Psychology of Money and charity

1. S
Waterloo Wellington Fund Raising Executives
June 9th 2015
The Psychology of Money
Presented By
Richard A Daugherty CHS

2. Agenda
• Types of Givers
• Putting some perspective on Planned Giving
• Helping with the process
• Is Life Insurance a (good) option?
• Other ideas
• Questions

3. Types of
Givers
• Religious Giver
• Members of a local church who channel nearly
all of their givings to religious institutions
• Generational Giver
• Giving is a family tradition
• Grateful Giver
• Re-payers often give to medical charities and
educational institutions who have helped them in
the past
• Moral Giver
• Altruists give because it makes them feel good
• Social Giver
• Wants to make the world a better place and have
a good time doing it
• Investor
• Wants to take advantage of tax and estate benefits
and work for non-profit organizations who
understand their concerns
• Community – Minded Giver
• Typical local business owners who serve on the
boards and committees of non-profit
organizations

4. The Psychology of Giving
‘How do I determine how much I can give? I’m worried about
having enough for my retirement and my own savings. I’d like
to give more but at times like these, I have to be careful with
my money.’

5. What Advisors See
S Upcoming Intergenerational Transfer of approximately $67 Billion
S Fact finders very vague about goals or desires for Planned Giving.
S Most Advisor’s are not educated in Planned Giving so they cannot give
direction and advice to clients
S Clients do not know or understand enhanced methods for Planned Giving
S Advisors see Planned Giving as an Estate Planning issue and most work in
the accumulation phase of their client’s plan

6. What Clients See
S Advisors do not usually bring up the idea of Planned Giving
S Clients do not want to re-do their wills (or procrastinate)
S Solutions need to be simple to understand and implement
S Planned Giving is a lifetime commitment so needs to be positioned as such
(example: Life Insurance as an asset)
S One more expense to add to their budget

7. Giving from Income
Donor Concerns:
▪Concerned about adequate monthly cashflow
▪Not able to or willing to budget for extra commitment
▪“Already donating as much as they can”
▪Not seen as sustainable in the long term
▪Never considered making it part of the their budget

8. Giving from Assets
Donor Concerns:
▪Taking away part of their estate that would otherwise go to family
▪Long term commitment of Planned Giving Program
▪Other needs for long term funds (medical issues)
▪Need to review program and reasons ongoing and often
▪Lack of understanding regarding tax benefits

9. The Advisor’s Role
• Financial and Estate Planning with donors
• Assist the charity with information for donors
• Help to educate donors
• Provide workshops and seminars
• Work with other professionals

10. Education Workshops
We have developed workshops to help Charities:
▪Educate donors with regards to Planned Giving
▪Provide perspective with regards to making Planned Giving
part of a financial and/or an estate plan
▪Provide specific information on the use of financial products
and how they can be used for Planned Giving

11. Workshops (con’t)
▪ Provide a forum to ask questions and generally discuss some
Planned Giving models
▪ Demonstrate the simplicity of setting up a Planned Giving
program
▪ Provide a resource person for both the donors and the
Charity for ongoing education and training
▪ Present ideas that appeal to all types of donors

12. Using Life
Insurance
• Final Expenses
• Debt Elimination
• Income Replacement
• Buy/Sell Funding
• Share Purchase Funding
• Intergenerational Transfer
• Insured Annuity
• Collateral Term Insurance
• Insured Retirement Plan
• Key-Person Protection
• Executive Top-Up
• Succession Funding
• Mortgage Insurance
• Creditor Insurance
• Planned Giving

13. Using Life Insurance for Planned Giving
The Process…
• Application (Health and Lifestyle Questions)
• Acceptance, Rating or Decline
• Naming a Beneficiary
• Assignment of the Policy

14. Anatomy of a
Life Insurance
Policy
• Premium
• Dividend
• Cash Value
• Beneficiary

15. The key is…….
Naming beneficiaries is very Important because:
✓Funds flow directly to people or charities named and therefore bypasses the
will
✓Saves estate on probate fees, estate taxes, legal and accounting fees
✓Funds flow to named beneficiaries within approximately 30 days
✓Several beneficiaries can be named as percentages or amounts
✓Can be changed any time
✓Confidential

16. Different Types of Policies
Term
• Low initial premium
• Level death benefit
• No cash value
• Expires at age 85 or earlier
Whole Life
• Higher premium, but guaranteed
for life
• Potentially rising death benefit
• Accumulated cash value and
dividends
• Lifetime coverage
• Option to pay for limited period

17. A Tale of Two (Term) Policies
Term 10 - $50,000 policy
Initial Annual Premium - $210
Year 11 Renewal - $710
Year 21 Renewal - $1,642
Year 31 Renewal - $4,631
Year 41 Renewal - $13,152
Term 10 - $50,000 policy
Initial Annual Premium - $118
Year 11 Renewal - $221
Year 21 Renewal - $374
Year 31 Renewal - $783
Year 41 Renewal – $2,092

18. Case Study
• John and Mary
• Both age 40
• Would like to donate to their
favourite charity
• Term 10 – $50,000 policy*
Initial Annual Premium - $118
Year 11 Renewal - $221
Year 21 Renewal - $374
Year 31 Renewal - $783
Year 41 Renewal – $2,092
*Contract expires age 85

19. Case Study
• Whole Life - $50,000 Policy
Guaranteed Annual Premium – $934.*
* $1,415 for 20 - pay
In Year Twenty…
Projected Cash Value = $12,643
Projected Dividend = $556
Projected Death Benefit = $71,086
In Year Thirty…
Projected Cash Value = $45,645
Projected Dividend = $1,375
Projected Death Benefit = $112,687

20. Tax Implications and Application
Two Choices
•Tax receipt for insurance amount received on death*
•Tax receipt annually for premium paid*
*Speak with your accountant

21. Other Options?
Other Considerations:
➢Donor is not insurable
➢Donor has an existing life insurance policy
➢Donor is not in favour of life insurance
➢Donor wants to consider other options

22. Guaranteed Investment Certificate (GIC)
vs Guaranteed Investment Account (GIA)
S GIC and GIA is the same investment product
S Principle is guaranteed
S Set rate of return for period invested
S Renews at end of term if desired
S GIC from bank or credit union or GIA from insurance co
S GIA has named beneficiary and pays pension income

23. Leveraged Giving
S Client borrows $50,000 from bank (collateral loan)
S $50,000 is invested in conservative mutual funds or GIA
S Annual interest of $1,625 is paid by client and written off as “interest paid
on money borrowed to invest” from their income tax
S Charity is named as beneficiary of the fund
S On death of client, loan of $50,000 is repaid from investment and
S Charity issues tax receipt to estate for growth on investment

24. In Summary
My Advice is…..
•Provide education for your donors
•Work with advisors who understand and are positive about Planned
Giving
•Remember that donors have more questions and need more information
than is usually being provided and that every donor’s situation is different

25. Questions?

26. Thank you!
For any more information, please contact us at
Ogilvie Daugherty Financial Services.

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