Top 10 Charitable Trends, Sins and Ethical Conundrums Bryan Clontz, CFP® President, Charitable Solutions, LLC www.charitablesolutionsllc.com (404) 375-5496

Trend/Sin #1 – Advisors Aren’t Asking the Charitable Question at the Right Time and in the Right Way The following slides were developed by Lee Hoffman, President/CEO, Planned Giving Design Center from data derived from "The 2010 Study of High Net Worth Philanthropy" Sponsored by Bank of America and researched and written by The Center on Philanthropy at Indiana University

Who Initiated the Philanthropic Conversation?

Russell James, Ph.D., CFP – Texas Tech Trend/Sin #2 – Using Techno-Language, Making Things Too Complicated and Failing to Leverage Social Norms! Russell James, Ph.D., CFP – Texas Tech

Trend/Sin #3 – Advisors Presume Clients Want to Accumulate Wealth Forever 2014 US Trust Survey- Only 49% of millionaire boomers feel leaving an inheritance is important. Leaving an inheritance is increasingly being viewed as more harmful than beneficial and has dropped in importance for five straight years. The Buffet, Pickens, Gates inheritance plans are resonating with the Millionaire Next Door population – this should create windfalls for charities

Trend/Sin #4 – Advisors Don’t Run The Numbers Case Study #1 – IRA donation during life vs. Qualified Charitable Rollover Donor is 75 and has $75,000 in AGI. She wants to make a gift of $10,000 to her favorite charity. Case Study #2 – Lifetime Art Gift to Non-Use-Related Charities Donor inherited modern art from his grandmother. He wants to donate it to a local community foundation donor advised fund.

Trend/Sin #5 – Advisors Spend Too Much Time Running the Numbers and Let the Tax Tail Wag the Dog! 70% 50% 39% 35% 28-30% From 1956-1972, charitable giving was consistently at 2% or higher of GDP – Source 2012 Giving USA Report

Trend/Sin #6 – Advisors are not Engaging the Charitable Beneficiaries in the Process Nearly 75% of all charitable plans are created by the donor’s advisors Only 25% ever notify the charitable beneficiaries Many plans don’t contemplate any mission changes or the inability to fulfill the original intent More restricted gifts are being created than ever before Windfall donations, especially if restricted, can create incredibly inefficient, costly and nonfunctional purposes Case Study: Flower Funds

Trend/Sin #7 – Don’t Touch Cash – Donate Non-Cash Assets! Non-cash market – real estate, closely held stock, weird assets, is estimated to be 4-6 times entire stock market Non-cash gifts are accelerating to reduce lifestyle, maximize tax benefits and retain liquidity Largest non-cash donations in history have been made in last two years Cash BAD, everything else GOOD – donate long-term capital gain property with lowest adjusted cost basis

Source: Charitable Solutions, LLC 2014 based on 990 data Non-cash gifts have more than doubled in contributions and size to only three charities! Non-cash gift contributions Average value (size) of non-cash gifts Source: Charitable Solutions, LLC 2014 based on 990 data

Ethical Conundrum #1 – Charity Has Helpful Counsel/Volunteers Facts: Most charities aren’t flush with cash. So some ask that their legal counsel draft a Charitable Remainder Trust for a donor for “free.” Issues? Solutions?

Ethical Conundrum #2 – Professional Advisor/Attorney Indirect Benefits Facts: A national charity wants to incent professional advisor referrals. So for each $100,000 referred to the charity, they will open up a donor advised fund for $2,000 in the advisor’s name. Issues? Solutions?

Ethical Conundrum #3 – The Charity Isn’t an Insider Facts: On December 31th, professional advisor calls a charity to see if they will take 8 million shares of publicly-traded stock with a $2/share price. The donors were the Chairman and CEO. On January 14th, charity learns the shares are restricted and on February 18th, the shares dropped to 7/10ths of 1 cent. The donors never got an appraisal, told the charity they took the $16 million deduction and never filed a Form 8283. Three years later, the charity still can’t sell the stock and it is worth $8,200. Issues? Solutions?