Giving Season 2020

Giving Season 2020:

A Call to Action for Philanthropists

 

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ANN LIMBERG: Hello, my name is Ann Limberg. And I'm the head of Philanthropic and Family Office Solutions for the Private Bank. And on behalf of the entire team, it's my pleasure to welcome you to today's call. I first want to say, we hope that you and your families and friends are healthy and doing well. We know that this has been a challenging and a really difficult year for so many of you, both personally and professionally as a result of this global pandemic. And in such an extraordinary year, we realize that philanthropy is more important than ever.

And as we continue to live with and adjust to so many very real external pressures, whether the pandemic, or the resulting economic turmoil, or the call to action for social and racial justice and equity, I think it's fair to say that the scope and scale of needs that philanthropy can tackle today may seem very daunting. There is so much good work to do, I think it can sometimes be hard to know where to start or how to have the greatest impact.

And so our call today is designed to help you with just that. To help you think more strategically about how you can have an impact with your philanthropic efforts. We're very fortunate at Bank of America to work with so many donors and nonprofits across the country. And because of that, we're able to see issues and challenges, as well as solutions and emerging innovation from all sides, and to really bring that information and those ideas back to you.

Right now we're in the heart of giving season, where traditionally 30 to 40% of all charitable giving occurs. But certainly this year, giving season will be anything but typical or traditional. And over the next several weeks, many of you on the line will be making important decisions about your giving. And we know that you likely have many questions, given how much has changed this year and just how much really continues to evolve.

And so I hope that today's discussion with several key members of our philanthropic and wealth planning team will answer those questions and really help you come away with a clear plan for action. Giving certainly has never been more needed, nor has it ever had such potential for transformative change. And so we invite you to step into that role, knowing that you have the full support of Bank of America Private Bank, both as an advisor and your partner in the community.

And it's now my pleasure to hand today's discussion over to Erin Hogan, our Philanthropic Market Exec for the Southern region. Erin has spent over 20 years working in the philanthropic and nonprofit sector, advising high net worth clients and their families on their personal philanthropic legacy. She is also a very active board trustee and community leader who brings really valuable firsthand knowledge about the need for nonprofit support right now. With that, I want to thank you again for joining us today, and I will turn our call over to Erin.

ERIN HOGAN: Thank you so much, Ann, and thank you, welcome, to everybody on the line. It's a pleasure to be hosting this call, and we're so grateful that you took the time to join us today.

As Ann mentioned, I have the great privilege of overseeing our philanthropic solutions business for the Southern US. We are having a lot of these conversations, as you well know, we are in giving season. Giving season is absolutely our busiest time of the year, no surprise there. But for many of us giving season feels like it started many, many months ago, really, as the impacts of the global pandemic really started to take hold.

In fact, we were talking about this recently, and we've already had Giving Tuesday, right? So I guess we're poised to do it twice in the same year now.

We've actually learned a lot. The need is great, as Ann has said, but we've learned a lot about what has changed, what's working, and what's not working. And we've seen just a tremendous outpouring of generosity as a result. And that is wonderful and very positive, but we still have a few crucial weeks to go before we close the books on 2020. And I know that there is so much curiosity and certainly a great deal of dependence from our not-for-profit partners, really looking to see how we finish strong in this year.

As you can see here, we've got a wonderful panel. And we're really going to be focusing this time on you as donors, and really, how can you make the most of this time, these last few weeks between now and the end of the year, when we know so many of you are sitting down and making these decisions right now. And they're so incredibly important and weigh heavily on many of us on how to get started.

We're going to be talking about some important tax planning issues. Obviously it's been a very busy year and a busy couple of weeks. We're going to be talking about how to have impact, really. How do you make sure that your dollars are having the impact that you'd like it to have? And even really thinking about engaging your family. It's always a very important topic when it comes to giving. So we're going to be having some discussion and also we have an opportunity to hear your questions directly.

So, very excited to point out our chat feature. Please, if you have questions, if you go ahead and type them in, we will be able to see them in real time and we can ask our panelists for their comments. And so, without further ado, I am really delighted now to introduce my colleagues and philanthropic experts who will be joining us today.

First, we have Miki Akimoto. Miki is a Managing Director and a Senior Philanthropic Strategist with our national consulting and advisory practice here in Philanthropic Solutions. Miki actually works extensively with individuals and families and private foundation clients, really on all aspects of giving. From mission formation, to grant-making strategies, to governance. She's actually our governance guru. She has a lot of experience prior to that role working within national philanthropies and also with not-for-profit associations. So she really brings a really important blend of the donor and the doer perspectives to the work. So, excited to have Miki join us today.

And also we have Ramsay Slugg. Ramsay is a Managing Director and a Senior Wealth Strategies Advisor with our office Chief Investment Office here at Bank of America. Ramsay has many, many years in this role. He's one of our most expert strategists. Working with clients, really on all aspects of financial and tax and estate planning. In addition, he served as our national head of art planning for the Private Bank Art Services group. And if you haven't had a chance to listen to Ramsay talk about tax planning, I promise you are in for a real treat today.

So with that, why don't we go ahead and get started? Miki, Ramsay, welcome. Thanks for joining us today. I'm actually going to start with a question for you, Miki. And looking back, now that we are here, nine months into this global pandemic, this economic crisis that continues, and really just the increasing social and civil unrest where inequality, racial inequality, is at the heart of that conversation. What do donors need to understand right now about the state of the not-for-profit and the social sector?

MIKI AKIMOTO: Thanks for having me, Erin. I always love talking with you and Ramsay about these incredible issues. And so, yeah, let's set the stage. Where is the nonprofit sector at? And I think one of the things that's really important for us all to remember is that the nonprofit sector is in fact a key pillar of our economy. Let's start there. It is the third largest employer by sector in the United States. Really, responsible for not only holding people's jobs, but also people's lives in their hands. It provides health care, education, social services, safety net. It is such an important central pillar of our economy and society.

And, not surprisingly, it is facing, you know, just unreal challenges right now. Fundraising challenges have been horrible, as you can imagine. When the pandemic hit in the spring was right when many nonprofits have their big annual fundraisers, many of which had to be canceled and then turned into virtual events. Which have had some success, but not sort of the same level of success for many of them as they have in the past.

Couple that with the fact that nonprofits had to completely rewrite the book, in those cases, in how they delivered services. If suddenly everyone's staying at home, how do you do mentoring for youth? How do you provide education? There was a conversion to telemedicine. So everyone started facing this challenge of upending their service models, trying to figure out new revenue models, and sort of how you navigate all of that.

And then if you then think about the conversation that really began, well, picked up again, after the killing of George Floyd. And what we know is that people of color led organizations, and particularly Black-led organizations, are systemically and historically underfunded. I'm actually going to check my notes here because I want to get these numbers right. There is a recent study that looked at Black-led organizations that showed consistently they're not only funded at lower levels, but the funding that they do get had more restrictions on it.

And even when you look at organizations focusing on the same issue-- so if you look at organizations that are focusing on improving life outcomes of Black men-- revenue at organizations with Black leaders was 45% lower than groups led by white leaders. And leaders focusing on the same issues about Black men. And so, you can imagine, those kinds of inequities have been magnified even further and driven even wider during the funding shortfalls that we're seeing in the sector.

You've probably seen some of the headlines that you know there's been hysteria that up to 40% of nonprofits could close. Actually, there's been some good meta-analysis recently. But a fairly sober look at the sector suggests that one in nine nonprofits could close their doors in the next 12 to 18 months. Then again, if you go back to where we started from, of, this is a central pillar of our economy, that is a massive loss.

And so what you see is a sector really shifting. You see a nonprofit sector that is shifting its service delivery models. It's thinking creatively about its revenue. It's really trying to steward its donors. And in that conversation, what we're beginning to see emerging is the nonprofit sector reaching out and shaping calls to funders and donors like people on this call, saying, we've got to do things differently. That there's new practices that we need to start talking about.

ERIN HOGAN: Yeah, that's a really important point. Just how central, really, the not-for-profit sector is to our economy and our society, providing such common good, common benefit. I like your point about how donors have been responding as well. And I think that this is something that's a very bright spot.

And I like to be a you know a glass half full kind of gal in these conversations. Donors really didn't have the playbook that you mentioned earlier. And what we saw was just tremendous, I would say, innovation and flexibility. In fact, I'm not sure if most folks realize that, in the initial aftermath, literally within a matter of days and weeks, there were hundreds of COVID response funds that were set up, really across the entire country. And so, really, immediate places for donors to plug- in and meet that really incredible surge of basic needs that we were starting to see.

Not too far after that we saw over 700, maybe closer to 800, public funders right now signing a pledge saying that they would give more and it would be more flexible. They would provide less restrictions. And really just trying to be there and support their not-for-profit partners. And actually, I think, by last count, as of October, there's been $12 billion committed or given to COVID-specific causes. And I think close to

$8 billion specifically committed to racial equality efforts.

So, really seeing a lot of positive movement from funders that what are some of the specific things that you've been seeing from donors? I know a lot of people on the line are wearing that hat right now. And how have they had to pivot?

MIKI AKIMOTO: I think you're absolutely right, Erin, that this can be seen as the glass half full, right? Let's not downplay the fact that there are some really tough things happening. But there is this chance to innovate and disrupt and do things in new, exciting ways. And I think a great story is one that you and I worked on together in the South, with one of our client foundations, which was really focused on education, including some work in higher education. And this foundation was getting ready to do a series of grants to support sort of traditional, what I would call post- secondary outcomes, around supports for kids in community colleges-- or students in community colleges, because we know they're not all kids, right? And then that we were really helping them get make those decisions right at the point where that first big shutdown happened in the spring.

And we realized, and colleges realized, that they had to pivot. And so we really helped reshape that giving around meeting those virtual needs. Around thinking about things like emergency grants for students who might be homeless. Around equipment grants. Thinking about the infrastructure that would be needed to support virtual learning. Which again, are not things we might have thought of 12 months ago, but now are actually paramount.

And so I think this is an example of the way people and foundations can pivot very quickly with their giving and be flexible in their thinking, while still aiming towards a particular outcome. And what we see, really, are that our clients, donors, foundations across the country, are reviewing everything about what they're doing. Everything from how they do their grant-making, how they do their policies, and even their mission and governance. And so they're really pulling all the levers that they can. Recognizing that, again, we have to build a whole new playbook.

ERIN HOGAN: So on the point about missions. This is actually a question that I had in quite a few recent conversations. So, certainly with clients that are looking to start a private foundation. So, a mission, having a mission, a mission statement. Something that really declares what you're going to do with your giving. It's not required, right? Certainly not by IRS standards. But for those people who are wondering why they should have a mission, what is your advice to them right now, particularly with these circumstances?

MIKI AKIMOTO: I think a mission statement, or a mission view, is more critical than ever. To your point, no, not required, but it is a best practice. And what we know from our studies of high net worth donors, the biannual study that we do of high net worth givers, those that have a clear mission statement really find their giving more fulfilling. They find themselves more focused. And it's also a way of connecting others to your vision and your search for impact in your area.

I think the other thing is that, at this moment in time, the needs that are out there in the community can feel overwhelming. It's really hard to know where to start. Or you know how to say no to things that could be very worthy. And having that mission statement allows you to really put a lens and some boundaries around those things that you realize are most important to you. And that it helps you, it's a decision-making tool at a time when decisions can be really tough. And it also helps you focus your own journey as a learner and philanthropist. That a mission statement, you could think about, the kinds of readings, the kinds of conferences, the kinds of webinars that you want to connect to. And then, how you want to think about assessing your impact. Learning from that and continuing to refine what it is that you're doing.

ERIN HOGAN: It's true, that question about, how do I know where to give? Really, the most important question to start is you, right? As a donor, what are you trying to accomplish? So there are a few other things that have been pretty interesting just in terms of practical steps that I know donors have been taking. And so, you know as people are thinking about their conversations with grantees, what are some of the things that they could be looking at, really to maximize their impact right now?

MIKI AKIMOTO: Absolutely. There's these very practical, tactical things that you can do. First of which is to really step back and look at that nitty gritty administrative, nuts and bolts, of your grant-making process. If you're part of a foundation, or a giving circle, or a donor advised fund that uses some kind of application process, really take a look at that and strip out everything you don't need. Make sure that you're only asking for the critical information that you need to make a decision. And also think really critically about reports. You know if you're asking for reports, are you really using them? And are you asking grantees to put in too much work for relatively small grants?

This is a common complaint. I know any number of nonprofits who really feel, quite often with some degree of correctness, that funders are not really using reports the way that funders claim that they are. I could tell many stories about that, if we had more time.

I think the other thing that you can really think about are multi-year general operating support grants. Right now, the world is changing as we look at it. And what nonprofits need more than anything else are those flexible, unrestricted, general operating kinds of grants, so that they can use those funds nimbly and quickly to respond to emergencies and emerging conditions.

Because you know again, none of us could have foreseen where we would be 12 months ago. And I think it would be naive to think that we're not going to have more things happen. If you just think about the disaster season we're having. You think about the wildfires. You think about the derecho in the Midwest. You think about the fact that we've had 10 hurricanes hit mainland US this year alone. Nonprofits need that ability to move quickly and not have to go back to donors and say, you know you gave me this money for X, but I really need it for Y. Is that OK? Let's save nonprofits time.

If you've made previous multi-year commitment, and you have the bandwidth, consider accelerating those payments. Make those payments up front, because again, cash is king right now. The ability to respond quickly.

And the other thing to think about is by giving nonprofits cash early, you allow them to buy local services, which also has an economic impact, right? It rolls over. So there's another good effect there.

And then keeping in contact with your grantees in a way that signals your support but isn't asking for too much of their time, but you're not taking their precious resource of time as well.

I think the other thing nonprofits sorry donors can do is look around, seeking, foraging, and supporting collaboration. This is a moment in time where nonprofits and funders really need to work together collaboratively to share information, share resources, share learnings. And funders are often in a great position to hold those spaces and create those spaces for that collaboration.

And you could look at that whole toolbox that we all have access to. You could think about impact investing. You could think about volunteering. You could think about executives on loan. You could think about how you're doing purchasing, where you're buying your goods and services from.

And then, I would really emphasize that this is a moment to think about risk and the equity question. You know, how are you thinking about both the risks you're willing to take for nonprofits that whose financials may look a bit shakier? Are you willing to put that risk in to preserve vital services for your community? And are you putting an equity lens on things? Are you really thinking about some of the things I talked about earlier, in terms about the historic underfunding of organizations that are led by often marginalized communities?

So I think those are some of things that you can think about.

ERIN HOGAN: Miki, we have a question through our chat box, actually. And I think it goes back to some of our earlier conversations about racial equity, right now being at the forefront. And then, you've just brought up a very common phrase that we're hearing a lot, which is a racial equity lens, or an equity lens. Talk a little bit more about that. What does that mean from a donor's perspective? Why is it important and how is that actually being done in real time right now?

MIKI AKIMOTO: Absolutely. So let me talk about equity lenses altogether. And I think obviously the question that's at the forefront of so many of our discussions right now is racial equity. And that cannot be overlooked. But if you think about the fact that in almost any area that you're interested in, there are inequities buried in data that you may not fully understand.

And so, to give a very current example, if you think about the fact that we've just passed Veterans Day. And, Erin, you and I were talking earlier, we're both the daughters of veterans. Families with long military history. Veterans is an issue area that's near and dear to many of our clients' hearts. What is not always well understood are the specific issues of women veterans.

And I think often, if you think about a veteran, what pops into your head is a man. Because that's been in so much of the military history. But in fact, women are the fastest growing segment of the veteran’s population. Women veterans are 250% more likely to die by suicide than their civilian counterparts. They are also the fastest-growing segment of the homeless veterans’ population.

But what happens is that for women who are in the military, in addition to the kind of issues that affect many veterans, like PTSD. And I want to talk for a second and say, many, most veterans, reintegrate into civilian life just fine. But there are veterans who need support. And of those, if you are a woman, it is likely that you have experienced other things, such as military sexual trauma. And so programs where there are a lot of men in the programs, or the services are provided by men in uniform, like your VA centers, are not helpful to women. Women veterans need different kinds of treatment settings. And so that's a lens to think about when you're thinking about veterans that may not be readily apparent.

And then if you look at higher education. Again, if you're sort of interested in making sure that at this moment in time, people are getting credentials. And you think about, you've probably heard that enrollment in colleges is down. If you start unpacking those data, what you find is that while overall enrollment is down significantly, first year enrollment in community colleges is actually down 23%. And community colleges disproportionately serve Black and Latinx students.

And so if you're really interested in higher education, you may not thinking about community colleges. But if you apply a racial equity lens about really supporting populations most in need, that may drive you toward community colleges in a way that you hadn't before.

ERIN HOGAN: Those are really two very clear examples of just aggregating the data and really looking at the subgroups, really looking at the demographics. Because when I think about equity in grant-making, it's not, everybody gets the same support, right. It's everybody gets what they need in order to be successful. And so taking that look as a funder, I think, really has great potential to really increase not only your knowledge of the sector, which is incredibly important to being a high impact donor. But you actually are more likely to see meaningful results, especially for some of those subgroups who have historically been marginalized and so much at the forefront of our conversation today.

OK, so Miki, you and I could talk about this as funders for days and days. So we're going to pause right here, because I now want to switch gears and bring Ramsay into the conversation. I know that Ramsay has been having many, many presentations around tax planning. And certainly year-end, this is a busy time for you, as really all of our clients are thinking about their year-end giving strategies. So let's get your take on where we are right now, just from the tax planning perspective and year-end charitable giving. What you're seeing and what some of our clients should be thinking about right now.

RAMSAY SLUGG: Well, Erin, the good news is that depending on what a client's specific goals are, they have a lot of options as to how they can structure their giving. Just to meet all these various demands that Miki has just been talking about. And obviously we're all familiar with writing a check to charity. That is the most common, that is the easiest, but unfortunately, the least effective tax efficient way to make a gift to charity.

From our discussions that we found out that most clients aren't really motivated by that tax deduction anyway. They really do want to be they give to charity because they're charitable. But at the same time, to the extent that there is a tax benefit, they do want to have tax efficiencies. So our focus is really more on efficiency, rather than motivation.

And there are multiple ways to structure this, both within a family unit and individually. So let's look at the three basic ways that we do this. First is direct giving of either cash or assets directly to an operating charity. Again, far and away the most common way that people do charitable giving.

The second way is what I like to call indirect giving. And that's where we give to a charity, but it's not an operating charity. And then that non-operating charity in turn gives money to an operating charity down the road. And down the road could be the very next day, or it could be the next generation, or two generations down the road.

And the most common examples of that would, of course, be a private foundation, which many of us have heard about. Or the other common way of doing that, more common way, is a donor- advised fund, and I'll probably just refer to that as a DAF, going forward. That's its acronym. And that's actually the fastest-growing area of charitable giving.

Now foundations themselves are all about control. And it's all about control over future investments. It's control over future giving. But all that control comes with a cost. It comes with a cost of having the least tax advantage associated with it. And also the most burdensome operating rules to go along, to prevent abuses of that control. Which we unfortunately see from time to time. Not very often, but it happens from time to time.

Donor-advised funds, on the other hand, are all about ease. They're really easy to set up. They are really easy to operate. You don't have to do very much. You don't have to file tax returns, so on and so forth. And that's part of the reason for the appeal, is that they really can accomplish what you want to accomplish with a private foundation, for the most part, but you can do it in a much easier way. DAFs also tend to have the most advantageous tax rules associated with them.

The third way, which gets overlooked a lot, I think, is what I call split interest giving. And that is where we take an asset, or a pot of assets, and we put it into, most of the time we're going to put it into a trust. And the most common examples there would be a charitable remainder trust. And that's where we put that asset or a pot of assets in there. We sell that. We retain an income stream for a period of time or for life. And then whatever's left over goes to a charity down the road.

You don't see a lot of those right now because they don't work particularly well in a low interest rate environment. And we've been in a low interest rate environment-- everybody thinks that's new this year, it’s not-- we've been in a low interest rate environment for 13 years now. So, it's just gotten to be lower and lower this year, and it's going to stay low for a while, it looks like. I can't predict or promise anything on that.

The flip side of that-- not technically, but from an optics sort of point of view-- would be a charitable lead trust. And that's where we put assets, or a pot of assets, again, into a trust. We pay charity a stream of income for a period of time. And then what's left over comes back into the family.

Now if you pick either one of those, make sure you've got somebody on the team who understands the rules. There are 11 different varieties of charitable remainder trusts. There are at least four different varieties of charitable lead trusts. And each of those has some more optional features that you can add on. So you want to really, really understand what you're getting into if you do that.

Now, whichever way you structure your gift, the other thing that's really, really important is asset selection. Now cash, publicly traded stock, those are the easiest. And there aren't that many rules around it. And if you go to a charity and say, what would you like? They obviously would love to get cash. Very easy for them to handle.

Most charities, it's also very easy for them to handle publicly traded stock. They're going to have a brokerage account. They can accept a gift. Whether they put it in their endowment or otherwise, they can sell it. They can move forward.

But when we move into other highly appreciated assets, that's actually the most tax efficient way to do charitable giving. And if we do that, we do what I call, we score the charitable trifecta. Because if we do that properly, we get, number one, a fair market value deduction for the asset. Number two, we don't have to pay capital gains on the capital gains tax on the capital gain that's inherent in the asset. And number three, we don't have to pay health care surtax on there. So we get three benefits in one.

For the charity it's six of one, half dozen of the other. They're going to get the same value regardless of what we do. But from a donor perspective, that's much, much better.

And that's not the end of it. Because this year, we have a special deal. It's for this year only, because part of the CARES Act, which was stimulus part three, was passed back in March. And of course, we heard about all sorts of different situations going on. CARES was a massive, massive stimulus package. But one of the things that came out of that, whole charitable deductions are capped based on adjusted gross income. The CARES Act took that away for cash gifts to operating charities. So you could give and deduct an amount equal to all of your income this year. It's a special deal. We've had that in the past, more limited than what we've had it this year. But that is a this year deal only.

Now, whichever way you go. Whether it's direct giving, indirect giving, split interest giving. No matter what assets you use. Whether you do this 100% AGI limitation, if that works for you. Please remember, there's a lot of rules. There's a lot of options that people mess up every day. You don't want to be one of those people. So make sure that you've got an advisor working with you who understands those rules, to make sure that you don't inadvertently mess up on an otherwise valid and wonderful charitable contribution to these nonprofits who are in so much need right now.

ERIN HOGAN: So, Ramsay, and that is to an operating charity, versus a vehicle, right? The gift? The AGI exemption?

RAMSAY SLUGG: Right, the 100% AGI would need to go to an operating charity. Now, you can stagger that and structure it, and part of that actually could be to a private foundation, part could be to a donor- advised fund. But to get the other 50%, kind of the kicker on there, that has to be cash to an operating charity. So again, you want to make sure somebody's in there who understands how those rules interact with each other. Because they're a little tricky. They have some, some other parts of it changed this year as well.

ERIN HOGAN: Well, I would be remiss if we didn't talk about the impact on taxes from the recent election. And I'm sure we have lots of folks on the line wondering what they should be expecting. So can you just talk a little bit about what you know has changed, what could change, from recent events?

RAMSAY SLUGG: Gosh, and it keeps changing every day. You know, a few months ago, it looked as though there would be this so-called blue wave, and that the Biden tax proposal would be adopted. And I don't mean to be political here, in any way. This is just the facts. And in that case we still don't know exactly what's going to happen. I mean, we have a pretty good idea. We got a little more of an idea yesterday with a couple races being declared. We have a couple of races that are not going to be held until January of next year. So we won't have absolute clarity until then.

And taxes were not really particularly high on the election agenda. Certainly not like COVID and some other issues and infrastructure, and so on and so forth. But still we had a dramatically different tax picture depending on the outcome.

And that could include, it still could include, would be higher income tax rates next year for individuals. Now when you have a higher income tax rate, that actually gives you more benefit to a charitable deduction. But at the same time, we were going to get two caps on that very same deduction.

One of those caps was going to be a return of itemized deduction phase-outs. Now we've had that before, depending on who was in the White House. The last four administrations, we've either had it, or not had it, depending on who was in power. So we know how that works. And what happens is once your income hits a certain level, you start to lose a certain percentage of your otherwise legitimate itemized deductions.

The other proposal was new. Now, it wasn't a new proposal, but we've never actually had it adopted. And that is to treat everybody as though you're a 28% taxpayer. Or not everybody, but anybody who was in a higher bracket would be capped as if they were a 28% taxpayer.

So on the one hand, deductions look better. But on two other hands, deductions look worse if all that would have come to pass. Those are all big ifs right now. They are big, big ifs right now. So don't panic.

What I would say, and what I am saying to people, is if they're looking at making a big deduction this year or next year. If those are the two doors. Like, do I pick door A, do I pick door B? I would go with this year. And the reason for that is we know what the rules are for this year. We don't know what the rules are going to be for next year. So that's important to take that into account.

ERIN HOGAN: Seems like we have that comment at the end of many recent years. What we know what we have right now. Next year is yet to be seen.

Well, I want to switch gears here. Because one of the other big topics that comes up and is really at the heart of all these planning conversations, and certainly with philanthropy, is family. The role of family. And I can think of very few conversations that I've had with clients where family isn't one of the central goals when it comes to formalizing their estate plans, but also their philanthropic giving plans.

But we know that it can be very challenging to actually start this and engage family in a meaningful way. We've seen G1, G2, all the way to G6 and 7 that have struggled really around that conversation. So we're in the midst of a significant intergenerational transfer of wealth, and we do know that family foundations and donor-advised funds, to your point, Ramsay, are really increasing at a very rapid clip. And young entities like that definitely need a lot of support when it comes to this aspect of governance.

So I see Miki nodding your head, because you spend a lot of time doing this, Miki. But talk about why. What are the benefits of engaging your family, aside from the obvious? And how are you helping our clients really kind of put this into action?

MIKI AKIMOTO: Absolutely. It is, as you say, it comes up in almost every conversation with clients. About how to involve family, where do I start? And I think one of the nice things is that philanthropy is such a great way to have intergenerational conversations, and to not only pass along intergenerational values and to have conversations about those things that tie family together, but also to share history and stories. Because many times that family foundation is rooted in some important moment in the family's history.

And so I think a good example of this is, I can tell a story of a client that we worked with recently. This was a fairly significant foundation in the Midwest. It's about 20, 25 years old. It was founded out of a family both important event around the business that the family worked in, but also unfortunately a family tragedy, where they lost a family member.

And so there's a sort of history that binds the family together. The founding generation is now in their 70s and 80s, the G1s, as we call them, first generation. The second generation daughters, who are late 40s, early 50s, are actively involved and really working on the foundation. And then there's this cohort of six grandchildren, sort of all in their early to mid-20s, or late 20s.

And you know, unsurprisingly, there's a little bit of generational friction. They're talking about the same things, they're not necessarily using the same language or even the same communication platform in some cases. There's the whole funny thing about how the G3s refuse to answer email, but you can text them.

At any rate, so these are the kinds of things that we navigate through. But what was really wonderful is that the first and second generations really, really wanted to involve the third generation, the grandchildren. But they really weren't quite sure how to start or how to have those conversations.

As we worked with them to create some space, to create some openings for that conversation. To put values back on the table and show them the many ways in which they were aligned. But again, sometimes just using different words. And out of that work, what we now have is three generations aligned. They've created some working groups to do things like review their mission statement. Talk about the values. And to think about how to take the founding story of this foundation and their clear central mission, but allow it the space to evolve a little bit. For the grandchildren's interest. For the way the world has evolved. For issues that just weren't on people's radars 20, 25 years ago. And to think about how they're going to work together.

And so they're rewriting the mission statement. They are working on their grant guidelines. They're looking at including some racial equity lenses in some other work, particularly for the city that they're working in. And so what we really see is that the foundation is stronger. There is a commitment by the third generation to step into the leadership roles in a few more years.

There's been a specific on-ramp created for how to become a trustee of the foundation. And the generations are really aligned and excited and ready to move forward together.

 

ERIN HOGAN: I love that story, actually. And I'm always so, I would say, inspired, when I see and hear of families actually take that step. Because it can be intimidating. And certainly, trying to do it virtually, in these circumstances, are hard. But so many benefits, obviously, just having that opportunity to really articulate those values and then declare what you're going to do together. If you're going to choose to get together. I think it's a really important concept.

And for folks on the line that are going through a similar experience, or thinking about doing something like this, I will say you're not alone. Of the family foundations out there today, 70% of them are relatively young. They were formed in the last 30 years. And so really this is the first full generation of actively giving during your lifetime and through multiple generations.

Another fun fact that I learned was, 50 years ago, you had maybe two generations living concurrently in a family. Now it's up to five. And so all of those life experiences and preferences in terms of communication, not to mention geographic disparity. More important than ever to be really clear about your goals, if you choose to give together as a family.

So Ramsay, I want to switch over to you. What is obviously, lots of multi-generational planning aspects going on. And I'm sure you've seen quite a few things. What's your take on the role of family, and really family versus even individual planning?

RAMSAY SLUGG: Well, I think Miki just gave a great example. And we've got many, many examples within the Private Bank and within Philanthropic that we see families working together well and using philanthropy as a way really to educate the next generation. And I should say generations, again, because well it's not uncommon that we've got three, four, five generations being involved.

But at the same time, a lot of people want to kind of go their own way. And so I get a lot of questions about, how do I pursue my own specific philanthropic strategy? Again, you know the most common is to do direct giving to an operating charity. And operating charities couldn't live without that. I mean, that's their annual fund. That's where most of their gala money goes, so on and so forth. So that's really, really common.

A couple of the things to keep in mind that people forget about sometimes, though. If you are thinking about selling a major asset of some sort. It might be real estate. It could be very valuable art. It could be, and I bet you're having a lot of those questions come in, it could be the family business, for example.

But if you're thinking about selling a major asset and you're also thinking about making a large charitable gift as part of that transaction, consider giving away part of the assets to the charity before you do the sale. Now, it doesn't always work out. You've gotta run the numbers in every situation to see which is going to work better. But quite often, if you give it to the charity, either directly or through a donor- advised fund, or, and here it gets real tricky, to do it through a private foundation. But it can be done, with certain assets. And you do that before you make the sale, you're going to avoid some capital gains tax. And so that can work out well for everybody involved.

Qualified charitable distributions. If you remember, anybody 70 and 1/2 who's got an IRA can make a direct distribution to a charity of up to $100,000 a year. A married couple could do $200,000 a year. Now, last December we got a new tax law, which changed that 70 and 1/2 age up to 72 for minimum required distributions. But it didn't change the age for qualified charitable distributions, which a lot of people get mixed up. Because those two things, they sort of interact together, but they're two separate things.

And then, as part of the pandemic stimulus and relief that we got this year, all of those required minimum distributions got to take a year off. So we expected since so many people confuse those two things that it would be quite naturally that we would see a big decline in qualified charitable distributions. In fact, the opposite has been true. And we're seeing them-- so far at least, and this is kind of anecdotal-- we're seeing them track along about where they were last year. And we're now just coming into the giving season. And as people are realizing they can still do that, I think maybe those are going to hold their own.

That's a particular provision that I didn't think it was going to be nearly as popular as what it's been. It's really, really popular, particularly for people with large accounts. And if you do something with the split interest giving-- again, that could be a sale of a business or otherwise-- you want to consider using a corporate fiduciary such as Bank of America to make sure everything's done right. There are a lot of rules. When you set it up, when you operate it. When you do even though a charitable remainder trust is a tax free entity, it still has to file tax returns. That's kind of crazy, isn't it?

But you want to make sure all those things are done correctly. And if you use a corporate fiduciary such as Bank of America, we're going to make sure they are done correctly. So those are kind of my final tips on that.

ERIN HOGAN: These are such important points and I think one, obviously, Ramsay, you make an excellent point that, yes, we have goals for our family, but we also have goals for ourselves. And so being clear on both of those things is so important. It really helps to avoid a lot of confusion. Having a very knowledgeable advisor. Obviously, taking advantage of some of these changes. I think every time I talk to you, Ramsay, I learn a little something new, a nuance in some of the changes to the code.

And I really have to say, your point about having a trustee, having really an independent guardian, if you will, over not only the complexity that needs to be managed on an annual basis, but really providing, I would say that voice of independence and oversight. And I know that in many cases certainly as multiple generations go through the G2, G3s and beyond, having that independent partner that's really there keeping the donor legacy front and center. And making sure that everybody is able to come together and make decisions together. As one of my clients called it having a grown up in the room. And it was actually quite helpful. So all in furtherance of keeping family harmony when we're choosing to get together.

So OK, we are really running quickly through here on our time. And I'm hoping we have time for some questions. But I really have to say, the last question from me is really using the title of this event, it's the call to action. And so I think, obviously, the call to action is to be charitable, but to do it in a way that makes sense. And everybody's circumstances are all unique. So I'm going to ask each of you, what would you like the audience to take away, in your call to action. So, Miki, why don't we go ahead and start with you.

MIKI AKIMOTO: Absolutely. And I think picking up where you led us into this, Erin that the call is to be charitable. And I just want to remind you of something that Ann said at the beginning of this call. In ordinary years, a third, or slightly more than a third, of all charitable giving is done in Q4. And we know that there's been extraordinary outpouring so far this year. But if you can, I am strongly urging you to keep giving and to really think about how you're going to do your end-of-year giving.

Individuals and families are absolutely the backbone of charitable giving in this country. If you think about combining individual giving, bequests, and giving from family foundations and donor-advised funds, that accounts for about 88% of all philanthropic giving in the country annually. So charities really count on us. Count on us to chip in, to support this incredible work that's being done. So please, give generously. Give patiently. Give with kindness. And give with a mission focus. And if you want any guidance at all, obviously your Bank of America team is here to support. We've got dedicated philanthropic specialists. So please, we're a phone call or an email away. I can't promise we'll do TikToks, but you know, we're around.

ERIN HOGAN: Ramsay, how about you? Call to action for the audience.

RAMSAY SLUGG: Yeah, I would just emphasize two things I've already mentioned. And one is, we have this rather unique opportunity this year. If it fits in your plans, if it makes sense-- and I've talked with more clients this year than I ever had in the preceding years when we've had this limited opportunity to contribute and deduct up to 100% of our adjusted gross income-- if that fits in your plans, it's really a great, great opportunity. Although it was passed as part of the pandemic relief, it's not limited to COVID- related causes. It can go to any operating charity. Just can't go to a DAF. Can't go to a foundation. But you could give it to any operating charity. And as we've heard from the numbers, some of them are really, really hurting this year.

The second thing, again, I can't overemphasize, if you give with something other than cash or a publicly traded stock, make sure you have an advisor who knows these rules. Because I see it all the time. I see every year. And it's really sad when people make otherwise legitimate charitable contributions, that they didn't understand the assets that they gave away. The charity didn't understand substantiation rules.

There are a lot of little easy ways that you can mess up. And it's really, really sad when the letter comes from the IRS-- it's always sad to get a letter from the IRS-- but it's really, really sad when you get it and you find out that this otherwise legitimate charitable deduction has just been denied. That's probably the saddest letter of all. So please use a qualified advisor.

ERIN HOGAN: Excellent advice from both of you. And I'm excited because we actually have some time for some questions that we have gotten through our chat box. And Miki, I'm excited. I love this question. This is actually a question that comes from somebody on the line. And it's actually more around systems change. And so, thinking about donors responding in the short term, but also in the long term, what are some things that donors are doing or could be doing if they're trying to balance, really, the need to be charitable and meet that immediate need, but they're interested in more of the root causes and the systems that are perpetuating those results right now? So kind of a big question, but I'm always so excited when we get a systems change question. So what are your thoughts on that?

MIKI AKIMOTO: Oh, so many thoughts. But actually, I have a great example. I'm working with a family that is very place-based, and by that, they really focus their grant-making in a particular city and slight surrounding geography. And this is a city that was actually hit fairly early very hard in the pandemic. And so this year, they had a strong focus on education, workforce development, and the arts. And arts education is one of those sort of overlap areas. And they are really thinking at the systems level on some of those things.

But they recognized early in this year, they needed to make a bunch of very fast, human service relief grants. To hospitals for PPE, for schools to give virtual lessons. And so they sort of broke their usual mold and they did soft grants. And this was back in the naive days when we all thought life would be back to whatever passes for normal by now.

We met again about a month ago to say, OK, how are we going to plan for 2021, because clearly there's a lot to think about. And we talked about their desire to really get back to the systems focus, but also recognizing that, as we talked about earlier, the world's still really messy. And so they're going to run this very interesting parallel process next year. They're going to reserve the bulk of their grant-making for the systems change work that's still underway, but now with some twists, depending on the systems. You know, people are going to incorporating more virtual, but they're still really trying to get some of these root causes.

At the same time, they have scheduled in quarterly meetings to do what I would characterize as responsive or disaster grant-making. They're sort of reserving a pool of money that they're going to just do responsive grant-making for whatever needs have cropped up in that sort of unanticipated way. And so I think that there's this way of holding both/and into your heads. It's not either/or. The world is both/and. And so that they're really thinking about this in both ways, I think it's a very creative way of going about that.

ERIN HOGAN: I would wager to say that I'm sure the next generation, or the upcoming generations, are quite interested in tackling some of those root causes. And so, really just great energy and excitement and passion and commitment for that. New solutions, that solution-based philanthropy. Great example. Thank you Miki.

Ramsay, I have a question here for you. And it's going to require you to have your crystal ball about next year. Is there any chance that we think that we might see some of these one-time only benefits renewing into 2021, like the AGI deduction? What are your thoughts?

RAMSAY SLUGG: Well, unfortunately something happened with the humidity or something, because my crystal ball got really, really cloudy last week, and I can't explain it. But I think if you'd asked me that question a month or two ago when it looked like the election was going to go a certain way and that one party would be in control, then I'd say it was unlikely. Because it wouldn't make really very much sense to have this enhanced deduction over here, and then throw two caps on it over here.

Now, there's a small subsection of people that it still would have worked for them. But it would have been so confusing. And I'll tell you, I wouldn't want to be the one to work out the Excel spreadsheet to figure out whether it made sense or not.

So, I don't think that's going to happen at this point. Again, it's not over until it's over. It won't be all the way over until January 5th, and who knows what happens then. But it looks like we're probably going to have a divided government. And if so, I'd say there is a good chance this will be extended. I think everybody agrees that there's going to be stimulus part four. And part four, I don't know how big it's going to be or what it's going to cover. Who knows? But I think there's a good chance that they would include this 100% AGI in that.

It's not a very expensive provision. It looks good. So everybody voting for it makes it look good back home. And it certainly does some good for charities, if it helps out. So I think there's a pretty good chance we'll see an extension of that. But again, my crystal ball is foggy.

ERIN HOGAN: Well, we shall have to see. But that does not change the fact that right now there are things that everybody can and really should be doing between now and December 31st. And I think you reminded us that taxes are incredibly important, but they are not the single driver when it comes to charitable giving. In fact, really the desire to have impact and to give to causes and organizations that truly reflect your values. And that you're seeing that impact actually happen, once you've identified it. Those are really the hallmarks of really good, satisfying, effective giving.

So for folks on the line, look out for our next iteration of our research. I know our highly anticipated study of philanthropy with the Lilly school at Indiana University is always something we like to get out there in front of folks. And so, we will be looking at a retrospective of 2020. And so, I think it's going to show us a lot. And I hope everybody really takes some time. Of course, we are here to talk about that, as well as all the things that we talked about today.

So I want to take a last couple of minutes really just to thank Miki and Ramsay for your insights and your experiences, your advice and guidance. I think it's real time and actionable, and it's always great to hear these stories. Some of these are a bit more complex, obviously. It would take a bit more time. And everybody's personal circumstances and family circumstances would be at the center of that.

So please, I would encourage you to reach out to us. Reach out to me personally. I oversee the South for our philanthropic work. It's certainly a pretty big territory. But we're taking lots of phone calls and meetings. Miki's a great partner. Ramsay's a great partner. Really, everybody who invited you to the call today. Please pick up the phone and reach out to them. And we will happily sit down with you and have a follow-up WebEx, or a phone call, and we certainly hope in-person very soon.

So I would just like to end our call today by wishing everybody, again, a very happy giving season. To all the veterans, and to all the children and grandchildren and spouses and siblings of veterans, I personally would like to say thank you again. And really looking forward, again, to our future holidays and time together. Reflecting on just how important philanthropy has been and continues to be. And I feel very positive that we're going to really show up strong in 2020, because the need is great, but the opportunity, to Ann's earlier point, to really have an impact has never been greater.

So with that, I am going to thank everybody. And enjoy the rest of your days and your weeks. And we will be back soon with more content and more follow-up. So, operator, this concludes our call. Thank you again, everybody.

MIKI AKIMOTO: Thank you. RAMSAY SLUGG: Thank you. [MUSIC PLAYING]