Bangor attorney Nat Putnam explains how he works with clients to weave their charitable goals into estate planning.
MaineCF: In your role as a trusts and estates attorney, what sort of conversations do you have with your clients about their charitable giving?
Nat Putnam: I like to raise the issue of charitable giving with every client as part of the initial meeting. I typically ask whether there are any charities the client wants to benefit as part of their estate plan. If there aren’t, that usually is the end of the discussion. If the client identifies specific charities they want to benefit, my job is to help them refine their objectives into a definitive plan.
When the client is charitably inclined but doesn’t know what organizations to support, I will typically frame the discussion around what charities they give to on an annual basis, whether they are a member of a board of directors, or if they volunteer for an organization. These questions begin to help the client focus on what they are passionate about and what difference they would like to make.
MaineCF: Once they have decided that they want to make a gift, what kind of assets do you propose they use?
Putnam: A lot depends on whether it is going to be a lifetime gift or one that takes effect after death. I am a big advocate for funding charitable gifts with tax-deferred accounts, such as IRAs and 401ks, because of the tax efficiency. For example, if the objective is to give $100,000 to a charity and we have a choice of assets, I typically recommend that we fund that gift with an IRA because this prevents the non-charitable beneficiaries of the client’s estate – usually the kids – from having to pay income tax on the distributions from the IRA. In other cases, the gift may involve a particular asset, say a piece of real estate. If someone has attractive timberland that they don’t see passing to their kids, that would obviously be where we would focus and look at the most tax-efficient manner to make the gift.
MaineCF: Can you give us some examples of circumstances when you’ve found it helpful to turn to the Maine Community Foundation as a resource?
Putnam: I work with a lot of families that are interested in setting up family foundations and I’ve set up a number over the years. But there is a lot of complexity and expense in creating a foundation and once it is set up you have to maintain it. You have to understand the complicated tax rules that apply to foundations and be able to identify situations that are going to raise concerns. You also have to file an annual tax return, and you have to do the heavy lifting of deciding what organizations you are going to support each year.
In a lot of cases, families decide they want to create a legacy, but they really don’t want to incur the expense and the work it takes to maintain a foundation. In that case, a donor-advised fund is the perfect solution.
Even though several other organizations administer donor-advised funds, the Maine Community Foundation really is the organization that has its finger on the pulse of what’s going on in Maine. So if a client’s objective is to benefit organizations that are based in Maine and make a difference in Maine, I don’t think there’s another organization that does that better than the Maine Community Foundation.
Nathaniel S. Putnam, Esq., is chair of the Estate Planning and Wealth Transfer Planning Department at Eaton Peabody in Bangor. His practice is focused on estate planning, trust and estate administration, and planning for owners of closely held businesses. He is a member of the Maine, Massachusetts, and District of Columbia bar associations. In 2012, Putnam was elected a fellow of the American College of Trust and Estate Counsel.
