Transcript:

Ben Smith:

Welcome everyone to Retirement Success in Maine Podcast. My name is Ben Smith. I'm joined by my co-host Curtis Worcester, the Sugarloaf to my Sunday River. How are you doing today, Curtis?

Curtis Worcester:

I'm doing well, Ben. I'm doing well. That's appropriate because it's all of three degrees outside today, I think.

Ben Smith:

Yeah, it feels... I was just sharing with Curtis, I was waiting for my son to get off the bus for the last 15 minutes and I don't know that my face is going to have any expression over this podcast, because I'm so cold, but we're Mainers, we fight through all the conditions, whether it being cold or hot. So it's just what we do. It's in our nature.

Curtis Worcester:

That's right.

Ben Smith:

Well, we want to talk about another topic today and again, we've danced around nonprofits as a theme in our show over the course of our history here, but one thing that we've really uncovered as a theme in our show has been that there's many things that bring our lives fulfillment. One thing we consider as we discuss our own mortality is our legacy, right? That's something that I think that comes up quite a bit. What have we changed or what have we made better? And sometimes our work is our legacy. Sometimes we do volunteer work.

Ben Smith:

Sometimes it's family bonds and memories. Another way to build legacy though, is to use our savings during or after our lives to give to a charity that can impact others' lives. Perhaps I'm really passionate about helping people with developmental challenges integrated into the community and live full [inaudible 00:01:57] lives. Maybe I want to be able to impact the lives of dogs and cats that don't have homes or maybe there's a population out there like we had Mary Taylor on from Literacy Volunteers of Bangor, maybe there's a population out there that reads at less than a fifth grade reading level and they can't get better jobs or take their prescriptions correctly or live more fully because of their education level and they need tutoring and help.

Ben Smith:

There's countless of worthy nonprofits and charities out the there. So what should we know about finding which charity is the best match for our own personal values and our dollars? When should I give to charity? That question comes up with a lot of our clients, right? Is I don't want to give it away too soon because what if I need that money? So when should I give to charity? How and how much should we give to them? So those are a lot of the questions that we've gotten over the years. We said, "Hey, this is a topic I think we got to dig into."

Curtis Worcester:

Yeah. And you hit it there, Ben, those are all great questions. And our next guest who I think is going to help us answer those questions is the vice president and charitable planning consultant for Fidelity Charitable, which is an independent public charity that helped donor support more than 328,000 nonprofit organizations with $51 billion in grants.

Ben Smith:

That's billion with a B, right?

Curtis Worcester:

Yeah, with a B.

Ben Smith:

That's a big number.

Curtis Worcester:

So the mission of Fidelity Charitable is to grow the American tradition of philanthropy by providing programs that make charitable giving accessible, simple and effective. Our guests assumed his current role in 2010. In this role, he is a premier resource on charitable planning for advisors and their clients in the northeast area. He educates advisors on current charitable planning trends and strategies along with leveraging the benefits of Fidelity Charitable's donor advised fund program to help philanthropic clients give more to the charities they support.

Curtis Worcester:

Prior to joining Fidelity Charitable in 2010, Mr. Garbutt held various sales roles at leading organizations, such as Deutsche Bank, Fidelity Investments and MFS Investment Management. So at this time, I would love to welcome Glenn Garbutt to the Retirement Success in Maine Podcast. Glenn, thank you so much for coming on our show today.

Glenn Garbutt:

Oh, it's my pleasure, guys. Great to be here. I've been looking forward to this.

Ben Smith:

You have? Well, you are our first recorded guest here in 2022. So we said, "Hey, what a great way to kick off 2022 with a recording," but also, Hey, it starts getting into tax season." I know year end gifting is a big deal. So I know that's something where people maybe just went through and said, "Hey, maybe there's some ways I could make this better here in the end of 2022."

Ben Smith:

So I think there's some things that we're going to be able to learn from you today, Glenn, but we always like to get into a little bit of your own history and why you are in the role you are and how that gives you purpose. I'd love to get a little bit of your background of where you're from and your childhood experience.

Glenn Garbutt:

Sure. So I'm joining you from Philadelphia, which I live in the suburbs of Philadelphia. I was born and raised here. Throughout my work history though, I've spent quite a bit of time in New England. So several of the companies that I've worked for have been Boston based, and this is the second region I've covered, which is New England based. So that gives me the opportunity to visit rather frequently.

Curtis Worcester:

I want to rotate a little bit into what you're doing in your professional life, Glenn. So could you just give our listeners a little snippet of what you do and then maybe what do you love about it?

Glenn Garbutt:

Yeah. So the great thing about what I do and we just got through Giving Season, so we call it Giving Season, really the last three months of the year is when we take in the majority of the dollars to our charity. But let's back up. I work for Fidelity Charitable, and we are a donor advised fund. So Fidelity Charitable is the largest donor advised fund sponsoring organization in the country. In fact, we're the largest charity in the country based on contributions and grants out the door, we've been around since 1991.

Glenn Garbutt:

And in that time we've granted out over $55 billion. Last year, 2021, we granted out over $9 billion. The final numbers are not in yet, but we've granted out over $9 billion and that's something we really pride ourselves on is grants out the door. So as you mentioned, I've been with Fidelity Charitable since 2010, really we've grown like weed in that time. The numbers were much smaller back when I started in 2010 and donor advised funds in general, not just Fidelity Charitable, are really just exploding in popularity. So what I love about it is we're making it easier for people to reach their philanthropic goals to give money to charity. And you read our mission statement, that's what we're all about.

Curtis Worcester:

I like that.

Ben Smith:

Nice. Well, I know, Glenn, we're going to dig into that quite a bit. We want to canvas the whole charitable landscape here with you today, but I want to ask a connection we always have to ask all of our guests, not the last one we always ask, but it's always the one we always have to ask our friend is, do you have any connections to Maine?

Glenn Garbutt:

First of all, I will say this, I love Maine and I've been to Maine, I don't know, maybe 15 times in my life and usually it's for business, a few pleasure trips here and there. I love to fish. I like to fish on foot. When I lived outside of Boston for a few years, I did a lot of fishing on the New England coast and don't ask me what times of year they are, I think it's like the middle of summer, the stripers love the cold water.

Glenn Garbutt:

So I spend many weekends in Maine doing some fishing up there, but I just love, Maine is one of those states it's so rugged. And I just appreciate some of the rugged terrain in this country, topography, places like Maine. If you dropped me off blindfolded in the middle of Maine, it's one of those states I'd know where I was the second I took my blindfold off. It's just super identifiable, whether it be the coastline or the beautiful middle of the state.

Ben Smith:

Well, and I think that's the fun part about Maine is we just have so many distinct areas. Is we have the small city, we got some really nice robust towns and downtowns going on, but we have mountains and shores and farmlands and have a really nice mix of altogether. And of course, it's really geographically diverse, but also have a vast distance to it too. So I love that. We hear that a lot from an outdoorsman perspective is it's just a really great playground there.

Glenn Garbutt:

It really is. And you should change the name of the podcast to Retirement in Summers in Maine, because the older I get, the less I like dealing with cold. You guys were talking about how it's three degrees up there today, I don't know if I could take 10 minutes of that.

Ben Smith:

Well, I will say it was zero, I think, when we woke up.

Curtis Worcester:

It was.

Ben Smith:

And this is only January, right? So it'll get a little bit colder. We can bet that. But I will say it's something where I think by the time March hits and April hits, you're ready for some warm weather, that is for sure.

Glenn Garbutt:

There is something about it builds character.

Ben Smith:

Right?

Glenn Garbutt:

And if you look at the people, I mean, they're tough, they're perseverance. They have character. And I think part of that is enduring the tougher months.

Ben Smith:

We do have the leg up on people where the whole like, I walked to school both ways uphill and two feet of snow type thing, is I think we just have to say we're from Maine and people go, "Oh, okay. Yeah, you're pretty tough. Yeah, I get you."

Curtis Worcester:

There you go. Glenn, I want to take some time now and rotate and actually dive into this conversation of charitable giving. So just generally speaking, we want to build a foundation for our listeners. So why do people give charitably and how much do people give to charities annually? I know you just gave us some 2021 numbers there, but how has that changed over time? I know you've been at Fidelity Charitable since 2010, so if you could just talk to how that's progressed in your time there.

Glenn Garbutt:

That's a great place to start. As you mentioned, we have over 300,000 donors or somewhere abouts and they give for different reasons and they're in different points of their lives. And I think that also impacts what people are thinking about, but by and large, they want to make the world a better place. And if you look at any, I do a lot of reading, of course, on philanthropy, but if you read any study done on let's say, high net worth or ultra high net worth individuals, well over 90% of them give to charity.

Glenn Garbutt:

Now, of course, it's a matter of degrees, some support just one charity, but they're all giving. Within that 93-95, 96% of high net worth individuals that are giving to charity, some of them are doing extraordinary things, but ultimately, they either want to give back or they're considering their legacy. They want to help the institutions that have helped them get where they are or they want to see them function properly or they have a love for a certain cause, it could be a disease or it could be the climate, or it could be animals.

Glenn Garbutt:

There are all sorts of different reasons why people give, but what I think a lot of people don't realize is when they think of the overall philanthropic picture in the country, if you ask the average individual, I think they would say that, "Oh, it's corporate foundations and what have you, that are doing most of the giving." And the reality is it is individuals that are driving philanthropy in the United States and it has been that way well over [inaudible 00:12:01] of the annual giving in the United States is done by individuals.

Ben Smith:

Wow. And so what are you seeing Glenn, from an annual net? So I know, again, from the clients that we work with, they always want to know a reference of, "Hey, am I giving a lot? Am I giving a little?" So what are you seeing as an annual amount that people generally give to charities? What's a range that are kind of, I don't want to use the word normal, but what's the range that you generally would see in any given year?

Glenn Garbutt:

These are tough things to pin down, okay? So I will tell you that I deal with individuals of all sizes. We don't have a minimum on our donor advised fund, so someone could start a donor advised fund with a few hundred dollars, but we also deal with people that give hundreds of millions of dollars. We have tech moguls that give us three, $400 million, they open up a donor advised fund and make a contribution maybe of stock in their company, but when I'm dealing with a donor or I'm dealing with the intermediary to a donor, and that's mostly what I do, I'm called a charitable planning consultant, that's my role.

Glenn Garbutt:

And I'm dealing with intermediaries, to state planning professionals, CPAs, wealth managers, trust and estate attorneys, and talking to them about how a donor advised fund might be a solution. So I try not to get jaded, whether... I think $5,000 to charity is significant and it's irrevocable. So when you give the money to charity, of course, you get your tax deduction, you can't get it back. So I would say for anyone, they want to think about their comfort level with giving away whatever dollar amount they're thinking about, is it a dollar amount that they'll be comfortable giving away and not getting back and for different people, that's a different number.

Ben Smith:

So Glenn, obviously your experience at Fidelity Charitable since 2010, so you're 11 years, at least in and counting. So over your tenure there, are you seeing that more people are giving more over time? Are you seeing that this is a growing space from donating money or making charitable donations to organizations, or are you seeing this level off? We've had a pandemic, we've had coming out of a financial crisis at a 2010 and a lot of people were very impacted by that. So how have you seen over your tenure, this kind of trend?

Glenn Garbutt:

Unfortunately I can't share graphics with you here today, but if you look at overall philanthropy, it continues to tick up as if you're looking at a chart of the S&P 500 or something, $1,000 invested in the S&P in 1950 is worth X today, the chart of individual philanthropy in the United States looks very similar to that. So I would say, yes, people are giving more, there are events in the world when you see the pandemic that we've seen, it does tend to increase giving. It does encourage people to give back when we see major disasters in the world, it does tend to have charitable giving spike up.

Glenn Garbutt:

I do wonder, is that the same people giving more or is it the base of givers that's growing? And I think it's just that, I think it's the base is giving more. We're seeing millennials are extremely generous. Despite what people might think about millennials, they do give to charity. They're giving in different ways, but it's a philanthropic generation, the next generation that's coming up. So I think overall philanthropy in this country is in a very healthy place. In the donor advised fund space that I am in, it just so happens that we're one of those areas that have really captured people's attention.

Glenn Garbutt:

They find it an extremely easy way to give and not just to give, a lot of times the driver to a donor advised fund like ours, the driver is what they're giving, because if I want to give to the local soup kitchen, my appreciated shares of Google, they're not equipped to take those appreciated shares of Google, but it's much better for me, the donor, to give by Google instead of writing a check. So they might use a donor advised fund like ours to be the conduit to get that money to the soup kitchen. So that's a driver too.

Ben Smith:

And Glenn, I know we're going to get into donor advised funds quite a bit later, so we'll talk a little bit about that in a minute, but I want to ask about, from the other side here. Is that look, there's a lot of charities and nonprofits that need money annually to operate and thrive, right? Is there's always this, they're trying to grow, they're trying to help more, they're trying to do more with every dollar that they're getting in.

Ben Smith:

So if I'm a donor and I'm looking at all these organizations out there that are asking, we all get those asks in the mail of, "Hey, can you just give us $5? Can you give us whatever gift?" And we all have limited budgets or maybe budgets of what we want to do in a given year, so how can someone identify which causes are important to them and then be able to know what impact their donation is going to have? How would somebody go through a process like that?

Glenn Garbutt:

So it's the process of determining what organizations are important to you, right? So is it my church or my synagogue or my alma mater that I want to support in a yearly basis? Do I want to give to every charity that knocks on my door $50 or would I rather give that one institution that I really deeply care about $500? And there's no right answer. Some people feel better about sprinkling it around and some people feel better about giving more significantly to fewer organizations. So that's the type of question that I think people need to ask themselves.

Glenn Garbutt:

If I had an unlimited budget, what are the five institutions, let's start there, that I really want to make sure are healthy and thrive? And maybe start there and say, "Do I need it to be eight? Would I rather have it be two?" And then it comes down to what I said earlier, which is, do I like the idea of supporting many organizations? People think that's not a big deal when you check that box, I'm going to give $25 to this one charity, but that's how they build a base. And that's why they send those postcards out.

Glenn Garbutt:

They want to build a base of donors that they can rely on, on a monthly or an annual basis and that contributes to the overall health of that organization. So don't think your $20 is not significant to that charity, but when it comes to the individual donor, at that level, it's what organizations do you most deeply care about? You ask about tools. So there are websites out there that could really help, ours is actually, this is not a commercial for our website, but it's a terrific place to visit when you're considering, should we make a family mission statement? What are our values? We have all kinds of tools around those things.

Glenn Garbutt:

But then there are other sites that can help you dig into a specific charity. You could visit Charity Navigator, charitynavigator.org, guidestar.org, and do some digging into charitable causes. I typed in reforestation and 1,000 charities popped up. There are tools out there for people. And then you can really dig into, a lot of them make their 990 available, their tax return available. So you can actually dig into how they're spending their contribution dollars.

Ben Smith:

Glenn, I'll add to that too, because I think that I've been on several boards in my career as well. And one thing that I always thought is that donors really, maybe they don't know what power they really have and they assume that the gift that they're giving, whether it be $25 or maybe there's something that's bigger, is they really underestimate their ability to just call up the organization and have a conversation about their donor dollars. And it just feels like they go, "Well, I don't want to bother anybody," which, by the way, we talk about that as a main trait quite a bit is, "We don't want to bother you. We'll just assume they're too busy and we'll just give them what we feel we can give."

Ben Smith:

But I think to your point about alignment of values to the organization, I think it's really important to go, "Hey, if I give you $25, what would you use that on? Where would that go? How would you spend that? What's the next priority for you guys that you're building towards?" I know we talked to Mary Taylor and one of the things she was saying is they've done a really great job of saying, "Hey, if you give $140, that's the cost of them to support one new person that needs help learning to read in one year."

Ben Smith:

It costs them $140 to do just one tutor to one student match. So if you're going to do $25, well, that's going to support about maybe two months of that activity, maybe that's something you want to fund. But even getting higher and higher dollar amounts is I think you have more and more ability to call them up and say, "Hey, if I gave you $100, if I gave you X dollars, what would you use it for and how would you use it?"

Ben Smith:

And then, by the way, you can call them up at the end of the year or the next giving cycle and say, "Hey, I gave you X dollars, how did you use it? How did it turn out? Did you grow? Did you meet all those things we talked about?" And seeing the feedback cycle, which makes you feel good as a donor, which I think as we're alive, we're looking for is, "I gave you the money, did it actually help? Because I want to see things get better." I think that's a really important point in all this is we're doing this because we want to make it better. I know I went off on a [inaudible 00:22:03] there, but I think that's an important point I wanted to make there too.

Glenn Garbutt:

It's a great point, Ben. You're really touching on something, which is a bigger conversation in philanthropy right now, which is around impact. People want to know that their dollars are being essentially impactful in the community or at the charity that they're giving to. And I think it does start with having that relationship with the charity. I totally recommend, as you mentioned, reaching out to the charities that you care about before you make that gift and ask them that question, whether it's $100 or $100,000, "How would you put this to use?" And they're anxious to have those conversations with their donors. They want to have that relationship and they are transparent. They will tell you, "This is what we're really working on for 2022."

Ben Smith:

And by the way, Glenn, if they're not willing to have that conversation with you, that says something too, right?

Glenn Garbutt:

I think it would be rare, but yes it would.

Ben Smith:

Yep.

Curtis Worcester:

So that leads into my next question and we touched it there. So in this scenario, say we've identified a charity that say we're interested in, how can I really get to know that charity right before I decide to donate? So how can I research the charity? I know you mentioned call them up, talk to them, ask them what they would do with your donation, but how can I make sure they are tax exempt 501c3? How can I tell how they're doing financially? How do I know if they're being transparent and accountable to donors. So is there a research process there that maybe extends a little bit past just reaching out to the charity itself that you could elaborate on?

Ben Smith:

And Glenn, I'll add to it. I almost think back to the Seinfeld episode of Costanza where he's got the human fund. Is, "Give to me, to my human fund because we want to support the humans." So we want to make sure we're not being defrauded here at any point, right?

Glenn Garbutt:

It's on Netflix now, by the way. I'm catching my share of those episodes now and it's amazing. But I touched on two of the tools that I think are very helpful for the situation we described. GuideStar and Charity Navigator are two websites that I visit frequently. And you can delve into, if you really want to dig into it, a lot of times, as I mentioned, they put their 990, their tax return on there. But the other thing we mentioned is having a relationship with the charity and getting to know the people and trusting the people.

Glenn Garbutt:

And they'll also have websites in many cases, obviously the bigger the charity, the more likely they do have a website and they'll get into the statistics of how they spent money, what they accomplished, what they're looking to accomplish in the future. So I would say those are the three main things that I would look to do is check. Your bigger resources, GuideStar, Charity Navigator. Check for the charities website and then build a relationship there at the charity.

Glenn Garbutt:

In many cases, I'm sorry, just to sidetrack for a second. So in many cases, people are supporting the local animal shelter and they don't have the infrastructure for a website. So it is getting down to knowing the people and volunteering at places. Obviously it's going to help you to feel really good about that cause you're supporting if you see what they're doing on the ground, but it'll also help you build a relationship with that organization and get to know the people when you do that.

Glenn Garbutt:

So there are charities of all sizes, you could support everyone from your alma mater that's going to have a big planned giving [inaudible 00:25:38] area. If you look at most of your colleges and universities, there's 10 to 50 people in planned giving, but if you look at the local soup kitchen or the local animal shelter, sometimes it's just one person that's doing it all. They created the charity, they're running the charity, they're the face person when you call that charity. So charities come in all shapes and sizes.

Ben Smith:

It's a really big point, Glenn. And I want to ask a question and this has just come up from a client perspective. And again, sometimes it's this idea of, okay, it's not just maybe here's a one time donation, maybe this is something that eventually I want to give a lot of money to, right? I want to see a big impact. And again, a lot of this is we want to make sure the charity's ability to bring about long lasting. So one thing is that you want your gift to continue to do it over time, but also meaningful change, right?

Ben Smith:

So I don't want to just give something just like, "Okay, well, here's $3 [inaudible 00:26:37] in 210 is what's happening. It's like, "Okay. Yes, I gave money, but it really is not going to provide anything meaningful over time." But also is looking at making sure that we're creating that change and it perpetually does. One example we had was we had a client who was really passionate about his college experience and he was really not succeeding at college. And he said, if it really wasn't for certain professors that picked him up when he was struggling, he wouldn't have completed his degree.

Ben Smith:

And if he didn't complete the degree, he wouldn't have met his spouse. And if he hadn't met his spouse, he wouldn't have had his kids. And all the things that brought him joy in life, he could stem to finding success in college. So he thought that was his moment in his life that was responsible for a cascading of good events and he wanted to help. And we hear the story in lots of different ways, right? Is that this is the moment and that's what I want to help other people have.

Ben Smith:

So he thought that experience of professors seeing his potential, even though he was struggling was really the reason for many of those positives, so he wanted to create a scholarship for kids that were struggling in school like he did and needed help to get over a hump. So my long-winded question is, all right, I got this situation, I want to make a gift. I want to make a big gift maybe. So I want to do this, but I don't know these people, what's the best way to bring this up because it feels very, obviously our own money is very private, right?

Ben Smith:

So if I say, "Hey, I have a sum of money." And maybe to me, 25,000 is very significant, maybe it's that tech mogul you talked about with 400 million, whatever, but how would I go about starting the conversation of I'm telling people of this very large gift, which feels like a very intrusive conversation to have about myself, but I also want to make sure that I'm talking to the right people about that impact I'm going to have is actually the impact I want to be given. So how would you just approach that situation?

Glenn Garbutt:

First of all, it's a great story and that's certainly what would fit the criteria of someone who wants to give back to an institution that was important in their lives. And again, it's reaching out to, in that case, a university to say, "Hey, here's what I'm thinking." And I think people are under the impression that in order to create a scholarship program, I need millions of dollars because I'm going to need to give $100,000 and pay four years of tuition, [inaudible 00:29:21] dollars a year. So they come in all sizes.

Glenn Garbutt:

My kids' high school, they pick one of the football players who shows a high GPA and a good disposition and they give them a $500, they call it a scholarship, and it's in remembrance of someone that passed away. But then we look at the legacy question, which you started with, which is, I want to give while I'm alive, but I also want to give while I'm no longer here, and there are all different sorts of ways you could do that. Obviously you can leave one lump sum.

Glenn Garbutt:

You can have that drawn up in your state documents that when I pass away, I want this percentage of my estate to go to, you name the university. There are also ways that you could have that lump sum of money be ladled out over time as a percentage. And it depends on the vehicle you choose to do that. But I would say another trend that I'm seeing more in the ultra high net worth space is even people with kids are deciding, "Hey, we're worth X and our kids are going to be fine, and we'll give them half of X instead of the entirety, and we'll leave the other half to charity."

Glenn Garbutt:

And that seems to be a trend that I'm seeing anyway, that can be done with a donor advised fund, it can be done with trusts, it can be done with private foundations. There are all sorts of vehicles that you could utilize to see that vision through.

Curtis Worcester:

I like that. So I want to keep going here and talk about the how, when we talk about giving to charity, right? So I think all of us, we have many different forms of assets in our lives. Some of them might be more advantageous to give than others. For example, I know Ben and I, in our area, on the radio hear all the time about an organization, Kars4Kids, where you can donate an old car to charity. So I guess the question I want to get to here is how, from an asset perspective, are people giving to charity? Is it mostly just cash? I know you mentioned some stocks. Is it hard assets like a vehicle? Just kind, what are you seeing there in trending and what you're doing?

Glenn Garbutt:

I know that commercial you're talking about.

Ben Smith:

It's really catchy, isn't it?

Glenn Garbutt:

Yeah, it really is. They've done a great job with that. I can recall that playing in the car and my kids would be singing it for weeks on end, but another great topic we should touch on, which is sometimes it's really important to look at, we've talked about who you're giving to and why you might want to give there, but what about what you're giving? And that sometimes is a hugely important question. We spend a lot of time talking to people and I personally spend time talking to people about cash is the worst asset to give. We discourage people from writing checks to charity.

Glenn Garbutt:

Not that it's the worst thing to do, but if you have appreciated assets lying around, it's a far better scenario. So let's look at the example. I mentioned Google stock, it's on my mind. If I bought Google stock five years ago, I put $50,000 into Google stock, it's worth $100,000 today, am I better off giving $100,000 worth of Google stock to charity or writing a check for $100,000? The answer is obvious, it's I'll never touch that tax [inaudible 00:32:51] of $50,000 in gain if I give the Google stock directly to charity. If I'm giving $100,000 or even worse yet, I sell the Google stock, take the proceeds, pay taxes on the proceeds and then make the gift to charity, you're much better off giving an appreciated asset.

Glenn Garbutt:

So it's a rudimentary example, but it's a conversation that we have quite a bit. And then there are many other things beyond appreciated publicly traded stock. We take in, and we're not the only one, but we take in privately held assets as well and that's the fastest growing thing that we do here at Fidelity Charitable. Cryptocurrency is another big one that we're seeing in 2021. We saw quite a bit of cryptocurrency, but shares of a closely held business. So let's say for those, we talk about what's driving people to philanthropy, a lot of times it's a big liquidity event.

Glenn Garbutt:

So if I've spent my lifetime, I went to a certain business school, they taught me how to succeed in business. I went off and I created this business and I've worked there for 25, 35 years, and now I'm getting ready to sell that business, now I could do something really significant with my philanthropy. So what we talk to people about is in a lot of cases, it's possible to give a percentage of the privately held stock in your company ahead of the sale.

Glenn Garbutt:

So if my company's worth, I'm just going to use round numbers, $10 million and I want to give 10% of it to charity, well, I could sell the entire business, pay the taxes on that business and then make a million dollar gift, not as advantageous to me as if I gave $1 million in stock ahead of the sale. Now I'm paying capital gains to $9 million instead of $10 million and I get a million dollar deduction. So I am not giving legal and tax advice, by the way, that's my disclaimer. Talk to your tax advisor before you do any of this, but these are ideas that we see donors utilizing.

Curtis Worcester:

Got you. And then I just want to follow up and I know you did just answer it here. So generally speaking, what are some ways that we can work to build a charity budget in our lives today? We talk about leaving to charity, if we pass away, sort of that legacy donor, but how can I build a budget that won't rob me of my lifestyle today, but still maximize say the tax benefits? And I think I know where you're going to go with your answer, because we've touched on it, but can you just talk about that and how people can work a charitable budget into their everyday lives?

Glenn Garbutt:

Yeah. So a lot of people do tithe, so it's the idea of a fixed 10% is a real thing. And then it's a question of, again, what am I giving? Am I going to give 10% of my income in cash or am I going to find appreciated assets to get to that 10%? But then we go back to a topic which we touched on, which is your gift to charity is irrevocable. So you don't want to give until it hurts. You want to give what you're comfortable with. And obviously we have a big audience here and it's a big country and people are in all different sorts of financials situations.

Glenn Garbutt:

Some have the luxury of giving away a lot of money and a high percentage of what they make or what they have saved and others are not in that position. So it's a question of comfort. We see plenty of people that are in their prime earning years and while they're making a lot of money, they're looking to yes, give to charity, but also [inaudible 00:36:17] some away because their plan is when they retire, they want to do something structured around their philanthropy.

Glenn Garbutt:

So in a lot of ways, their philanthropy is going to be a second career. Not everyone's going to be in that position, but it is something that's nice to think about like, "Maybe while I'm making this money, I could take care of my philanthropic needs for the rest of my life, if I do it properly." So I don't know if I answered your question, but I can give your audience things to think about anyway.

Curtis Worcester:

Yeah.

Ben Smith:

Yeah. And I think, Glenn, you're coming up with the idea that I think a lot of us in Maine know of is the story of Harold Alfond, who created this Dexter Shoe Company in Dexter, Maine, and sold that shoe company and made a lot of money on it. But then as part of that, again, he made a part of the sale proceeds into the Alfond Family Foundation, the Harold Alfond Family Foundation, which continues to give money to kids for their 529 plans into college savings for kids.

Ben Smith:

So I think what you're saying here is there's one that maybe people in Maine maybe know pretty famously because that foundation is touching so many kids and their first grant into those college savings account comes from that Alfond Foundation. So really, that's a shining example I would use to think about. But I want to, I know we've danced around the idea of donor advised funds a little bit, I want to get a little technical here. I want to ask you to help us really define really what a donor advised fund really is.

Ben Smith:

Because again, this is something where probably even on my radar and maybe it was like six years ago, five years ago, is when it really came up on my radar and it was becoming more mainstream and seeing this happen just from the clients I was working with. So I want to ask you about just what it is, because I want to then also add in for the examples that I'm seeing from our clients too. So would you start there with just the definition of what is a donor advised fund and how does it work?

Glenn Garbutt:

Sure. So a donor advised fund, first of all, I represent Fidelity Charitable, we happen to be the largest donor advised fund, but there are many others. Schwab, Vanguard are examples of other large donor advised funds out there and then you have community foundations. So community foundations are big in New England, in Maine, in fact. And community foundations usually have a donor advised fund component to them as well. But essentially the way it works is the donor advised fund, we're set up as a 501c3.

Glenn Garbutt:

So a client makes a gift to our 501c3, but we are not the soup kitchen. We're not running the soup kitchen. We're granting it out to the soup kitchen. So the two things that I think your audience needs to understand is think about the donor advised fund as that charitable vehicle and think of it as a grant making organization. So you're going to give to that charitable vehicle or set up as a 501c3, you're going to get, ideally if everything's done properly, you're going to get that tax deduction as if you're giving directly to any 501c3, and then you're going to be able to grant out to the charities that you care about.

Glenn Garbutt:

So it could be other 501c3s or IRS deemed qualified recipients like churches, schools, hospitals, synagogues, et cetera. So really, the key words, I have this conversation a lot as you can imagine and this [inaudible 00:39:51] that I use to describe how a donor advised fund works. It's the three Gs, give, grow, grant. So you give to your donor advised fund, get your tax deduction, the money while it sits in the donor advised fund can grow and it grows tax free and then it could be granted out to the organizations that you care about. So give, grow, grant.

Glenn Garbutt:

So a lot of times people, they're under the impression that the donor advised fund is going to take your charitable contribution and then they're going to make the determination of who receives your grants. And the magic of what we do is the donor gets to recommend the grants and they also get to recommend how the money is invested while it sits inside of the donor advised fund. So they've made their gift, the gift part, it's sitting in the donor advised fund now and they're naming their account whatever they want to, so it could be called the Ben Smith Charitable Giving Fund.

Glenn Garbutt:

And now while money is sitting there, it could be granted out at any time, but it can also be invested while it sits there. So you can almost think of it like a 529 plan, but for your charitable giving or even a 401k. Where a 401k is a structured vehicle for your retirement, this is a structured vehicle for your philanthropy. So just remember to give, grow, grant. There are literally hundreds of donor advised funds across the country, we're probably the most widely known one, but it can be a terrific way to reach your philanthropic goals, whether you want to give it all away next week or over the years.

Ben Smith:

Well, and Glenn, I want to add to that too, just from how we'd use the donor advised funds as well, because I know when it comes from, somebody says, "I want a gift." As you said, there's lots of reasons for not giving cash. It could be any asset. And say it's 10 shares of a publicly traded company, which maybe that 10 shares is worth $1,000. Okay, they go to the charity and they go, "Hey, I want to give you these shares."

Ben Smith:

And maybe they don't have an investment account to receive those shares. Maybe the philanthropy officer or maybe the executive director doesn't get back to you quickly with, "Hey, this is year end. I have to give this to get the tax deduction this year and I need to do this now." So moving assets sometimes between different entities or organizations, sometimes isn't the speediest of transactions because A, maybe it doesn't happen frequently for that organization, but B, it's also you're relying on financial institutions to send assets over because you don't want to sell it.

Ben Smith:

So that's a big thing. So what we've found was because usually there's a timing element that the donors are looking to make. And usually as you say, the giving season is the last three months of the year and the height of the giving season is probably in the December end of year timeframe. And we, as I think, an unassuming public might want to make that donation, not thinking it will take that long of a time and sometimes it does.

Ben Smith:

So what we've seen work really well is this whole donor advised fund as an intermediary where you can say, "I'll give that security in that instance to the donor advised fund, get my tax deduction in the year and with quick timing when I need it, then I can gift at any point, once I've got my tax deduction, if it's not till January 2nd of the next year, it's not a big deal."

Ben Smith:

I've now broken up the tax deduction part from the charitable gift part and what I also like about that is there's years that maybe I need to take a deduction and I need to make a bigger gift, but I don't want to signal to that charity that, "Hey, I got all this money sitting here, because I give one big gift and they're going to go, "Next year, Ben, you gave me a big gift last year, we really appreciate it. You know what would be great is if you gave us 10% more of that gift next year." So signaling is a big deal as well.

Ben Smith:

So breaking up those two transactions I think has worked really well for our clients in lots of different perspectives. So again, that's why from our end, it's been a really great tool in the toolbox for people that want to gift, not just various assets, but also from making sure that, that relationship with a charity is not progressing maybe too quickly from the financial lens, from the donors perspective.

Glenn Garbutt:

So Ben, you hit on a number of, I think, important points. So let's think about that scenario where I have, I'll go back to the publicly traded stock again, Google, we'll pick on them again. So I have $10,000 worth of Google stock and I want to support 10 different charities, do I give $10,000 of stock to my church and ask them to give me $9,000 back so I can distribute the other nine? That creates all sorts of problems, you can't do it.

Glenn Garbutt:

So the donor advised fund can be a really good solution to give the $10,000 and disperse it from there. And the year end thing is hugely important. I may not have figured out who I want to give that $10,000 to yet, but I can make my gift in 2021, we just went through it, and then figure it out later. Let's get the deduction now and figure it out later. So you touched on something that's I think very important.

Ben Smith:

But also, Glenn, what I think is important about that structure is there's really not a time sensitivity too, I got to move that 10,000 gift from Google. I don't have to make that gift from Google within 10 days of giving it to the donor advised fund, right? That can stay there for a longer period of time, even multiple years, correct?

Glenn Garbutt:

Yeah, that's right. So you could give in 2021 and then grant the money out the door in 2022, 2023, I won't get into too far into the weeds. Our minimum grant size is $50, so you can give as little as $50 at a time. Each donor advised fund tends to be different, so you want to check with your donor advised fund to see what their minimum grant size is. And most now have a minimum grant policy.

Glenn Garbutt:

So they'll ask you to make maybe a grant a year or give away a certain percentage a year, but we're not bound to the private foundation rules, which have a required minimum distribution rule of 5% per year, we're not bound to that. Fortunately, our donors tend to give away much more than that, but that's another story for another day.

Curtis Worcester:

I want to rotate a little bit Glenn, and it's something I think you briefly touched on earlier about, there are times, I know we've seen with our clients and when they're fortunate enough, they experience an IPO or they have equity compensation. They exit a business, security appreciation, right? Any of these scenarios can immediately influence someone's liquid wealth.

Curtis Worcester:

And also sometimes we've seen that without careful planning, these instances can increase obviously income and then taxes, right? And then it may become a scramble at year end to look at charitable giving or something to tone down the taxes, if you will. So I want to ask, what are some planning considerations that you would like to share with people that could experience these types of transactions?

Glenn Garbutt:

So I really hope that people are strategizing with their tax professional on a yearly basis. A meeting with them at least once or twice a year, and plotting out what the year is going to look like. And if you do anticipate a larger than normal income year because of some liquidity event or some stock award or whatever the case may be, there's only so many ways to get a tax deduction these days, your mortgage, or charitable gifts and philanthropy hopefully will figure into the equation, if you are having a big year and you're looking for a deduction.

Glenn Garbutt:

So I really think it's so important to be working with someone you trust, working with someone who's really sharp to build a strategy and not just wait till the last week of the year [inaudible 00:48:19]. I could do something to offset my huge tax liability from 2021. And often timing is the enemy because people wait until it's too late.

Curtis Worcester:

Sure. Yeah.

Ben Smith:

Well, Glenn, I want to ask another question here, because I think some of this is we've been focusing on we're going to make the gift or how do we make the gift, but let's talk about maybe the process of following up on the gift, right? Because again, we're investment people at the end of the day here, so we want to follow up on our investment. We want to see how we did. So how would you advise someone to go back to the charity to see how they're using the money? So this might be how many months or years later do we check in? What sort of leash do we give that organization to figure out whether they were successful in using the dollars or not?

Glenn Garbutt:

Yes, we certainly have our share of donors that do that kind of follow up and it does run the gamut. One of the things I wanted to say, we touched or we danced around anonymity. One of the reasons some people use donor advised funds is for the anonymity so that you're not getting hounded by the charity on a yearly basis. You mentioned that example of, I make a significant gift and then the following year they're asking for that gift plus 10%.

Glenn Garbutt:

So one of the nice things about our donor advised fund and others is that you can make a grant to a charity and be fully recognized by address or just name, name only. So the name of your donor advised fund, they won't have your address, they can't contact you, you're fully anonymous. So we have a number of donors that make fully anonymous grants.

Curtis Worcester:

I like that.

Glenn Garbutt:

Yeah. So we do like people that appreciate their anonymity. But to answer your question, it does go back to having that kind of relationship with the charity. And it's not too late. If you made a grant, a gift to a charity in 2021, and you've never spoken with them before, there's nothing wrong with picking up the phone and saying, "Hey, I made a gift to your charity last year. I'm just curious, where did my money and other money go to use and what are you working on for the future?" So having that relationship with your charity makes a ton of sense from that perspective.

Ben Smith:

And I'll add to, Glenn, I know some people don't think this way, but from a donor perspective, it's almost like you're a shareholder of an organization, right? It's you're almost like you're an owner in a way, right? You've given money to help things work and they want your money to continue, they need your money to continue to keep the organization going. So in a way, it's almost like, "Look, they are reporting to you as a shareholder, kind of a manager perspective there.

Ben Smith:

They're responsible to the community, the people they're helping, but also you as a donor." So I think that's an important point. And I guess I want to ask the question is what do you think we should do if we're not seeing the impact we'd like? It's, "Hey, we were sold the bill of goods and we thought it was great. And it was going to be we're going to change the world and we're going to create lasting change." And you've given them time and it hasn't worked out. What would you advise someone to do at that point?

Glenn Garbutt:

Well, the leverage you have is the power of the checkbook, so to speak, right? You can stop giving to that organization and let them know that you're going to stop giving to that organization if they don't discontinue this policy that you don't like, or don't put the monies to better use. And I don't want to get into an area where a donor can only have so much control over a charity. So you're getting a tax deduction and you don't necessarily get to run that charity and say, "Hey, by the way, I'm making this gift to the University of Maine, my nephew goes there. I would like them to receive free textbooks."

Glenn Garbutt:

You can't have that sort of level of control, of course. So there's that separation. But you have that power as a donor, you are the lifeblood of the charity, and you hope that the donor has that sort of relationship where there's trust, you trust that they're doing good things. We've talked about Charity Navigator, we've talked about the charities' website, they're disclosing what they're doing with these monies. So there's that trust level that's established when the organization is doing good works and the vast majority of charities out there are functioning in that way. They're above board, they're doing great work. And they earn your trust as a donor.

Curtis Worcester:

I like that. So we have reached the tail end of our conversation today, Glenn. We do have one question that Ben alluded to way back at the beginning that I love to ask all of our guests. So obviously we are here today on the Retirement Success in Maine Podcast. So we like to ask, how are you going to find your personal retirement success?

Glenn Garbutt:

Yeah. So we are a podcast, we need to work in some Bigfoot or UFO dialogue to go viral, right?

Curtis Worcester:

That's right. That's right.

Glenn Garbutt:

Can we do that before we end?

Curtis Worcester:

Go for it.

Glenn Garbutt:

So I'm a simple person and I want to see my kids be in a good place. And I want comfort in retirement. I want to be able to give back and that's part of what I'm doing while I'm in my earning years is I am socking away money to not only give away in the current years, but also to give away. I envision a retirement where hopefully I'm comfortable, my kids are on a good path, I can help if they really need it, and then I could do some giving back and live a fun existence where hopefully I have a fishing rod in my hand.

Curtis Worcester:

Perfect.

Ben Smith:

Well, Glenn, thanks for coming on today. Again, I know charitable giving is something that, again, we all have that push-pull within our lives about, we want to help, we want to make things better, but we also need to be mindful of ourselves and making sure we have enough money. So that's a really big balanced legacy, kind of the financial planning question in that. We really appreciate you coming on the show today to really help wade into those waters and figure out what is out there for options around charity, especially regarding to donor advised funds and really appreciate all your expertise you brought on today. So thank you so much for that.

Glenn Garbutt:

Well, it's been a real pleasure for me. You two are very easy to talk to. I'm going to hire you both as sound consultants and video, as a matter of fact, you're great. Not only can I hear it coming through, but when I listen to your podcast, the sound quality is phenomenal. I don't know if that's Curtis, who gets the credit?

Ben Smith:

Yeah, that's Curtis. Yep, that's 100% Curtis.

Glenn Garbutt:

Nice work, Curtis.

Curtis Worcester:

I shouldn't take it all. We do have a wonderful producer as well, that extends past me, but of the two of us here, I'll take the credit, between Ben and I, but I can't leave out Zach on the other end as well.

Ben Smith:

Yeah, Zach is a hidden ingredient in the background. And all of a sudden he's going, "Wait a sec." Okay, good. We're good. You got us there. Well, Glenn, thank you so much. We really appreciate it. And we will catch you next time.

Glenn Garbutt:

Anytime, guys. Thanks so much.

Ben Smith:

All right. Take care. All right. So charitable giving. So the topic of today was giving charitably to fulfill your family mission.

Curtis Worcester:

That's right.

Ben Smith:

And I know we talked about lots of different things today from a charitable perspective, but I think the point of having Glenn Garbutt on from Fidelity Charitable is really talking about, "Hey, there's other vehicles out here and ways to do this than just the whole, here's the checkbook and write out the two line and just make the amount and send in the mail." So I think that was maybe an educational, a foundational topic today, which we spend a lot of time on with our clients and talking about those goals and legacies. But Curtis, from your perspective, what was something that you took away from today's show?

Curtis Worcester:

I think it was kind of an overall conversation that came up a couple times within our episode and it was just, I think the idea that you don't need millions and millions of dollars to make an impact here to charity, right? And even from our perspective, not even the charity's perspective, people want to donate for a lot of reasons, but one is it helps whether it's their tax situation or it's what they want to do, like a mission wise. And there's ways to still do that even if you're not the tech mogul giving $400 million, right? Anyone can build a budget, they can fit in a number that is comfortable for them and use these vehicles.

Curtis Worcester:

I know Glenn specifically talked a lot about the Fidelity Charitable donor advised fund, but there's systems in place to help you attain your charity goals here and it doesn't need to be you giving millions of dollars. And what did he say? Their minimum was $50, right? And it still lets you accomplish what you want to accomplish. And then another piece on the back end of our conversation that stuck out to me was the idea of following up. I think you asked the question and really making a point of, where is your money going? Is it doing what you thought it would? Is it doing what you wanted it to do?

Curtis Worcester:

And Glenn made a good point that you ultimately hold the power of your checkbook there. And charities will talk to you. And if you call up and say, "Hey, I gifted in 2021 and it was my first time gifting to your organization. I really just want to see the impact there." And I think he was clear and that charities will welcome that conversation and it's something that you should do to make sure it's sustaining that goal of your giving. So those are just a couple of things that really stuck out to me there. But I want to flip the highlighter back to you, Ben, and what was there in that conversation that stuck out to you?

Ben Smith:

I think one thing here is, and we didn't get to this a little bit, but donor advised funds, I'm not trying to make this into a commercial for donor advised funds, but this is a newer trend that we, and again from Glenn's experience of what he's dealing with every day, but the point is that there's more democratization here of being able to gift that in ways that maybe only that ultra high net worth group that he was talking about were able to do before that now has been abled, as you said, at a very low level, I can gift and I can gift lots of different assets in a very efficient manner, because again, the point is if I made a $500 gift, but if that was going to cost me, maybe if I gave some security that was appreciated, maybe that would've cost me $600 by the time I pay taxes to give $500.

Ben Smith:

So why don't I give more to the charity or give more to myself and the charity rather than giving maybe to the government through taxes? So there's just a way to do that, but also this idea of the family mission. And I like that the donor advised fund has this little more perpetuity in it. So say I gave $1,000 gift and we got that minimum $50 at Fidelity right now, okay, so for the next, essentially 20 years, if it never grew, I know those give, grow and then gift, say it didn't grow at all, well, I could do 20 gifts over the next 20 years at 50 bucks and, by the way, say something happens to me and I'm in year 10 of that gift, well then I can say, "Hey, my son, I want you to take over and I want you to gift for the next 10 years."

Ben Smith:

So there's ways of making gifting and charitable donations, a family thing. Is that this is something we do as a group. And while I might gift differently than what my son ultimately does, or my wife, Cara, we might all have different ideas. We could do this together as a group, but ultimately maybe that money wants to be gifted and I want my son also to get into that habit and that practice of giving charitably as a family value. And I'm one of six university main grads in our family. Education's a big deal. So I could create a donor fund for education and for giving to say, the University of Maine, in that case.

Ben Smith:

And maybe that's something I want to do, but maybe I don't want our family to be all over it and getting headlines for it, because Mainers, we don't like attention. I know that's something we don't like to do. So maybe I could do it that way. So again, that was something where we didn't talk a lot about that as a piece there, but we've seen several clients do that. And it worked really well and really seamlessly versus, hey, this money, I pass away, I then give it to my son or my heirs, go through probate, go pay estate taxes, if there's any to be applied, to then give it, to then give it away. It's like that would not be the most efficient way to do that transaction.

Ben Smith:

So there's lots of, I think things there to be thinking about. So I think as part this, if you're interested, this is hopefully a good foundational piece to learn and this is educational, but when it applies to you, I think this is really important, as Glenn said, to talk to your tax professional, have that strategy session, talk to your estate planner and talk to them about what makes sense for that situation and your finance advisor, have those three legs of the stool work together to help figure out what's the best thing for you.

Ben Smith:

Again, I think those are really important lessons that come out of today and we'll have the links that Glenn gave us in our blog. So to go find those, you can go to blog.guidancepointllc.com\58. And you can find the show notes, you can find a little bit more about Glenn and his background. We'll have the links to Fidelity Charitable there too. And the transcript of today's show, you can go check that out there.

Ben Smith:

We really appreciate you tuning in. We know it's winter in Maine and there's nothing to do, but maybe curl up next to the fire and maybe read a book, maybe listen to a podcast. Maybe go skiing at Sugarloaf or Sunday River. But we really appreciate you tuning in to our show, the feedback that you've given us over time and we can't wait to catch you on the next one. Take care.