New Report Shows How Super-Wealthy Give

Planning Matters

Gift Planner Turned Financial Advisor Discusses Ultra-Wealthy

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Gift Planner Turned Financial Advisor Discusses Ultra-Wealthy
As an attorney, financial advisor, and former fund development executive, John Goodwin has spent most of his career helping people meet their personal and philanthropic goals. In this “Gift Planner Profile,” Mr. Goodwin shares his thoughts on the giving habits of the ultra-wealthy and how proposed estate tax changes may affect the giving of significant wealth holders.

Give & Take: Tell us a little about your background as an attorney and planned giving officer.

Goodwin: I started practicing law in 1986 in the estate planning group of one of the largest law firms here in Seattle. Even at that time I had an interest in planned giving because my older brother, Mike, then was director of planned giving at Washington State University. In the scope of that work, I had the opportunity to become the charitable specialist in the firm and be involved in setting up private foundations and charitable trusts and to help structure large outright gifts on behalf of clients. I was recruited to the University of Washington by Frank Minton who was then the director of planned giving and spent eight years there altogether. After three years in planned giving I became the associate vice president in charge of the campus-wide major and planned gifts program including all the school and college development directors and assistant deans. What we had was an integrated planned and major gifts model involving both a central staff and a decentralized staff with extensive cross training, obviously somewhat influenced by Robert Sharpe’s thinking at that time.

Give & Take: How did you come to your current position as a financial advisor?

Goodwin: When I left the U of W, I set up a consulting business providing strategic counsel on large-scale philanthropy to local foundations and high-net worth individuals. I came to the realization that this strategic advising work needed to be done within the broader framework of wealth creation and wealth management. That is in large measure why I joined the wealth management firm, Quellos Group. I am now able to continue to provide strategic counsel about philanthropy as an integrated component of the overall plan to grow wealth and eventually distribute wealth to both the family and the broader community. I view all my prior experiences—as an estate planning lawyer, charitable gift planner, major gift fundraiser, philanthropic consultant—as integral to developing a comprehensive sense of what it means to provide “wealth management” advice. I think I have a good sense of what motivates wealthy people, what makes them feel good, and how they want to relate to the management and use of their wealth.

Give & Take: What have you found to be the primary reasons people make large current or deferred gifts?

Goodwin: I think that the reason people ultimately make those gifts is because they are deeply engaged in the organization or the cause, they see a need, and they see an opportunity to make a difference. There’s a hurdle that is then presented: Do they have the financial capability or capacity to make a substantial gift commitment? Once they satisfy themselves that they do, it is really a no-brainer to make that commitment given their level of engagement. In my work, it has always been about the donor seeing a need, seeing a way to make a difference, and feeling connected and financially secure enough to be able to make a substantial gift. Part of that is getting good advice, which came through in the Bankers Trust survey (Click here to see page 1 for more on this survey). Very few people are able to figure it all out on their own. It helps for potential donors to get good advice that can help them decide that they do have enough wealth to make a sizable commitment, advice about how to structure a gift so that it is tax efficient and tax sensitive, and advice about how to structure a gift so that it really makes a difference for the organization.

Give & Take: What impact do you think estate tax changes may have on giving by the wealthy during life and at death?

Goodwin: We deal with people who are the ultra-affluent, those with $50 million or more. With regard to this question, I think you must separate out this group of people from those with fewer assets who will also be affected by estate tax reform or repeal. As you saw in the Bankers Trust survey, one of the questions that confronts wealthy people is “do I have enough wealth to secure my needs and the needs of my children?” At lower levels of wealth, it does seem to me that changes in the estate tax would drive more money to both family and charity, probably, as noted in the Bankers Trust survey, in a ratio that distributes a somewhat higher percentage of the tax savings to children. Over a certain level of wealth, however, people know that their needs are secure, and they have identified some level of wealth that they want their children to have. Any amount of wealth they manage to accumulate above that level, they wouldn’t give to their children for fundamental reasons that don’t relate to the tax structure or changes in the tax structure. For example, they may not want to demotivate their children. For the ultra affluent clients that I deal with, I don’t think estate tax reduction or changes would fundamentally affect their charitable aspirations because most of our clients drive the residue of their estate to charity after they have provided adequately for children and other loved ones. I don’t expect that to change.

Give & Take: What specific advice would you give gift planners in light of proposed estate tax cuts?

Goodwin: What I would tell them is a lesson that you could also draw from the Bankers Trust survey. That is that they should focus on the fundamental things that motivate people to give regardless of what the tax structure is. Focus on the connection with your donor, focus on engagement, focus on convincing them that your organization is a worthy place to give and is making a difference. Focus on finding people that have already provided for your organization or institution or tell you they are considering the possibility of doing so. That is paramount. Second, to the extent that understanding the tax consequences of giving and the ways to give is an important part of donors developing a comfort level to give, continue to educate prospective donors about those tax savings, efficiencies, and opportunities in the most highly professional way that you can. At this point it may be wise, where appropriate, to focus attention on things that are still certain, like income tax savings and capital gains tax planning, and providing for increased income that can be accomplished through various gift planning vehicles. If you do those two things, help connect donors and prospective donors to your organization in a deep and lasting way and provide the highest caliber counsel possible about giving opportunities, then when their other advisors are in alignment with that the gifts are going to come.

Give & Take: What did you think was the most important finding in the Bankers Trust Private Banking survey “Wealth with Responsibility 2000”? What did you think about how the wealthy say they would distribute their assets if allowed to do whatever they wished?

Goodwin: The most important thing that I took out of that survey was the number of people who don’t know whether they have enough to be secure in order to be significantly philanthropic. We see that in our work every day. We help show people the capacity to do good deeds that their wealth presents. Once people know that they are secure and that their children will be secure, their ability to answer that question about how to divide their wealth between charity and their children becomes more obvious to them. The survey also pointed out the fact that very few ultra affluent people are interested in making their children as wealthy as they could possibly be. If you presented that option bluntly to a client, there are very few clients who would select that as a goal for their children. When people have significant wealth, their objectives are much more balanced between providing for their children and doing other kinds of good in the community. This is evidenced by the degree to which people volunteer or the degree to which they give during life. I think people’s estate plans generally mirror the values that they live by during life. I can say that all of the clients that I work with would direct the most substantial part of any estate tax savings to charity and not their children. I think the more pressing near-term challenge is confronted by that group of people who are not ultra-affluent who find themselves significantly less wealthy than they were a year ago. Gift planners must now meet the challenge of helping these people see that they do still have enough to take care of themselves and their children as well as give to charity. This presents a ripe opportunity for marketing planned gift vehicles which can help people who are in that middle ground and really don’t know if they can be philanthropic.

Give & Take: What is the primary way significant wealth holders leave assets to charity?

Goodwin: In my experience, wealthy families and individuals turn to the whole toolbox of charitable techniques over the course of their lifetime. Very often, the first vehicle that they turn to is a private foundation or a charitable remainder trust, or some combination of the two vehicles because they are confronted by the potential benefits of diversification of a concentrated stock position through these vehicles. The charitable trust, similarly, can be a source of cash flow for lifetime giving for annual, capital, and endowment needs, and in certain cases corpus of the trust can be available for accelerated lifetime gifting. As the wealth position becomes more secure you see more frequent and larger lifetime gifts for operating, endowment, or capital purposes. And, of course, as we know, for many people the most significant gifts they make will be made at death under the provision of their will or revocable trust.