, is what are some of the ways that donors can really think about evaluating the charities that they’re considering giving to? They’ve created their donor advised fund, they’ve figured out what assets they’ve wanted to put in there and how much, but in terms of choosing where to give that money to, what are some of those things that people should consider?

Colby Bircher: I would say, first and foremost, start with the charity’s mission. If you find a charity you’re interested in, really look at what their mission represents, and make sure that it aligns with your personal values.

After that, taking it a step further, you can utilize some of these resources that you see on the screen, which are available through the Fidelity Charitable website, to really start evaluating the charity in a more detailed manner, perhaps looking at who their board’s comprised of, see the charity’s financials, how much they take in a given year versus how much they grant out. And then of course, also, look at how they’re really utilizing the funds that they fundraise throughout the course of a year.

I think taking those steps really helps somebody feel more comfortable in knowing that their gift is truly making an impact and a difference.

Josh DeForest: Thank you. As I mentioned earlier, we will have a Q&A session here in just a little bit, so if this has sparked any questions that you’d like answered, don’t forget to put those in the chat. But, Colby, thank you very much, and we really appreciate this insight that you’re able give.

Colby Bircher: Thanks, Josh.

 

Different ways that you can give

Josh DeForest: Well, now that we’ve talked about, what does it look like inside of a charity that you might give to, what are some of these different ways that you can give, I want to discuss how we think about that here at Mercer Advisors.

As I discussed earlier, I wanted to pull up this slide again because we’re really going to be focusing on two areas of the financial plan: How to integrate this into your tax plan, and how to think about it in the context of your estate plan.

We’ll start to sound like a broken record on this, but this is what is really important. First and foremost, you have to create that foundational financial plan. This is the lens that we use to look at every other aspect of someone’s financial life. So whether that’s evaluating what are the different goals that someone has, what is your attitude around money, what has that looked like historically for you, really what are we trying to achieve, really analyzing what are your assets and what are your liabilities. As Colby mentioned, what types of those assets might make sense to do a gift with, and what would be maybe less impactful than some others.

Looking at income, what does your income look like both now and in the future, and how might your expenses change, both with things like inflation and social security. How might insurance, especially as it relates to health insurance, change?

These are all of the things that are so interrelated, so that even as we’re thinking about one very specific area related to charitable giving, understanding all of these other areas actually sheds a lot of light on how to do charitable giving more effectively in the context of the financial plan.

 

Start developing the tax strategy

So, from there, we go on to number two. Start to develop what that tax strategy is. For example, what does your long-term tax plan look like? Are you in a period of time where your income is higher today but might be going down in the future? That’s where Colby’s recommendation of utilizing a donor advised fund to get a bigger benefit on your tax deduction today that might not be as valuable later can actually help you give even more money to charity in the future.

Also, talking about those appreciated securities and being able to avoid paying capital gains taxes on those securities can be a really powerful utilization of a donor advised fund.

Beyond that, though, there’s even other strategies that you should consider as a part of your tax plan. The IRS has a special provision that for those people who are age 72 and older and are required to take money out of their IRAs, you can do a qualified charitable distribution and give that money directly to a charity and not have to recognize that as income on your tax return, which can actually have some pretty amazing tax benefits to it.

There’s even simple strategies like lumping charitable giving in to a couple of years so that you can take advantage of the standard deduction and the charitable deduction that you can get.

The key with all of these things is making sure that you’re looking at this holistically, and this is one of the reasons why here at Mercer Advisors we have tax professionals on staff who can not only just prepare the tax returns, but also look at the year in the past, the year that you’re in right now, and also help to plan many years in the future, and incorporating all of this as it relates with your estate plan so you can have a bigger impact on your charitable giving.

 

Maintaining a current estate plan

And then the third thing on here, and before I even talk about some of the strategies, probably the most important thing is it relates to your estate plan is just making sure that it’s current and up-to-date. I can’t tell you how many times I sit down with someone, a prospective client or something like that, and their estate plan is 10 or 20 years old, or better yet, they don’t have an estate plan whatsoever.

It’s really critical that these documents are, one, in existence, but two, are current, both with the tax law that is happening today, they’re current with what someone’s desire is for their estate plan.

A lot of times, a lot of time passes, and there’s not really a cohesive strategy for that. And so, once again, this is an area that Mercer has really focused on in having estate planning attorneys and paralegals on staff, not just to be able to give estate planning advice, but also to be able to draft the documents and make sure that they stay current as someone’s financial plan changes, as the landscape changes, and just as time goes on. It’s really important to keep those things very current.

The next thing, though, it just thinking about, what are the areas of your estate plan where you want to accomplish charitable giving? We spent a lot of this conversation so far talking about something that I do think is really important, which is having an impact on the world around you today through charitable giving, but what are some of the ways that you might want to include some of those charities in your estate plan, and what are the assets that make the most sense to give to a charity as opposed to other ones?

There’s also things that you can do with creating a certain amount of income as it relates to your charitable strategies as well, and again, when you have this holistic picture, the recommendations become a lot more clear, because you know what all of the moving pieces are.

We’ve mentioned a couple of times that we’d have a section here for some questions and some answers, and so, Andrew, I’d love it if you could come back up, and Renee and Colby, if you guys could join us back again and we could see what questions have come through the chat and start to answer some of those.

 

Attendee Q&A

“Can I donate time instead of cash?” And there was a follow-up, “Can I still get a tax credit for making that type of tax donation?”

Andrew Thompson: Wonderful. Thanks so much. Josh, Colby, Renee, that was really terrific and we had some really insightful questions coming up, so why don’t we start with Renee. Renee, the question is, “Can I donate time instead of cash?” And there was a follow-up, “Can I still get a tax credit for making that type of tax donation?”

Renee Kurdzos: You can definitely donate time. We always appreciate that. As I already mentioned, Josh and Colby are two of my volunteers, which we appreciate. There are some organizations that will match your time. I know Microsoft, for instance, will donate money to the organization to whom you are donating time, but you cannot get a tax deduction for donating your own time, even if you’re doing it in a professional capacity. There are some very strict rules around that in the IRS where you cannot get a tax deduction for that. But we’d still love to have you.

 

“Is it better for me to give now over a lifetime, or maybe some kind of structured in perpetuity annual amount, how do people think about that?”

Andrew Thompson: Wonderful, there are clearly a lot of great ways to contribute. The next question is for Colby. Colby, the question is, “Is it better for me to give now over a lifetime, or maybe some kind of structured in perpetuity annual amount, how do people think about that?”

Colby Bircher: Great question, and really it comes down to your personal situation. If you find yourself making those checkbook giving, or the cash gifts, throughout the course of your lifetime, perhaps you are better off thinking about utilizing a planned giving vehicle.

The other great aspect of doing so is they can work very nicely in with your estate plan. Many of our donors will actually leave their Fidelity Charitable account as the beneficiary to, say, an IRA account or their 401k, or perhaps their estate, to carry out their charitable legacy well after their lifetime as well.

It also brings up another great point about successors and the ability to really engage the next generation and family members in your giving as well, which is also an option.

 

“Do medical charities like yours, Fred Hutchinson, have a minimum donation value?”

Andrew Thompson: Excellent. Let’s go back to Renee. Renee, the question is, “Do medical charities like yours, Fred Hutchinson, have a minimum donation value?”

Renee Kurdzos: Oh, gosh no. Any charity I’ve ever worked for, we will take any gift that you give. I had a donor who used to always loved to say “Every penny counts,” and she had a favorite number, so all of our gifts came in with the ending of 33 cents, and that was her way of reminding us to be appreciative of whatever we were getting. And it’s true, it really does matter. Whatever you can give, we can use.

Andrew Thompson: Great. Another one for Colby. You mentioned some kind of somewhat humorous examples of what people tried to donate. Are there any other unique things that people maybe overlooked that they could contribute or donate that maybe they don’t? That was a question that came through.

Colby Bircher: Yeah, I would say we’re working with a lot more donors that have alternative types of assets, perhaps interest in hedge funds or private equity funds. Those can often also be an optimal asset to consider using for philanthropy.

Where it becomes tricky is with assets that are deemed collectibles. For example, if someone tried to give us a Monet painting, we as a donor advised fund do not have somewhere to showcase it, so it’s really not going to be tax advantageous for the end donor to consider gifting that to us. They’d be better off going perhaps directly to the museum.

I do say it varies case by case, but the best part about it is we’re always more than willing to have a discussion around the asset.

Andrew Thompson: Perfect.

Renee Kurdzos: To add into that…

Andrew Thompson: Please, Renee, yes, jump in.

Renee Kurdzos: We’ve done quite a few art donations at the Hutch, oddly enough, and Colby’s right, because you have to deduct your cost basis versus the fair market value because the organization’s not going to use it.

But I was able to help a donor one time who gave me three weeks’ notice that he was selling a property of his in the Berkshires and wanted to close it down, and he had about 55 pieces of Northwest Native American art that he’d collected out here when his son was still getting treatment, so it was a really well-established collection.

He was trying to figure out what to do with it, and so we had to go through the tax ramifications, but also a lot of our collectors do want to keep their art together, so I roped in the Burke Museum and they took about 45 pieces. We took a couple as well, so those got the preferential tax treatment, and then the rest were sold. We found an auction house that specialized in Native American art and we were able to get some great prices for the remaining 12 pieces.

Again, it wasn’t as great of a tax deduction, but at that point we had kind of been able to parse through who wanted what from the collection, and then those were just the remaining items to sell.

 

Developing a financial plan, a charitable plan, and just kind of how that works and how it looks?

Andrew Thompson: Wonderful. John, I don’t want you to feel ignored over there. A question came through about developing a financial plan, a charitable plan, and just kind of how that works and how it looks. It sounds like it’s a really important thing to do, but maybe you could talk about how that works with beneficiaries, inheritors, and just kind of how that process might begin?

Josh DeForest: Yeah, I think it’s really critical to do a lot of data gathering, which can at its onset feel a little bit like homework, but one of the things that I always assure people is that we’re not asking for information that’s not relevant, because, as I mentioned earlier, it’s also related…

Sometimes part of our conversation, especially as it relates to charitable giving, is like, well, what are the types of assets that you have? What does your tax situation look like? How can we squeeze the most amount of giving out of someone’s financial plan?

But it really starts with diving really deep into all of those different areas. In fact, it even brings up a question and that I was thinking about, Colby, for you, which is, a lot of times when we end up meeting with clients, they have employer stock options, they have different types of RSUs, incentive stock options.

What do you think the role of those types of things can be in charitable giving, because I know that, especially up here in the Pacific Northwest, there’s a lot of people who receive a lot of compensation that way. Do you guys ever handle that?

Colby Bircher: Absolutely. One of my favorite topics is really surrounding equity compensation and how that looks with one’s charitable giving. More often than not, a lot of those assets can be tax advantageous to consider gifting, especially if you’re at the executive level or even beyond that and you’re getting certain things like RSUs.

The one key component that’s very important is that those assets do have to be vested prior to being gifted, so it really does depend upon your personal circumstance, but again we have some great pieces that speak to that, Josh, if anyone ever has options or would like to review it.

Josh DeForest: Yeah, and the reason I kind of bring that in as because that is oftentimes one of those really important things that you really have to look at as a part of a financial plan, is that those can have some really large tax impact, and so a lot of times that charitable giving element comes in, especially if that income is really lumpy, you have a lot of income one year and possibly less income another year, someone is looking to retire, and so you just get these big disparities in income tax by year.

That can be just one of those really important things to look at, and there are few topics that are I think more confusing for people, I think, than their executive compensation. It’s a lot of money for a lot of people, and yet it’s oftentimes not fully understood. So just making sure that you fully take advantage of those things, whether it’s just pure tax strategy, but also as it relates to giving, too.

Colby Bircher: Josh, one quick follow-up on that. A lot of the companies, particularly those Pacific Northwest, deploy some type of a corporate matching gift program, and a lot of times those gifts can actually be matched out of a planned giving vehicle.

So if somebody does have a donor advised fund for example and they’re making gifts out of that, their company will often honor that as part of the matching gift program, so keep that in mind as well.

Josh DeForest: Yeah, good point.

 

How should someone who maybe is just getting started with their estate plans maybe have some complexity to think about trusts and other estate documents, and how does that fit in overall to giving?

Andrew Thompson: Great discussion. One more for Josh. The role of trusts. How should someone who maybe is just getting started with their estate plans maybe have some complexity to think about trusts and other estate documents, and how does that fit in overall to giving?

Josh DeForest: Trust planning is really important. A lot of the times people have just sort of a simple will, which in Washington, a lot of people can get away with because tax law is a little bit easier here. But with a trust you can have a lot more control with where those assets go, the types of protections that you want, even for your non-charitable beneficiaries. It can really play an important role in administering that process very quickly and very easily as well.

I like to tell people, trusts have three advantages, is that they cost less money to administer, they’re a lot faster to get through the administration process, and they stay out of the public light as well, so it helps preserve some of that anonymity, but it can be a really good way to just make sure that you’re giving money to the places where you really want it to go and it’s really, really clear.

 

“How do I go about directly earmarking my donation to a specific effort with an organization like Fred Hutch?”

Andrew Thompson: Terrific, and that kind of relates to the next question which came in for Renee, which is, “How do I go about directly earmarking my donation to a specific effort with an organization like Fred Hutch?”

Renee Kurdzos: Well, there’s a couple different ways you can do it. Honestly, you can even just write it on the memo line of a check if you know that that fund is one that exists. But I always encourage folks to have a conversation with us directly.

I find, particularly when I see it happen in an estate plan where someone has put very specific language into a will, and it’s either something we don’t do anymore, never really did, or the language doesn’t match up with the program. So if there’s something very specific you want to fund, I would reach out to the organization.

If you are trying to stay anonymous for whatever reason, and I completely appreciate that, then you would call either Colby or Josh or someone like that, and they would call me and get that information for you, and then you would still have that complete information for either planning your estate or for your outright giving.

 

Directly making RMD into a donor advised fund

Andrew Thompson: Perfect, yeah, that’s a wonderful thing to know. Maybe we’ll do two for Colby. I’ll start the first one. “Colby, a retiree was asking, with their required minimum distribution…” Their RMD, I’m so used to calling it an RMD, getting all the syllables was new for me. “…directly make that RMD into a donor advised fund?”

Colby Bircher: Good question. Currently, you can take a qualified distribution to charity role within your RMD and gift it to an end charity. The IRS has excluded donor advised funds and private foundations from benefiting from it being a tax-free transfer.

So if you were to take assets from a retirement account and contribute them to a donor advised fund, you’d be taxed on the distribution. While you’d still receive a charitable deduction, more often than not it ends up being a wash. So I’d say, if you do have other assets to consider funding, that’s probably the better route.

 

“Are there any legacy giving content specifically on the web you’d recommend, especially as it relates to nonprofits?”

Andrew Thompson: And the follow-up question to that, just speaking to Fidelity, your employer, “Are there any legacy giving content specifically on the web you’d recommend, especially as it relates to nonprofits?”

Colby Bircher: Absolutely, we do have a section on legacy giving, and particularly for those individuals that don’t have heirs or don’t plan to leave the donor advised fund to their children to manage and give out to charity, there are some really neat ways in which we can set up year-over-year giving after their passing so that they can continue to really live out that legacy while working with many different nonprofits to support that over time.

We do have that available on our website as well, and anyone can reach out to me directly for that information, or of course can go through Josh and team.

 

“Any common tax mistakes I should avoid?”

Andrew Thompson: Good. Josh, question for you, kind of a general question, but just “Any common tax mistakes I should avoid?” So anything you commonly see day-to-day that people don’t think about?

Josh DeForest: Common tax to avoid. Well, probably the most common thing that I see is just people forgetting to report things. This is why I hire a professional. There are so many different moving pieces that it’s really, really easy to forget.

I’ll say one that oftentimes happens with charitable giving as it relates to donor advised funds is giving investments that have only achieved short-term capital gain status.

Typically, your deduction is limited to your cost basis and not the full amount of the gift, so what typically happens is someone says, “Hey, my Gamestop has doubled in value, I want to give it away now,” but if it’s only been a few weeks or months, you may not actually get the full benefit of that gift, so that can be a really important one that’s not immediately clear to people because they think, “Hey, I gave a donation worth X,” but you might only actually get a deduction worth Y. Those are probably two of the more common ones.

Colby Bircher: As a tag-on to that, we get questions from a lot of donors that say, “We have this stock, we’re going to sell the position, and then we’re going to transfer the cash to you guys,” and that really is something we want to avoid. Always transfer the asset in-kind if it is transferable in order to really maximize your tax benefit.

Josh DeForest: Yeah, good point.

Renee Kurdzos: Just to hop onto that, I would say the question I get asked the most from my fellow fundraisers and from donors when they get a tax letter from us after donating stock is, why haven’t we listed out the amount? Stock is considered an in-kind donation, just to pick up on what Colby was saying, so we don’t put the amounts in the letters, and that’s actually for your benefit.

We’ll put “20 shares of Microsoft” or whatever it is. We’ll often include the information on the date of sale just for your reference point, but your tax professional can actually choose different points for taking that deduction. They have to do it all at once for the fiscal year in terms of how they make those choices, so we want to make sure. That’s the reason why you’re not seeing that value in the letter. I probably get that question 20 times a year.

Andrew Thompson: Well, thank you. Thanks, everyone, for being on the panel. That should be about our time for the questions and answers, but I just wanted to pose one last one to all of you. Anything that hasn’t been covered today that you wanted to make sure to emphasize or kind of hit home as far as takeaways? I think maybe just give a few seconds for that.

 

Key Takeaways

Josh DeForest: Yeah, in fact, let me advance here, because we do have sort of some next steps. So, Renee, any thoughts on what you’d like to have people kind of take away as far as next steps for you?

Renee Kurdzos: Absolutely. Well, I hope I’ve demystified a little bit the fundraisers in your area, and that when we give you a call you’ll pick up the phone because we just are trying to get to know you and make sure that if you are making a donation to us it’s going to exactly where you want it to be, and that we’re also giving you good feedback in real-time on how we’re using that gift.

So I encourage you to go on today and call a charity, either your old favorite, maybe a new one you want to learn more about, and ask us some questions, put us to task. That’s what it were there for in terms of being fundraisers. We’re supposed to be facilitating your gifts and making you feel very connected to the charity.

Josh DeForest: Thanks, Renee. Colby, how about you?

Colby Bircher:  I would say, first and foremost, think about what your either short-term or long-term goals are as they relate to your philanthropy and start putting a plan in place there. You want to figure out what will have the most impact in terms of supporting the local causes you care about, and we do have a really neat piece on our website, it’s called Boost Your Giving IQ, and it’s a great starting point to really think about all of these things, so I would definitely recommend checking it out.

Josh DeForest: Awesome. Yeah, and if we haven’t belabored the point enough, please make sure that you develop your financial plan, incorporate that into your tax plan and your estate plan as well. Those are really, I think, powerful tools that we can use.

If you want some future reference before I kind of turn this back over to Andrew, we have included here for you guys to reference the fredhutch.org website, the fidelitycharitable.org website, and of course the merceradvisors.com, and so, Andrew, I will pass it back over to you.

 

Closing

Andrew Thompson: Yeah, wonderful. We have two wonderful exciting offers today as thank-yous. The first is DoorDash, so you could find a local restaurant near you and have some food on us. So, enjoy that. That will be coming out soon to your email, so keep an eye out for that.

The other offer that we have is for those of you who are new to Mercer Advisors, we’d like to provide you with a complimentary financial projection. It would be with me, so we’ll have a 30-minute time set aside, we’d send out instructions and how that works, and it could certainly relate to things we talked about today, like charitable giving, maybe retirement planning, so happy to speak with each of you who would find benefit value from doing that, and will send, again, further instructions out there.

And then, finally, I want to thank everyone who was part of this call today, Josh, Colby, Renee, it was wonderful content, great to hear your insights, and want to thank everyone who was able to attend live. There will be a recording of all this sent out as well, and I hope everyone has a wonderful rest of the day. Be safe and well.

Josh DeForest: Thank you very much.

Renee Kurdzos: Thank you.

Colby Bircher: Thanks, all.

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