Parcion Private Wealth works exclusively with business owners and their families, often supporting them through life-changing liquidity events. These events, such as the successful sale of a business, are exciting and emotional times for the owners and their families. Parcion supports these families leading up to, through, and after these events. At each stage, a common goal is to make a greater impact on the causes they care about. Parcion works closely with their clients to create a Philanthropic Plan to support their goals, and in coordination with their tax advisors, pairs their charitable objectives with effective tax-planning strategies.

If you have experienced, or are planning for a wealth event, this article outlines some considerations regarding your newfound opportunity to have a greater philanthropic impact.

FIND YOUR CHARITABLE PURPOSE

For some, defining their charitable purpose is easy – perhaps they want to give to their church, or the school they attended, but others are moved by so many pressing issues that it can be difficult to narrow down their giving focus. With over 1.5 million registered nonprofit organizations in the US, it can be overwhelming to choose where it will be most meaningful to donate.¹ This is so challenging, that many people resort to simply giving to any charity that asks for a gift. In fact, one study found significant disparity between issues that actually concern donors and the issues that they are supporting.²

If you are experiencing a wealth event, you have a special opportunity to think about your legacy and determine where you wish to make a difference. Parcion works closely with families through a deep discovery and interview process, to help them understand their values, what motivates their giving, and where they want to make the greatest impact. One way to start defining your focus is to make a list of every cause or charitable organization you care about. It is alright if this list is long at first. Start by thinking about how your life experiences have impacted your view of the world. Perhaps one of your children had a serious medical crisis and received great care at a children's hospital; or maybe you are disheartened as you regularly pass by a homeless encampment in your community. You have likely made donations to many nonprofit organizations in the past – put each of these charities on your list as well. Your list can include specific organizations (the Red Cross) and general causes (increasing college attendance rates).

Now cross off every issue on your list that you are unwilling to support in ways beyond writing a check. Which causes mean so much to you that you would support them with your time and energy, in addition to your financial resources? For what issues would you ask your friends and family to give; or spend time volunteering (perhaps serving on a board); or take political action to help ensure their success? When you have finished this activity, you should have a much shorter list that will offer insights into your greatest charitable passions.

To further refine your focus, consider volunteering and conducting site visits to charities that address the issues you care about. Talk with nonprofit leaders and other donors to learn from their experiences. As you "go to school" on an issue, you will be able to narrow down specific aspects of an issue that you want to address. For example, you may first decide that you want to tackle homelessness with your philanthropy, but eventually may focus on a specific location (e.g. a specific city); a subset within the homeless population (e.g. women or children); or develop a belief on how to best tackle the issue (e.g. build more beds and shelters, or provide better mental health services). Over time, you will be able to further define specific aspects of the causes you wish to address.

CREATE A PERSONAL GIVING PLAN

Once you have determined your philanthropic purpose, you will want to create a plan for your giving. The Parcion team and their Philanthropic Resource Partners can work with you to develop a customized plan to help you gain greater satisfaction from your giving and increase the desired impact from your donations. Together, you will want to answer some philosophical and logistical questions around your charitable donations, such as the following:

On what timeframe do you wish to make donations? Do you wish to give during your lifetime, or continue to have your wealth flow toward nonprofits long after your death?

Who do you want involved with your giving? Are there family members or trusted friends who you want to join you on your philanthropic journey? Do you want an independent professional to support you with research, outreach, or establishing your systems?

How do you wish to show up? Do you want to give anonymously or publicly? Do you wish to practice "trust based" philanthropy, or do you have specific requirements and metrics for nonprofit organizations? Will you accept unsolicited proposals for funding, or will you only make gifts to nonprofits that you contact first?

How do you wish to help charities beyond providing financial support? Do you wish to volunteer your time; serve as an ambassador by connecting nonprofits with others in your network; or offer your voice and credibility by advocating for an organization?

ESTABLISH A CHARITABLE GIVING ACCOUNT

In addition to defining where and how you will give, you might also be questioning what charitable vehicle is best for you. At a wealth event, many people consider two popular charitable instruments: a Donor Advised Fund (DAF) and a private foundation. There are now over a million DAFs in the US, and the number of private foundations has more than doubled since 2009. Each of these giving tools may allow you to gain tax benefits immediately (when the wealth event occurs), and then make donations for years to come. A powerful pre-liquidity planning strategy for business owners interested in funding a charitable giving account is to donate interest in the company prior to the sale. The fair market value of the business donation is a charitable deduction, and you may avoid capital gains taxes on the gifted business interest upon sale, if set up properly. Each of these charitable vehicles has unique benefits and challenges, so talk with Parcion's team of advisors to determine if either is right for you. A high-level comparison of DAFs vs. foundations is below:

DAFs are typically simpler to operate. Cutting checks to charities is easy, and many of these funds are managed with extremely low fees. However, the cost for this simplicity is that DAFs have greater limitations on how (and where) money is given away. In addition, it can be more difficult to hire staff to support your philanthropy; to make spontaneous gifts such as "raising the paddle" at a fundraising auction; and in rare cases a DAF fund manager may reject your request to support a specific nonprofit organization.

Foundations may offer greater flexibility in the kinds of gifts made, hiring support staff, and compensating family members who work for the foundation. But with this freedom comes a need for greater oversight. For instance, a foundation must establish officers and a board of directors. It also must regularly hold official meetings, capture minutes of these meetings, and publicly disclose details about its grants. Foundations are also typically required to pay out 5% of their assets on an annual basis (as of 2023).

CONCLUSION

If you are experiencing a wealth event, or simply wish to get more out of your giving, consider engaging Parcion Private Wealth for their Philanthropic Planning Process. Parcion has developed a process to help narrow and define your giving purpose, to experience more joy from giving, and to achieve a greater impact on the issues that are important to you.

Footnotes:
1. According to research by nccs.urban.org published on June 18th, 2020.
2. Additional information can be found in the Behavior and Charitable Giving article published by silo.tips on February 10th, 2018.

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