Advisor's Quarterly Update

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When the Advisor Becomes the Magician

Clients have expectations when they meet with their advisors – sometimes realistic, other times less so. When the advice involves the client’s finances, what the client expects the advisor to accomplish may put the advisor in the realm of Merlin, the magician. Yet, there are times when a savvy advisor can help the client accomplish far more than even the client thought possible. Such is the case with the philanthropically inclined client who wants to give more, but doesn’t realize it’s possible. Enter the “blended gift,” a technique which advisors may be familiar with and could elevate the advisor to the role of magician, at least in the client’s eyes.

When clients consider their charitable giving options, they often do it in silos. How much can I write a check for now? Should I consider a gift in my estate plan? Life income gifts such as charitable remainder trusts or gift annuities in most cases don’t even enter the discussion. Yet, the synergy of combining various gift options can enable the client to make a gift with impact - a gift the client may have never thought possible. In fundraising jargon, this is called the “blended gift.”  

Here’s an example of how it works:  Judy has been a lifelong supporter of the Red Cross, even having volunteered in her youth.  Now retired and in her late 60’s, Judy was moved by the support the Red Cross provided when Hurricane Maria swept through the Caribbean in late September 2017 causing catastrophic damage and leaving residents without power, phone service, food and drinking water.  Seeing how the Red Cross helped those residents in distress, Judy wanted to make a significant gift not only to assist current Red Cross efforts, but to sustain those efforts into the future knowing that catastrophic natural events will always be occurring. Judy met with her financial and legal advisors who developed the following gift plan for her:

  • Judy pledged $25,000 to be paid to the Red Cross over five years;
  • As part of Judy’s retirement income plan, she used low yielding publicly traded securities to fund a Red Cross charitable gift annuity for $75,000, increasing her retirement income and giving Judy a significant charitable deduction saving her income taxes; and
  • Judy included the Red Cross in her estate plan for a gift of $100,000.

Judy’s total gift of $200,000 was far more than she thought she could give, but her advisors assured her that this gift plan would work well with her retirement and estate planning.

Blended gifts enable donors to give more than they thought they could.  The blended gift can be used at many charitable organizations like the Red Cross for donors to make gifts that will have impact for future generations. The “blending” depends on the financial situation of your client, the gift options available, and your client’s objectives for the gift.

Judy never dreamed she could make a $200,000 commitment that she knows will ultimately be used to assist those in need for years into the future. However, her advisor understood the power of how a blended gift could enable Judy to do more than she thought she could.  Was it magic?  Not really, but Judy looks at her advisor as having pulled a rabbit out of a hat.