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Waterloo Wellington Fund Raising ExecutivesJune 9th 2015

The Psychology of Money

Presented By

Richard A Daugherty CHS

Agenda

• Types of Givers

• Putting some perspective on Planned Giving

• Helping with the process

• Is Life Insurance a (good) option?

• Other ideas

• Questions

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

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.’

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

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

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

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

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

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

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

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

Using Life Insurance for Planned Giving

The Process…

• Application (Health and Lifestyle Questions)

• Acceptance, Rating or Decline

• Naming a Beneficiary

• Assignment of the Policy

Anatomy of a Life Insurance Policy

• Premium

• Dividend

• Cash Value

• Beneficiary

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

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

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

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

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

Tax Implications and Application

Two Choices

•Tax receipt for insurance amount received on death*

•Tax receipt annually for premium paid*

*Speak with your accountant

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

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

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

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

Questions?

Thank you!

For any more information, please contact us at

Ogilvie Daugherty Financial Services.

The information contained in this presentation has been provided by Ogilvie Daugherty Financial Services (ODFS) and has been prepared for information purposes only.

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