Gift Hub

Passing a real priest off as a secular one - lessons learned the hard way

One of my friends from The Asylum is a real priest, though having taken a vow of poverty, he is always casting about for ways to make ends meet. I was able to borrow him a blue blazer and grey slacks, to disguise him as a Secular Priest, and was able to hook him up with a Family of Wealth for a Values-Planning Retreat, but he starting spouting Greek and Latin, saying prayers, offering to hear confession, or perform an exorcism, and was soon exposed as a pious fraud. "Hey, what is this? A real priest?" I had to give the family their money back and we may still face damages. From here on I am only going to employ Secular Priests with no background in ethics, theology, or any other discipline, other than sales, finance, law, say, or self-promotion. The harm a real priest can do to client's self-esteem cannot easily be rectified.  We need some kind of Secular Priest qualifying exam to make sure any would-be Priest holds his or her beliefs lightly, and is not judgmental. The client should be free to choose his or her Values from a list provided. And the list is not meant to be comprehensive.

Family Philanthropy and Your Journey to Paradise, First Class, no Return

With the help of my esteemed colleagues, Father Brennan, Missy Proctor, and Dr. Amrit Chadwallah, I am developing a Values Exercise for Multi-generational Family Philanthropy for our Private Clients in Wealthbondage4Good, based on Dante's Divine Comedy. What is your Lasting Legacy?  What circle of Hell will you be in on your current plan? Now place your family members. And your Most Trusted Advisor. We will have a Wall Map. Little push pins colored coded to family members. Then we will do the Family Mission statement as to their journey, when properly planned and led by us, from Hell, through Purgatory, to Paradise. To escort the whole family of wealth on a Journey from Hell to Heaven has to be worth a few dollars - computed as a big percentage of the total. I mean they can't take it with them. Philanthropic Travel is a lucrative niche, but this could be a hell of a lot bigger. We may be hiring Tour Guides if this all works out. How well do you know the Way to Heaven? Straight is gate, but we have a bulldozer, and your bags will be carried by Sherpas.

I apologize if I am being indelicate. The prevailing tone for this kind of Wealth and Wisdom work is that of the Undertaker at the Funeral, or the Pallbearers. Or the Ushers passing the basket. Nothing is more serious than Family Values. The photos of the dearly departed. The Guest Book. The overpowering scent of flowers. The heirs waiting for the reading of the Last Will and Testament. With or without a guide, we are all going to take that final ride. Wouldn't you rather be in good company?

Swift's Rhetorical Art, by Martin Price

Each day I read a paragraph from a 1953 classic text on Swift by Martin Price, under whom I studied for several years to no practical effect at that time. I re-read it now to learn how Jack Ketch, the famous hangman, and public moralist, broke or severed (as his loving wife said), the neck of the malefactor, "so sweetly." In those days, they probably had a real priest officiate, but if the budget were cut, Jack could have doubled as a Secular Priest, at no extra charge, taking off the headman's black hood, and leather cape, replacing them with a blue blazer. Or, actually, I guess, the blue blazer part comes first, to set a high moral tone, then the hood and cape, for the real action, then some kind of post-mortem in the blue blazer with closing prayer, and exhortation to the crowd to go in peace and sin no more. They say that condemned nobles would tip Jack a pretty penny to do the job with one stroke, so at least there is a proven business model, even if the moralizing is free.

Metrics for Good - My Confession as a Justified Sinner

"At its core, the metrics discussion is a myth because while everyone talks about it, professes to have seen it and debates its importance, impact metrics remain ephemeral, a force living in some deep wood, visions of which are obscured by branches, brush and bullshit." Jed Emerson  

As one who loves the work of Oscar Wilde (in particular The Decay of Lying and The Importance of Being Earnest), I consider literal truth to be a debasement of the human spirit and a well-crafted lie to be the highest form of human achievement (myth, religion, art). But for sophistry to rise to the level of art is satire, not confession. For a confession to be valid you must a) confess your own sins, not someone else's, unless you happen to have committed the exact same sins you confess for them; b) you have to sincerely intend to reform, and c) the confession has to be made to a valid priest, not leaked out on the internet, presented as an article, or just told to a therapist, or some stranger you meet on the street. Speaking for myself, I don't mind confessing some generic sins against the holy ghost, or garden variety sacrileges, like making a false confession, bearing false witness, or passing off a profitable myth as truth, which I have committed like everyone else to make a buck, but I have no intention of reforming just when the whole Social Impact Investment for Measurable Social Return thing is going Global. So, I will stick to satire.

Mindfulness in the Markets for Good

NY Times on mindfulness.

Mindfulness is a spiritual practice. It has great worth. As such it is for sale in Wealth Bondage. Or, we have alcohol, Ambien, Prozac, gambling, pornography, addiction recovery, leadership classes, self flagellation, mentoring programs, secular priests, family historians, butlers, jailers, bodyguards, taxi dancers, or whatever else you may desire at a price.

Mindfulness is inside and outside our bondage to this world.

Why Charitable Gifts of Non-cash Assets- The Business Case for Investment Advisors

Philanthropy and AUM

Often investment advisors are held back in serving the client's philanthropy by the fear, partly justified, that the gifts to charity, if significant, will come at the expense of assets under management. As discussed in a prior post, however, we are on the cusp of a major historical opportunity to help Boomer business owners in transition from success to significance, and also greatly increase and retain assets under management.

A Case in Point: Todd, A Day Late

Todd (not his real name) came to our wealth transfer firm the day after he sold his business, a C corporation with zero basis, for $100 million. His capital gain was $100 million. Tax due was $20 million. He said, “Help me wipe out my $20 million tax bill.” We helped him some, but the truth is he came to us at least one day too late.

Simplified Solution

Charitable Planning for noncash assets, particularly for closely held business interests and commercial real estate, is one of the most complex intertwined areas of the tax code. Proper planning requires a team with at least a tax attorney, a CPA, a business valuation expert, an investment advisor, and perhaps an insurance professional.

To see the value of proper planning, consider how Todd might have done better. Assume he sold half his firm inside a Donor Advised Fund and half outside. What would be the effects?

• No capital gain on the half sold inside the DAF
• A charitable deduction up to 30% of Adjusted Gross Income, with five year carry forward, subject to whatever limitations may apply under the phase out of itemized deductions. (Thank the Lord, for CPAs.)
• Half sold outside the DAF, with the gain partly offset by the deduction for the part given to the DAF.

Note the effect on AUM.

• $50 million new dollars under management in the DAF
• $50 million (minus whatever residual tax is due) outside the DAF

Yet, an advisor might fear that the $50 million in the DAF will be headed soon to charity, depriving the advisor of asset management trails sufficient to educate a child, buy a vacation home, and retire in comfort. Fear not! In fact, some well-respected philanthropic advisors will caution against a massive outright gift to charity for an endowed program. Instead, the leading edge idea is "personalized philanthropy," with staged payments.

Lawsuits: What We Can Learn

Robertson vs. Princeton

In a famous case, Princeton settled a lawsuit with a donor family, where the family said the school  had drifted from the donor's intent. 

$35 million in A&P stock had gone to Princeton in 1961 to create a supporting org. to fund the Woodrow Wilson School of Public and International Affairs for the education of future diplomats. The fund grew to $900 million and was used for Woodrow Wilson School and other items as well.

The donor was concerned that the school was not educating enough diplomats and wrote a note to that effect. Upon death of donor and spouse, the heirs filed a lawsuit to redirect funds to other schools. Princeton paid $40 mil in legal costs and settled, giving $90 mil back to a foundation.

 

Newcomb and Tulane

 

From 1886 to 1901, Josephine Newcomb gave $3.6 million to create Newcomb College within Tulane for “female education in Louisiana.” After Hurricane Katrina, trustees merged Newcomb into Tulane and absorbed the endowment. The heirs, Parma Howard and Jane Smith, sued. Case has been settled in favor of Tulane.

 

Garth Brooks

 

“A wave of unwelcome publicity has engulfed a nonprofit hospital in Yukon, Okla., hometown of the country music singer Garth Brooks, after a jury last month ordered it to return a $500,000 gift from the star—and pay him another $500,000 in damages.” (Chronicle of Philanthropy, Holly Hall, “Hospital Loses to Garth Brooks in Lawsuit Over $500,000 Donation,” Feb.6., 2012.)

 

Slippage

 

When a donor makes a big gift to a charity in order to make something happen, like a new program, or a chair, or even a new school, there is or should be a gift agreement that specifies the obligations of the parties. But often these are very specific about what the charity gets and leave wiggle room for what the charity is expected to do. The agreements are generally written by the charity and signed in an atmosphere of mutual good will. But over time, for good reasons and bad, the charity may drift from the original intent. Will the agreement be enforceable in court? Does the donor or heirs have standing to sue, since dominion and control was relinquished as a precondition of getting an income tax deduction? Does the State Attorney General have standing to sue, if the donor does not? Will the State Attorney General take the case? Does the office have a stack of such cases pending and limited staff to prosecute them? Most importantly, for the client's professional advisors, how did we get our clients into this mess, where a lawsuit against the donor's most beloved charity is their only recourse?

 

Staged Payments

 

 At the leading edge of gift planning, are what are variously termed "blended gifts," "virtual endowments," and "the three killer apps." All of this simply means that instead of making a huge gift, for an endowed program, and having the charity hold the principal and spend the income ("the spend rate") on the program, the newer idea is for you the advisor to hold the money and dole it out in stages and installments, as the work is performed. Is that not business common sense? Rather than give the charity the whole lump and trust them in perpetuity, we pay them as they go along. This will lead to nuances, like, for example, can a DAF make a binding pledge. (Some will, apparently.) And what pattern of payments is needed to make it possible for the charity to agree. They may not set up a new program for only one annual payment, but might for a pledge of the first three, or first five. On the back end of the payment stream might be a bequest, to fulfill the principal amount. That might come from the client's will, or from highly taxed ordinary income assets (like an IRA), or from life insurance. In the meantime, an "umbrella gift agreement" keeps donor and charity in synch. The money keeps coming if and only if the charity hews to the donor's intentions and performs. For more on this, from the nonprofit's perspective, see Dr. Steven Meyers, Personalized Philanthropy.

 

Todd Again

 

Back to our $100 million dollar business owner who could have transitioned half in a DAF and half in an outright sale. Todd said to me, "God gave me the money and if I don't give some back, he will take it all back." He wanted, let us say, a $50 million dollar Center for Religious Studies at a college. (He had not gone to college, so this was a way of leaving his mark.) 

 

If he gives the $50 million outright it will go into endowment. The school will invest the funds and use the "spend," say, at 4%, to fund the Center's annual expenses. So $2 million is spun off and spent. On that plan, Todd trusts the school. His recourse might be a lawsuit if they fail to perform.

 

Or, he could keep the $50 million in the DAF and spin of the $2 million each year, against a gift agreement that lays out his expectations. If the school negotiates it, and if the DAF provider is willing to do it, and if the tax attorneys all agree, he might pledge the first three years, or five years. He might even give the first 3 to 5 year's payment up front, as a sign of good faith, and give the charity time to pull it all together. But give it all up front? Knowing what you know now, would you do that?

 

Collaboration

 

What drives me personally? Do I live to get investment advsiors paid? No, what motivates me is to see us work together across the sectors to help people like Todd, business owners in transition, do more for others. For this to be possible we need to pool our best efforts across the disciplines. And, yes, if you are an attorney, CPA, investment advisor, or insurance professional there are many good ways to get paid - while doing the right thing for the client, family, and community. We can learn together and we can perform together. That is what motivates me and the courses I teach.

Boomer Business Owners in Transition - an historic Charitable Planning Opportunity

Today, in gift planning we have an historic opportunity - if we can seize it through canny collaboration among professional advisors, national gift funds, single issue charities, and nonprofit gift planners, and the respective associations to which we may belong.

 

Boomer business owners (think of them as The Rotarians), are reaching an age at which they must exit the business, which has been their baby and their identity. As they exit, they are very good prospects for a Donor Advised Fund. (Selling some or all the business in a DAF can save the 20% tax on capital gains.) More importantly, these are civic leaders and boosters who want to do more than take their name off the trucks, and their building, and put it on a gravestone. They want to go from "success to significance," set a good example for their heirs, and as one said to me, "make my last stand." They made their money in town, will die in town, and often want to give locally. They see giving generously, post-exit, as stepping up rather than stepping down or stepping aside. They step up into leadership and set an example for their heirs.

 

Once the business is sold in the DAF, the donor/client can go on to fund any charity, including the itty-bitty grassroots ones who could not possibly accept a business interest, or commercial real estate as a gift. They just don't know how, and there is too much liability.

 

Thinking "big picture" - what will happen and is happening is that local operating business wealth is being channeled to the national gift funds who are gearing up big-time in this market. So are some local community foundations. How this money gets reinvested locally in charities the donor loves, is what interests me, personally.

 

The financial mechanics are complex. So let me tell you point blank who comes out ahead.

1. Advisors increase assets under management as some of the business is sold inside a DAF and some outside.
2. Advisors sell life insurance to replace gifted assets.
3. Tax and legal mavens do consulting and documentation.
4. Valuation firms and business exit strategists do well.
5. National gift funds increase assets under management, and so do alert community foundatioss who can compete in this market.
6. Local nonprofits who cannot accept closely held C-corp interests, commercial real estate, or S-Corps - who find this whole topic daunting, can and should benefit as funds leave the DAF headed back home to the local community where the business owner lives and leads.

Who loses? And how to find your role in making this work

1. Local charities lose if they wait around hoping for a grant from a DAF. You have to be in the game pre-exit, if you hope to be in the game post-exit. Your role now is to identify possible prospects for this and convene advisors.
2. Advisors lose if they wait around to hear about this a year from now, after the donor has exited, and has the money all locked up in a fund the advisor cannot manage. Your role today is to learn more, talk to your clients and prospects, and network with local nonprofits who are in dire need of your expertise.
3. Attorneys lose if they fail to see that, given where the estate tax thresholds are today, the legacy game has changed from saving estate tax and maximizing net to heirs, to creating a successful and thriving life in which the business family does wonderful things for not only themselves, but also for the community. That is the new legacy planning. If you call that "soft," your own head is getting soft. This is among the most technical and multi-dimensional planning there is. Estate planning, business exit planning, retirement planning, investment planning, family dynamics planning, and planning for social impact. The rest of us, those of us who are not JDs, need you in this conversation. We cannot do it without you.  

I am speaking on this topic often to Partnership for Philanthropic Planning Councils, advisor associations, and national networks. For once, making good money and doing the right thing for our business owning families, and their communities, are well-aligned. A leader in all this is Bryan Clontz, CLU, CFP, AEP, CAP. I have been working with him, as well as Tim Belber, JD, and Dr. Steven Meyers, VP of The Center for Personalized Philanthropy at The American Committee for The Weizmann Institution of Science, to evolve the ideas, the teaching, and the practice. Here is a link to videos from Bryan to give you a taste.

Moral Injury - Trauma and Results

When the soldier, on orders, burns the convoy, finds the charred corpses of children, and gets a medal for valor, based on racking up a higher than expected body count, the soul is injured. When we say results are what nonprofits are for, we use the language we share with business and war. And the damage done to the abused souls who become abusers in their turn..... We hangmen hang each other on command. Harlow's monkeys clinging to a wire mother, chew through their own arms. We each need love (not earned, given; not metered but unstinting) to form a self and thrive. Nonprofits (some) are an extension of the family, of brotherhood and sisterhood. The results of fellowship, like the results of a house built from blocks by a child, or the results of a meal cooked by a mother, or of a bedtime story told, or sermon preached to a few souls nodding off in the pews, are nebulous. We only think, we in Wealth Bondage, that it is all about results, measured and managed, because we are the abused, who have become abusers in our turn. "Shark Tank Philanthropy," staged by the Devil for his own delight. Not for results - but for the sheer diabolical fun of watching beings created in God's own image debase themselves and each other. Results are a pretext. Satan's goal is the injured soul. The most injured rise to the top because they are without compunction...... Hush, Tutor, please. The walls have ears. You know Candidia, our Superior and Generous Patron, she who rules us all, thinks the world of you. You have broken more men and women for her in Wealth Bondage than the Marquis de Sade. And they love you for it and return for more. Many you broke, now break others. Your minions have minions. Don't buy it all back now. Break three more this week and you get a coupon for lunch.

The Problem of Evil and its many Benefits, artistically considered

If good, healthy-minded people see what they call "evil" as the exception, an aberration, something to be penalized or cured, a mere stain on their naturally pure soul, as on the fleece of a lamb, and if the evil people see all that the good people do and more - namely that the good are innocents who can be coopted, managed, used, and expended, lambs who can be led, fleeced and butchered, with impunity since lambs don't bite, where will the balance of power lie in markets, management, war, politics - all the things that govern our debased realities? Then there is, say, literature and philosophy - the same balance there, with the advantage to the Paul de Man or the Nietzsche or the Faulkner to whom mendacity, horrors, the perverse, the willfully cruel, are legible and manageable, readily included in the fabric of the text, if only in the knots, and the underside? And what of religion? Can we be sure the Devil had no say in The Book of Job? That his hand was not the one raised over Isaac on the altar? That he had no say in the Flood, or in the second coming when blood and fire cover the earth, in some neurotic's vision of revenge? Or, do we flip these texts and say that, no surely, the Father who takes his son's blood in recompense for an imaginary crime, involving an apple, is a moral exemplar, we just don't understand how, because Goodness so exceeds our dim capacity to appreciate it in all its glory? Yes, the sublime - like Nero fiddling as Rome burns, or Hitler in his bunker as Berlin burns. So Christianity and Islam meet in a shared mutually agreeable apocalypse, following their leaders, texts, and flags. In that is it the hand of God you see? So, I hear my Tutor, muttering in his half-sleep. The damn books, again. For a pillow, German Autumn, and for a mattress The Collected Works of Dostoyevsky, Conrad, and Faulkner. If I don't get him back to Oscar Wilde, soon, he may never emerge from this depression. Of course God is good. The nuns said so. Jesus Christ, why make problems where there are none? Family is good. Giving is good. Religion, literature. It is all good.