S2, E1: Unlocking charitable opportunities with complex assets

This is the first of six episodes in our second Philanthropic Insights series that offers advisors everything they need to know about making the most with gifts of complex assets. Throughout this series we will discuss the various areas of complex assets such as real estate, business interest, passion assets, alternative investments, and qualified appraisals – and we will bring in top experts in these fields. 

In our first episode, Kim Ledger brings on a fellow specialist on complex assets, Katie Collin. Complex Gift and Grant Director here at Ren to discuss how advisors can unlock charitable opportunities with complex assets.

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Transcript

Kim Ledger:

Welcome to Ren's Philanthropic Insights video podcast series, made to help financial advisors make the most of their client's charitable giving. I'm your host, Kim Ledger, Ren's VP of Complex Assets. In this series, we share everything you need to know about making the most with gifts of complex assets. Throughout each episode, we will discuss the various areas of complex assets such as real estate, business interests, passion assets, alternative investments, and qualified appraisals, and we're bringing in top experts in these fields.

If you haven't been following along with our Philanthropic Insights video and podcast series, be sure to check out the first series that dives into different ways advisors can leverage DAFs for long-term impact. With me today is my co-host and fellow expert on complex assets, Katie Collin, Complex Gift and Grant Director here at Ren. And we're going to discuss how advisors can unlock charitable opportunities with complex assets. Katie, thanks for joining me.

Katie Collin:

Kim, it is really a pleasure to be here with you.

Kim Ledger:

Yeah, well, this is one of my favorite topics.

Katie Collin:

Right, and mine as well.

Kim Ledger:

I know that from experience that you and I could sit here and talk for an hour, so we're going to keep that much shorter. We can probably talk for hours. But in this first episode, let's just talk about generally complex assets and how advisors... When you hear the word complex assets, what does that mean and how advisors can leverage that with their clients? So let's start with the first. What is a complex asset?

Katie Collin:

Right. So I like to say when I'm discussing this with individuals and financial advisors, complex asset really should be considered anything other than cash or marketable securities because there's just a little bit more you have to do, sometimes a lot more, but it really, really encompasses everything other than those two big buckets of cash and marketable securities.

Kim Ledger:

So as people look at complex assets, give some examples of what those might be.

Katie Collin:

Sure. So I think one of the most popular that you and I see is business interest, and I know we'll be talking about that specifically a little later, but they can be as wide-ranging as gifts of art, gifts of grain. I've heard of gifts of wine in a collection. So passion assets, again, is something we're going to dive into as well. But it really can run the gamut, real estate. If someone owns something and there's a value to it can be a gift. And so we really need to have that conversation with our general audience to make sure people understand if there's a value attached to it, you can probably make a gift with it, and we are going to help you do that.

Kim Ledger:

One of our partners, he likes to tell the story about someone giving dirt. They were able to monetize it and put a value on that dirt and they made a charitable gift of the dirt.

Katie Collin:

Exactly. You really can find ways to be creative. If there is a audience willing to have a conversation about value, there's a way to monetize it and turn it into a charitable gift.

Kim Ledger:

I had an advisor who also talked to us about making gifts of a racehorse. There's definitely some challenges there and so we weren't necessarily running to the starting gate for that one. We wanted something a little more stable. Okay, enough of the jokes.

Katie Collin:

Oh, goodness.

Kim Ledger:

But anyway, that was something that someone had approached us about. So I mean, it could be done.

Katie Collin:

Right. It can be. And even I had a former boss who always said, if someone's offering you something with a steering wheel, you really need to be careful and figure out what are you getting into, what liabilities can be attached to it, and how will you actually make that official transfer?

Kim Ledger:

And one of my colleagues has also said, "If it eats, I don't want it."

Katie Collin:

Probably a good rule of thumb.

Kim Ledger:

Yeah, exactly. So when you're looking at complex assets, how do you evaluate whether it's a good gift to a donor-advised fund?

Katie Collin:

Right. So you're really thinking about how can we monetize this into something? What makes the most sense at the end of the day? What kind of timeframe or lead time do we have to be able to liquidate that and turn it into cash to put into a donor-advised fund? And really you're thinking about how does that person feel about this? Is there a story behind it? How can we, in the donor-advised fund space, really help them? Is it because they're ready to grant immediately? Is there legacy planning that's going on? So we're really trying to figure out what do you have, know what you have, and figure out ways to really think about is this the right thing for a gift? Does it make sense for a donor donor-advised fund? There are certain rules that donor-advised funds have to follow when they're accepting certain assets.

And that's the conversation that we'll have with advisors is really thinking through what is it exactly that you have? Does this make sense? Are there rules we have to follow? There are very specific IRS rules for a lot of the different gifts that we see. So it's really important to work through and make sure we are bringing in the individual's tax professional, we are bringing in their estate planning attorney and really thinking through if this is what's available for giving, let's dot our I's cross our T's and make sure everybody's following the rules. Everybody knows what's happening.

I think you and I have said in the past, we've had situations where a tax professional will come in maybe probably too late to the conversation and say, "This doesn't make sense with your planning, and this is not the year you need a big tax deduction. We need to push pause. Let's gather everybody back around the table and think about maybe next year is the year for the big gift." I've also had estate planning attorneys come in and say, "I love that you wanted to do this. I didn't know charitable planning was part of your goal. We really need to think through this because of the structure you have set up with gifting to children, gifting to trusts for children or grandchildren, this is not the right time to do this gift." It's really important.

Kim Ledger:

And I think another important point is that donor-advised funds, the point is to be able to grant funds to charities. Right?

Katie Collin:

Exactly.

Kim Ledger:

So there has to be a way to monetize that asset and to have some liquidity and some cash in the donor-advised fund to be able to make those grants.

Katie Collin:

Right. Right. Because at the end of the day, that's the best part, putting money out into the community that you love and support, making an impact there.

Kim Ledger:

And we work with a lot of different advisors, whether it be financial advisors, some strategic philanthropic advisors who are there to help their client think a lot of that through. And we get to be a part of that process.

Katie Collin:

And I love seeing when families or individuals come in and there's a theme to their giving that they really want to create or solidify even more. And having some of those philanthropic advisors to think through. So what are we trying to do? Is there a larger purpose that we are participating in? Are we gifting to our alma mater? Are we gifting to our local orchestra? And is there a multi-year approach that's needed? And to really think then if the donor-advised fund is going to be their partner and strategy piece, how can we bring all of this together and accomplish everything?

Kim Ledger:

Exactly. I had a client that is very, very passionate about providing help and relief in a variety of ways in the Ukraine.

Katie Collin:

Oh, I love that.

Kim Ledger:

And so she made a gift of a piece of jewelry and then that was sold at Sotheby's. And so she's had cash then to make grants to these organizations to help that are providing relief in Ukraine, and that is a huge passion of hers. It was really, again, an honor to be a part of that.

Katie Collin:

Right. And those are the stories that we also want to amplify so that people understand it can really do a lot of good here.

Kim Ledger:

I'm hoping to have her on a future episode in a future series to come and talk about that.

Katie Collin:

Ooh, I'll be watching

Kim Ledger:

Can you share a success story, something that has been one of your favorite complex asset stories?

Katie Collin:

Sure, sure.

Kim Ledger:

It's hard to choose.

Katie Collin:

It is so hard to choose. It really is. But one that really was impactful personally and professionally was at a previous organization I was able to help facilitate a gift of piece of Kusama artwork who is become much more well known I believe in the last few years. There was a retrospective on her art in Cleveland a few years ago. And we had a donor who gifted one of her fiberglass pumpkins to the nonprofit and it was something that could be displayed, and it's something that people see on a regular basis when they interact with this nonprofit. And the donor was so excited to be able to make this gift. The nonprofit was thrilled to be able to accept it. And just everyone was so happy, and that's what you want at the end of the day. And while it was a little bit time sensitive of when it had to be delivered, everybody came together, everybody found ways to make this successful and it's still living in a great space in the institution to this day. So I love that type of story.

Kim Ledger:

Yeah, I do too. I do too. As you look at... We'll spend some time on this. I believe our next episode is on real estate. We're bringing in a real estate expert.

Katie Collin:

Excellent.

Kim Ledger:

And we'll talk to him about the just different aspects of giving real estate. And then we've also got a session on business interest, an episode on that. So I'm looking very forward to that. And then alternative investments, which we'll get into. And one of the other things that people... And passionate assets as we've said. And we're also doing an episode on qualified appraisals.

Katie Collin:

Ooh.

Kim Ledger:

Yes.

Katie Collin:

A great one.

Kim Ledger:

Because people ask me questions about qualified appraisals all the time.

Katie Collin:

All the time.

Kim Ledger:

And I'll speak high level, but it'll be great to hear from our experts in that field. So that's another great one. Going back to the high level here, as you look at the complex assets, what's the most common?

Katie Collin:

So I really think business interests has been what I see as a focal point lately. There are so many individuals that are part of large corporations, but there are also individuals who are entrepreneurs and it's a smaller company. And so there are so many interesting things that come out when you are helping these individuals think about what does charitable giving mean to them? Why is it important? And they feel so passionate about being able to use a piece of the business that they've built or the business that they've helped grow to make something exciting out of that that really can be a legacy for them and their family. And I think so many of these individuals and even the ones we've been able to work on together, they are invested in a process and helping understand some of the due diligence that has to happen in this process together.

Kim Ledger:

Yeah, because there is definitely some due diligence.

Katie Collin:

Yes, there is.

Kim Ledger:

One of the things too that I have learned is that this particular... especially in complex assets, if there's going to be a transaction or the business, just depending on how things are structured, but often an advisor might find themselves in a competitive situation and the other advisor, or other advisors may not have brought up charitable giving or charitable planning. And so this is a great differentiator to be able to go in and say, "Look, you can probably make this gift prior to the sale." And I'm thinking of that specifically. But there are a lot of wealthy clients that have other assets as well, car collections, the passion assets that we talked about, and we'll have Colleen Boyle from the Fine Art Group that'll spend some time on that.

Katie Collin:

Wonderful.

Kim Ledger:

Or clients who have a variety of real estate, that this can be a real differentiator for advisors, and they don't have to be the expert on it. That's what we're here for.

Katie Collin:

Right. And we're here to help. And I think it's really important for us to help give them some language or cues to listen to when they're having these discussions with their clients to think about, it's not just assets under management in terms of cash or marketable securities. It's make sure that you are checking in with your clients. Does someone mention a vacation home that isn't being used? Perhaps you realize that they don't have any heirs and charitable planning might be exactly what they need to help fulfill goals for themselves and their current immediate family. So it's just a really great way to engage more with your client, build a relationship with your client, and really help them. There's so many individuals, I'm sure you've experienced this as well, who get to a point in their life and they think, wait, I haven't really made a plan for that. And so being in that role of the financial advisor who's really helping and really stewarding someone through their financial planning can really make all of the difference at the end of the day.

Kim Ledger:

Well, and we've talked about before with the, if you're going to make the gift and you can avoid capital gains, it's just a more efficient way to do it.

Katie Collin:

It really is. Right.

Kim Ledger:

Great. Well, thanks so much for joining me today, and I will see you at the next one. We'll have episode two on real estate. So looking forward to it.

Katie Collin:

Same.

Kim Ledger:

Thanks again.

Katie Collin:

Thanks Kim.

Kim Ledger:

Bye-bye.

Katie Collin:

Bye.

Kim Ledger:

Thanks everyone for watching, or if you turned in via podcast, thanks for listening. If you want to learn more about Ren and how we might be able to help with your philanthropic program needs, visit reninc.com or email us at consulting@reninc.com. We'd also love to hear if you have questions or topics about planned giving you want us to talk about. And of course, don't miss the great information we have in our advisors Philanthropic Insights newsletter. Sign up at reninc.com/advisorinsights. Find all the links mentioned in the show in the description. And you'll find expert tips daily on our social channels. Check it out. Until next time, I'm Kim Ledger. Give wisely.