September is wills month – designed to draw kiwis’ attention to making sure their legacy is in order.

By Eleanor Cater

It’s been quite a year and it’s certainly been a time when we have seen professionals across New Zealand pause and reflect on what they can do to make a difference.

Many are stepping up in countless ways – volunteering, gifting their skill sets and showing corporate social responsibility in a myriad of ways.

There is no doubt that a lawyer’s role is a privileged one, giving crucial advice to clients at what are often watershed moments of their lives.

At Community Foundations of New Zealand we work with lawyers and financial advisers from across the country and we are privileged to work in communities and with charities across the sector. Needs are growing across New Zealand and, if there’s one thing lawyers can do this year to make a difference, our advice would be to encourage you to have ‘the philanthropic conversation’ with your clients.

A lawyer’s advice can be key for people to knowing their options and feeling empowered to make a difference

In our line of work we see that most New Zealanders want to make a difference but many don’t know how to go about it. And we also see many people who genuinely do not know how they can give their wealth away wisely. A lawyer’s advice can be key for people to knowing their options and feeling empowered to make a difference.

The importance of a lawyer’s role is backed by research. A major 2016 study from the UK (Legacy Giving and Behavioural Insights Report, University of Bristol, based on trials involving eight firms of solicitors and over 2,600 client interactions across the UK) found that the will-making process can reliably shape whether people leave a gift to charity in their will and represents “a valuable opportunity to raise awareness of legacy giving”.

The study showed that both solicitors and clients are comfortable with references to giving and that 69% of people said that they would be happy to have a solicitor mention charitable giving during the will-writing process.

Leaving a gift to charity in a will is certainly a fulfilling thing to do, and it could be any amount, even a small percentage, particularly if there are family and other beneficiaries to be taken care of. Any gift, made any way (pecuniary, a percentage or residual), is worthwhile.

Gifting through a named endowment fund

When leaving a gift to a particular charity, increasingly people prefer to do so through their own invested named endowment fund (NEF) which they can set up with their local Community Foundation. When setting up their NEF, the client nominates the charity (or charities) that are to receive the annual payout from the fund. The client then leaves the gift to the NEF so that the capital is invested in perpetuity, with the annual payouts (usually around 4%) being made in accordance with the client’s wishes.

People like the idea of the regular ongoing income being available forever to their favoured charity. They also like the reality of the returns: $100,000 invested with a Community Foundation over a period of, say, 100 years, is estimated to return around $775,000 to the charity, while still retaining its value. These calculations are based on a conservative average annual return of 6.5% and annual distributions of 4%.

It will continue to give, forever (hence the expression “the gift that keeps on giving”).

This endowment fund option really appeals to a strategic type of client who has a passion for a particular cause. So, if you are talking with a client about giving and know that they have a love for community – it could be anything from their church or community group, from arts to sport, from education to environment – you can suggest to them, without any ethical conundrum whatsoever, that they could create their own NEF for the future.

The client can give to their fund either during their lifetime (with tax rebates) or in their will, or both. In any case you may be surprised by the pleasure that giving brings and the fulfilment that comes with knowing how to give strategically to something that your client cares deeply about.

What you can do

During the will-making process you could bring up the philanthropy conversation, suggesting consideration of a bequest. We find these magic words are good: “have you considered including a charity or cause that you care about in your will?”, and outline the options, including an invested endowment fund option.

Bill Holland, of Holland Beckett Law, has had many a philanthropic conversation with clients over his career and says: “The philanthropic conversation works, and one I enjoy having with clients. It is very satisfying seeing clients’ philanthropic aspirations through and the pleasure they get from doing so”.

The philanthropic conversation can be very fulfilling, both for lawyers and their clients alike. And making gifts on an endowment basis is smart for community, providing reliable future funding streams for local charities.

It could become a key factor for the future in helping communities recover from the devastating effects of Covid-19.

Eleanor Cater is Executive Director with Community Foundations of New Zealand, the collective of New Zealand’s 17 Community Foundations, which run a lean not-for-profit model structured to give back to communities in perpetuity.