Opportunity Recognition: Too Much Of A Good Thing

Opportunity Recognition: Too Much Of A Good Thing

On occasion, a client walks through our door who makes more than they can spend – complaining openly about how much they’re paying in income taxes on money they don’t even need. Sounds crazy, I know, but it happens and we must face the facts and address it nonetheless.

While this “problem” is technically not a problem, for our clients it is their reality – and as advisors, don’t we want our clients to make more than they spend?

By directing surplus cash flow towards philanthropy or a philanthropic tool, we can help solve the plight of too much of a good thing.

Our first job is to analyze the sources of the excess cash flow

Is it coming from earnings, passive investments, a one-time event or from a recurring circumstance? Once we identify and fully understand the source, we can begin to question our clients about their specific concerns.

Are they attached to these assets? Do they want them to remain in the family? Do they foresee anything else in the future that they haven’t disclosed or confided in you about?

And have you even gauged their charitable intent yet?

Now is a good time to open the discussion and disclose the possibility of a charitable solution that will remove some of the surplus cash flow and unnecessary tax burden. Piling up money in an already taxable estate? Not sensible, but certainly not uncommon.

Suggest moving the assets away from the unnecessary taxation they’re exposed to and out of the estate – to be put to better use now or in the future. Then, and only then, can we begin to identify possible options and solutions.

There are a wide range of options available in the charitable spectrum

Depending on the goals, assets, composition of the family and other factors. Charitable Lead Trusts, Charitable Remainder Trusts, Gift Annuities, and Pooled Income Funds all present possible solutions for the problem of excess cash flow.

How we select and deploy those methods for each client and their situation is how we can add further value to the precious client relationship. If you don’t know these things, are you truly serving your client at the highest level?

Having surplus cash flow is what every advisor dreams for their clients

And how we advise those clients to allocate that excess is often vital to their future. Philanthropic planning adds a dimension that provides the client with more options and enables them to make choices for their family that other solutions don’t provide,

As advisors, we are tasked with providing our clients the best solutions for their individual circumstances – and to me that is simply not possible if you’re not offering philanthropic planning.