Ed Rodbro, CAP®, is the senior advisor in charge of charitable estate planning at the American Heart Association. He helps wealth advisors, estate planning attorneys, and other financial professionals develop charitable giving solutions for their clients. Ed spoke with Hannah Moore, CFP®, about how philanthropy can help you manage your clients’ tax liabilities, fulfil their values, and engage millennial clients on issues that matter to them.

Why advisors should learn philanthropic strategy

Just like most financial planners, Ed and his fellow philanthropy advisors help clients align their money with their values.

Specifically, though, Ed helps donors, tax professionals, and financial advisors plan non-cash gifts to the American Heart Association (AHA). These include gifts of stock, real estate, and IRA distributions, which are uncommon ways of giving that have interesting benefits.

Ed says, “When my colleagues need help with things like gifts of highly appreciated assets, they pull me into the conversation. I also talk to them about charitable estate planning and situations when they don't want to give up control, or they can't give up control of those assets while they're still using them.” He guides his contributors to set up testamentary dispositions, which are assets that are donated upon their death, and other estate plans that let them include charitable gifts in their final wishes.

Why should you be interested in how Ed’s job works? Because it can help your clients save significant money at tax time, implement their values in their financial plan, and leave a meaningful legacy. As we discuss in our interview, this is a particularly strong driver for millennial clients.

Changing tax laws and big gains in the stock market

Two things are shaking up the world of philanthropy right now: big gains in the stock market and upcoming changes to estate tax structure. High net worth families are concerned about owing more than they expected to the IRS and Ed’s expertise is more sought-after than ever.

One thing Ed encourages his clients to consider is making a charitable gift of their highly appreciated stocks. When they gift stock, the charity receives 100% of the current value of the stock and the donor receives a charitable income tax deduction for the full current value of that stock. Then they wipe out any potential capital gains tax in the process. “It’s a really simple win-win for everybody,” as Ed puts it.

Ed and his team also help clients donate stocks and other non-cash assets through donor advised funds (DAFs), charitable trusts, charitable gift annuities, and other charitable instruments, which all help wipe out capital gains taxes as well as reduce the overall income tax paid.

When it comes to the changes to estate taxes, Ed says that philanthropy is also equipped to help soften this blow. The push is on for defined tax-favored plans, and that will get more money to families like his clients and less to the IRS.

Unexpected opportunities for gifting real estate

Another great opportunity that Ed and his team are seeing right now is that real estate markets are at all time highs, and everyone's concerned about the next reset. They’re wondering, “When is our price going to fall?” So a strategic move right now is to consider gifts of real estate.

Ed recently helped a donor gift her home to the AHA through a life estate. “That way,” he says, “she can stay in that home until she needs to move on or until her death and she also gets a very, very large charitable income tax deduction. If she can't use the entire deduction in one year, it has a five-year carry forward provision.”

There are also interesting opportunities for landlords who have exhausted their depreciation credits on a rented property, or for people who own a vacation home or second home that they are no longer using. They can either donate the property outright or convert it to an income stream through a charitable trust or charitable gift annuity.

The American Heart Association has a unique program that makes it effortless to donate a real property. They have a “turnkey operation” for real estate that allows for a ton of flexibility. Usually, real estate gifts are very unpopular with charities but Ed says the AHA has got this figured out and they’re really excited about these opportunities.

Engaging millennials on issues that matter

Another trend that Ed is seeing? Growth in planned gift commitments from living, breathing clients — especially millennials. He mentions a recent study, which looked at 20,000 millennials who had completed their estate planning documents. The researchers found that 78% had completed their plans in 2020 and said that the pandemic made it feel urgent to do so.

Ed says the pandemic caused a huge upswing in people searching for information on estate planning and millennials took their search online.

In engaging millennials in philanthropy, Ed tries to connect with their lifestyle and values. He shares resources with them like FreeWill.com, where they can create and print a simple will for free, and Global Giving, where they can research charitable issues and agencies where they want to make an impact. He uses a site called CharityNavigator to stay on top of the next gen’s interests and values. Some of the most popular charities right now are the ASPCA, St. Jude’s Children’s Research Hospital, Planned Parenthood, and Doctors without Borders.

Ed also urges financial planners to bring millennial children and grandchildren into the conversation about their family’s giving traditions and family foundations. 

“I think it's helpful to look at the family in a broad sense. We can bring in the millennials to help us understand the next generation’s questions and concerns.” Advisors can play an important role in helping young donors understand their family’s philanthropic values, as well as the tools that are out there to help them realize their visions.

Where to learn more

Ed admits that he and his colleague are in really enviable positions. “We're not really selling anything other than solutions to the concerns that worry our clients more and more as they get older.”

When it comes to reducing their tax burden, leaving as much as possible behind for their families, and leaving a legacy that matters, philanthropy offers a huge variety of solutions for any client’s situation.

If you’d like to learn more about how to get the most out of charitable giving in your client’s financial plans, check out the FPA’s continuing education series in partnership with the AHA, Philanthropic Solutions in Financial Planning.

The course is divided in six parts, with six hours of continuing education credits on topics like how to enjoy tax benefits today with deferred gifts, annuities, and retained life estates, as well as navigating instruments like donor advised funds and charitable remainder trusts.

“It’s a good place to start gaining some understanding about philanthropy and how to engage clients in those conversations."

What You’ll Learn:

  • How philanthropic strategy can help clients have a bigger impact with their money
  • Changing laws and market conditions that require charitable expertise
  • Surprising opportunities for gifting real estate
  • How to engage millennial clients through philanthropic advice
  • How the FPA is partnering with AHA to get you up to speed on charitable giving

In this episode of YAFPNW, Ed Rodbro, CAP®, and Hannah Moore, CFP®, talked about:

Interested in following Ed? Follow him on LinkedIn!