Volume 19, Number 5
Anyone Can Leave a Legacy
By Carolyn B. Hennesy
In 1995, the nation was stunned by an unexpected act of generosity. Oseola McCarty, an 87-year-old laundress from one of the poorest states in the country, donated $150,000 to the University of Southern Mississippi. When asked why she made the donation, McCarty said, "I want to help somebody's child go to college. I just want it to go to someone who will appreciate it and learn. I'm old, and I'm not going to live always." McCarty, an unlikely donor, surprised many with her gift, and your clients might surprise you, too, if given the opportunity.
Most estate planning practitioners see charitable planned giving as an excellent way to circumnavigate the IRS for their wealthier clients. However, statistics show that dodging the IRS is not a donor's greatest motivation. A recent study by the National Committee on Planned Giving (NCPG) found that only 35 percent of those who made charitable provisions in their estates did so to reduce taxes. A whopping 97 percent of those who responded stated that their primary goal was to support charity.
And the numbers get even more interesting. IRS statistics from 1998 estate tax returns, combined with the numbers provided by the NCPG, show that approximately 91 percent of individual bequests to charity in America come from estates that are not even large enough to pay estate taxes at present levels. Further, 81 percent of the $143.3 billion donated to charity in 1997 was given by individuals. Americans are generous people; despite the fact that the majority of your smaller clients will not need to file estate tax returns upon their deaths, they still may be interested in estate planning with charitable intent.
When Oseola McCarty expressed an interest in charitable giving, her banker and her attorney sat down to explain how she could put her money to use while still taking care of herself and her relatives. Her banker laid out ten dimes (illustrating percentages) and wrote the names of the parties to whom McCarty wanted to leave money on small pieces of paper. When he asked how she wanted her money split, McCarty used the dimes to allocate to each recipient the amounts that satisfied her: one dime for her church, one for each of three relatives, and six dimes for the University of Southern Mississippi.
Although this approach may be overly simplistic for some, it was a clever way to help McCarty communicate effectively with her professional advisors without forcing her to take a crash course in estate planning. A similar approach could do a lot to reduce the intimidation factor many unsophisticated clients feel when confronted with myriad possibilities for settling their estates-or even practitioners faced with the same daunting possibilities.
Knowledge Is Power
For both the client and practitioner, knowledge is power. Clients who know their options have the power to exercise them. If the practitioner knows her client, she will be able to steer him toward a charitable solution that carries out his wishes. Therefore, it is important to interview your clients carefully to determine their values and objectives. Clients receive more value from practitioners who are willing to probe their emotions and extract their true motivations. You needn't conduct a therapy session, but leading questions like the following can help elicit relevant information:
- What gives you satisfaction in life?
- What has been your contribution to making the world a better place?
- What hopes and aspirations do you hold for your children and grandchildren?
By unlocking the elements of meaning in a client's life, the practitioner can serve the client unreservedly and find satisfaction in helping a client feel he will make a difference in the world.
Other important questions concern the fundamentals of estate planning and their potential impact on key life components. The client may need your assistance to answer these effectively.
- How will the decision to donate affect you (impacts financial independence for client and spouse)?
- How will it impact your heirs (family legacy)?
- What effect will it have on society (personal legacy)?
In order to facilitate answers, consider preparing a questionnaire for your clients to complete outside their appointment time, or completing it during a specific one-on-one interview. Personal interviews allow you to interact with your client, but questionnaires give the client time to consider answers and explore feelings about planning issues. When dealing with couples, be mindful that they may maintain different views and could benefit from separate questionnaires or interviews.
The answers to the suggested questions and the general information gathered in the interview process give the practitioner the power to help her clients. With this information, the lawyer and client can work together toward the client's goals.
Sometimes Even Attorneys Need Help
Although it's great that some of our clients think that we are superheroes, the truth is that sometimes even attorneys need help, especially in the area of estate planning. It's in the client's best interest to consult other professionals who can assist with a complicated estate plan-accountants and financial advisors, for example, both of whom are becoming more savvy in estate planning. If you do not have the requisite knowledge in a certain area, outsource it. The work will be done more efficiently and with greater competence if you create a team that can assist with your clients as needed. Plus, it never hurts to network-financial service professionals can be excellent sources for new client referrals, too.
Small Client, Big Heart
When utilizing the services of other professionals, be certain that your client understands fully how those professionals will be compensated, the relationships among the parties, and the role each professional plays. Consider your own fees as well. One element that hinders the development of charitable giving and estate planning among lower income clients is the relative cost of the work involved. Often it's not just the clients who are daunted by the cost of the work-practitioners also are. And that's reasonable: Who wants to do 20 hours of work but charge for only ten? However, you might think of this level of estate planning a bit more broadly and remind yourself that the services you perform for a less wealthy client could turn into referrals for more clients. A value-added effect is that a certain level of personal satisfaction comes from assisting the overlooked with remarkable things.
Be practical and efficient. Consider flat fee arrangements or installment payments, but review your local rules regarding fee arrangements. Build a library of forms and updated research that will eliminate half your work and cut your drafting time to a minimum. Ask your proposed team of professionals for suggestions, and make contact with local foundations and charities. Most charities today have a designated planned- giving officer who can take you through the specific requirements of that particular charity's gift procedure. The charities will likely be thrilled to know you're interested in assisting smaller clients with planned gifts and may even become a source for referrals.
Be mindful of the charity's perspective. If the legacy is an albatross around the client's neck, it may feel the same to the charity. Many charities now have gift-acceptance policies, so contact them early in the planning process to make sure the proposed gift will be accepted.
Make a Difference
Perhaps the most remarkable element of Oseola McCarty's story is that nobody knew she had amassed wealth sufficient to leave a remarkable legacy to the university. For years she laundered clothes for other people. She worked hard and saved for the future. At 87, when she stopped thinking about her own future, she began pondering the futures of others-young, disadvantaged African Americans. McCarty amazed the nation with her gift. Perhaps your clients cannot fund a new library wing at the local university, but a small planned gift from one of them could make the difference in at least one other life. Anyone can leave a legacy.
Carolyn B. Hennesy practices with Lugenbuhl, Wheaton, Peck, Rankin & Hubbard in New Orleans, Louisiana.
Many helpful resources assist with charitable giving and estate planning. Perhaps the best place to start is the Internet.
www.hfpg.org. The Planned Giving Design Center section of this website can point you toward resources in your area, has downloadable forms and articles about planned giving and tax issues, and produces an informative e-newsletter.
www.Philanthropy.org provides a wealth of linked resources to assist lawyers interested in researching charitable giving. It covers everything from sources for economics data to the Librarian Index, which bills itself as "the thinking person's Yahoo."
www.ncpg.org. The National Committee on Planned Giving sponsors national conferences on planned giving; this site links to survey results and current tax rates, among other topics.