Your Questions, Answered: Community Impact

October 15, 2020

On this week’s episode of Your Questions, Answered Aaron Fulton and Brian Leitner discuss using your money to make an impact, and answer the following question:

“I feel like I’ve been blessed and have accumulated a great deal of wealth. The reality is, I won’t spend it down over my lifetime. What should I think about in how to use my money to make an impact on my community?”

Do you have questions you’d like answered? Email them to QA@marinerwealthadvisors.com, and we’ll provide answers.

Transcript:

Brian Leitner: You have questions. We have answers. Back with another quick clip. Now we had a question that came in, this individual says that they’ve been blessed to accumulate the wealth that they’ve had. They won’t be able to spend out all their money and they’re interested in, making an impact with their wealth. What does that look like to you? What are some of the conversations that you have with clients around this? 

Aaron Fulton: Yeah, that’s a really great question and a fortunate position to be in. It doesn’t come easily. Of course. I’ve had the opportunity to work with a number of people that it kind of reached that introspective position in their life. And they start to think of things a little differently. 

But the first thing that we naturally would want to do is get our arms around what is impact and what does that really mean to each individual person that is unique from each other? For some people, an impact may mean helping their grandchildren gets through college. For other people, it’s helping prepare their children to receive an inheritance that may be larger than they’re used to handling. For other people it’s maybe social issues they want to participate in, helping the environment or even their local church or Alma mater. But with that said, typically we want to start to ask a very open-ended question. And if we took all of the barriers down all of the assumptions away, when we think about making an impact on the world, as we move forward, what would we want that to be? 

And as we start to define that and crystallize that a little bit, we want to start to dig one layer deeper and to ask, why? Why is this important to me? What life experiences do I have or have I seen in the world that make this very meaningful? As to how I would define an impact to me. And that gives us the framework and working with clients and, and for individuals to, to start to build out a very personalized definition of impact just as people do when they think about a definition of success. 

Secondly, is to start to think a little differently about our financial picture. And this may seem a little abstract at first, but when we think about our finances, a lot of us think about it almost inside of our financial statement. So if I am a real estate investor, if I buy another building, I increase my cash flow. I’m in short order able to buy another building in the near future. I see my wealth and I see my cash flow growing. And at this point in time, when we think about making an impact, we almost want to think about our finances a little differently and compartmentalize a couple of concepts. We have money that is available to create lifetime spendable cash flow. We have capital that’s set aside for lifetime capital purchases. And then we start to get our arms around the fact that there is a, a certain amount of money we may have, that is going to be resources for others. We’re not going to spend it during our lifetime. And at some point in time is going to be used by others. And we can start to look at a financial plan. If you wouldn’t imagine, need to suggest that in combination with a personal definition of impact. And it’s at that point in time that we start to create some of the strategy around it. 

And I think the industry likes to jump to a lot of very technical tax planning tools off the bat, but these are a couple of starting points that I think help, help people and clients to really define a more personalized experience around this endeavor. 

Brian: Thank you, Aaron. I know that there’s a process that you take folks through and it’s an exercise where you sort of, walk them through and they jot down what they think that looks like and the impact that they ultimately want to have, which, which is an incredibly powerful potentially even therapeutic. Once you go through that process and what are some of the, the tactics that you might implement, for folks that are looking to make an impact, what might that look like? 

Aaron: Yeah. So a couple of things now, when we look at the technical tools that are available, let’s say for example, we have a client that has a lot of built in capital gains, and we’re again, starting to look at their financial picture a little differently. 

One of the tools that we look for is we look for, for example, a charitable remainder trust and a charitable remainder trust is a type of tool that allows us to instead of pay a capital gain tax upon the sale of a capital appreciated asset is to actually get some tax benefits today, to diversify that position, whether it’s a highly appreciated stock or a piece of real estate, create some cash flow and get a current income tax deduction. And at the end of the end of our lifetime or ours and our spouse’s lifetime, for example, in a joint life scenario, a charity ends up with the remainder of that asset at the end. So that can be one of the tools that’s utilized. 

A second tool that’s a very commonly used and is quite exciting is a donor advised fund, for example, and a donor advised fund is becoming more popular today than it had been in the past, just with some of the changes in the tax rules. But it allows us to make a contribution and it can be with also highly appreciated assets, and get an initial tax benefit upfront and then sprinkled dollars out of that dollar advised fund to an charity over a period of years. And when I think about, the thought process of impact, impact as I’ve seen it, people want to make an impact on their family and their community. 

And those two tools are, are neat in the fact that they can create family resources at the same time of breeding a community benefit, but with a donor advised fund, how that can interplay is a donor advised fund can be  established in a family meeting, for example, could be held each year, whether it’s mom and dad and the children, or the grandpa and grandma along with their grandchildren can sit down and make family decisions and help to train the next generation as to what are we going to give out to the charities this year? 

The other thing a donor advised fund has, it’s a neat feature from the standpoint of impact on both family and community is it allows for a successor. So a parent can have that donor advised fund continue beyond their lifetime and all of those steps of making annual gifts to their community or their causes today can be continued and a resource for their family going forward. 

Brian: So Aaron, that’s helpful. Obviously, there are other ways to contribute to give back. The most simple would be just outright gifts to some of these institutions, as you said, whether it be religious organizations, universities, and things like that, whether that be cash, but obviously you get a larger benefit when you’re donating appreciated security. 

Aaron, greatly appreciate you being here. Appreciate your time and expertise. Thank you. 

Aaron: Thanks for having me, Brian. It’s a pleasure. 

Brian: And if you or anyone else has questions they’d like answers to, please feel free to email us at QA@marinerwealthadvisors.com. Thanks for watching. 

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