Les: Hello and welcome to today’s edition of Route 664, The Road to Human Kindness. I’m Les Winston, I’m the national spokesperson for socialsecharity.org.
That’s a project of the Endow America Network Foundation. It’s national in nature because we’re trying to change America. We’re trying to do that by teaching the public about Section 664 of the tax code and other social secharity devices that the tax code gives us. Those are devices that we’ve been using for many years, but not enough. We need to increase the number of individuals who understand how that process works. How to use charitable remainder trusts, charitable gift annuities, and pooled income funds to create income that you can rely on later in life. As well as to do some tax planning if you need to do something about taxes and also to increase the charitable wealth in the country. We would like to endow all of the nonprofit organizations that are doing what they’re supposed to do in our communities. You can do that by participating with section 664 as one route.
There is a cadre of professional philanthropic advisors. People who understand how to do this type of planning and who use it in their practices. Professional philanthropic advisors can achieve a Chartered Advisor in Philanthropy (CAP®) designation. It is offered by The American College of Financial Services®. One of our esteemed and very early members of CAP® is joining us today on Route 664 from the great state of Texas, Todd Healy. Good morning Todd.
Looks like Todd is frozen. Okay, so let me take you back. Todd and I go back a long way. We’ve been through several iterations of organizations. We’ve been at many conferences together where we’ve listened to professional philanthropic advisors share their knowledge about how to work with these wonderful devices. These are very powerful planning devices and they can be complicated. Some of them are easier than others. Charitable gift annuities are pretty easy to use, pooled income funds are fairly easy to use as well. But the charitable remainder trusts can be quite involved depending on what your needs are because it can be tailored to fit a lot of different situations. That’s why it’s important to work with a professional philanthropic advisor who knows how to use all of the different nuances of that planning tool, so you can do the best job you can when you’re doing this type of planning. Todd, are you there?
Todd: Yes, I’m sorry Les, I’ve just gone to my phone. I gave up on the internet. I apologize, but we should be okay now.
Les: Okay great Todd. It’s nice to see you.
Todd: It’s good to see you Les. May I make a point of personal privilege while I explain my surroundings?
Todd: I’m in East Texas and we have a fifth wheel that we’ve converted into my office while we are building a second home out here. Our mutual good friend, Phil Cubeta, said when he saw it on a Zoom that it looked like I’d been through a rough divorce and I lost.
Todd & Les: [laughter]
Les: Yeah okay. As long as you don’t start moving. [laughter] Todd it’s a real pleasure to have you with us today because you are a very old friend, but also a very wise individual in this area of planning using philanthropic tools. Your organization is C3 Financial Partners in Dallas, Texas. Tell us a little bit about your practice and how you use your Chartered Advisor in Philanthropy® (CAP®) designation to help your clients.
Todd: First of all, the name C3 came about because a lot of clients didn’t have the ability to move forward with their planning. Because they lack clarity of their goals and objectives; they lack confidence in the planning they’ve done – and maybe lack confidence in what they’ve been advised to do. Often people think of their planning as an event. We know that things change, tax laws certainly change, personal situations change, financials too. We emphasize that planning is not an event, but a process. The process needs to be coordinated. So the three C’s: providing clarity, confidence, and coordination in the planning.
I came into the insurance business from the nonprofit world. I have a master’s degree in social work. I was trying to figure out a way to incorporate my social work education into my estate planning, my business planning, and my charitable planning practice. I heard Phil Cubeta speak about the CAP® program. I became very, very convinced to take the program but said the only way I would do it is if we had a little study group. We started the study group 10 years ago – we were the first ones to do that. Mark Weber, in Omaha, followed close behind. Now, as you know, there are approximately 2,400 CAP®’s in the country!
We really wanted to get the advisors involved, Les. We wanted to make sure they were educated. We found the CAP® program is the very best way. We have probably 150 who have gone through the program in Dallas. The Dallas CAP® study group has recently been taken over by the Dallas Foundation and the Communities Foundation of Texas. I learned years ago that what’s more important than who you follow, is who is following you.
Les: That’s right
Todd: When these two foundations came together, collaboratively, to take over the study group CAP® program and institutionalize it, I was thrilled! They’ve been very, very collaborative and working together to maximize the exposure of the CAP® program and to make sure that it becomes an institution that lives on in Dallas.
Les: So it’s been going for roughly 10 years. Do you measure the impact that it’s had on the charitable wealth accumulation in Dallas and in the surrounding area?
Todd: You know we’ve tried. I know Mark Weber in Omaha has done a great job and I’m very envious. He and I have compared notes. The challenge in Dallas is we have at least six to eight community foundations. There’s just no way to really measure the impact. We don’t have one that we can work through solely. Now with the Communities Foundation of Texas and the Dallas Foundation working together, I think we might be able to do that. But we have not been able to quantify it objectively. Subjectively, we have quantified it by the leaders in this industry that have gone through it. Each course has a professional advisor and a professional non-profit person involved. We’ve done that from the very beginning. I guess one way of measuring it is when I called this year to help line up the facilitators for the fall class, I made six phone calls to get six facilitators!
Todd: A couple were for the very first class.
Todd: That has been very rewarding.
Les: When you’re dealing with your clientele and you’re trying to open the door to philanthropic planning as part of their needs, what is the impact on the client? In other words, when the client starts to open up about that particular part of their life – the values side of their life – what is the impression you get back from them?
Todd: You know, I think it’s all about asking the right questions. Recently we had a couple in our office who asked to go through their planning with us. The man was chairman of the board of a San Antonio based corporation. They had very little cash flow, they had a lot of publicly traded stock. Because of his position, he had to reveal any transaction that took place with the stock. I asked them what their philanthropic interests were and they really didn’t have much of a giving history. I asked him the old question, if you had a million dollars that you had to give away to a non-family member, who would you give it to? And they rattled off a half dozen charities. It just so happened that their church was building a new sanctuary. They created a charitable remainder trust and used some of the cash to build the sanctuary – actually put the doors on the sanctuary – and make some other significant gifts. At the time, it was a very minor amount of the stock that they owned, maybe 10 or 15 percent. The stock went from double digits – $25 a share – down to less than a dollar a share after they sold the stock through the CRT. So what was going to be icing on the cake – became the cake!
Todd and Les: [laughter]
Todd: We also ask the charitable question a different way. We used to say: there’s three places your money can go. Some can go to your heirs, some can go to your community, and some can go to taxes. How do you want it broken down? We used to try to get a dollar amount. We realized that was a dead end discussion, because it depended on valuation at the time of their death. So we’ve changed the question and we now ask: what percentage of your estate do you want to go to your heirs, what percentage do you want to go to the community, and what percentage to the IRS in the form of taxes. This has really helped open up the conversation.
Les: What do people say about the tax percentage?
Todd: You know, that is really interesting. We do this with a couple together. Very seldom do they both say zero. The husband is often a businessman. He might say, this country has been good to me. I’ve paid a lot of taxes and I’m willing to pay 10 or 15 percent when I die – a pay back.
Typically the mother, the wife, would want 100 percent to go to kids if they can’t give it to the community and avoid the taxes. But, Les, this has been a game changer – to ask percentages instead of dollar amount.
Les: Right, how about family involvement. Are you finding that is also a part of improving your relationship with your clients? Do you find that opens the door to them feeling better about money and their kids?
Todd: Yes, we certainly do. I have a CPA partner who’s based in San Antonio. For years she worked with families after a death occurred. One of the most challenging things she encountered was explaining to the heirs that a big portion of the estate was going to charity unbeknownst to them. Nobody had had a discussion! It just created all kinds of problems and all kinds of conflict. So we’ve tried to make sure that the children are involved and that they’re aware of it. We hope they are buying into it at the front end, because we don’t want contentious relationships at the end of the day after the parents are gone.
Les: Dallas is one of the major cities in the country. Of course, it is a lot different than Omaha, where Mark Weber is located. Dallas seems to have more financial advisors and is more financially sophisticated than smaller cities. Are the advisors more financially sophisticated with this type of philanthropic planning? Are they accepting it more, is it easier for them to talk about with their clients? Is that making it a little easier for the overall planning to be done? In other words, what’s the acceptance level of this kind of planning?
Todd: You know, I wish I could say that even with the CAP®s, it’s just smoothing the bumps in the road. But what we really learned and have come to realize is that while we need to educate the advisors, we really need to motivate the clients. If they’re not asking their advisors about how to accomplish some of these things, then we’re not going to get anywhere. We can educate the advisors all day long, but they’re still going to take the path of least resistance. I mean, I’ve been involved in two situations in the last month – after the fact – where businesses were sold by very philanthropic individuals and nobody mentioned CRT (charitable remainder trust). Nobody mentioned it.
Todd: I was referred to one banker who sold a community bank. He gave stock to the city, he gave stock to the county, he gave stock to the library. Very philanthropic. When he sold the bank, the cash went into his estate. He worked with a major Dallas law firm and nobody said anything to him about a CRT. After the fact, I explained to him how a CRT could work. He became so committed that he put cash into the CRT!
Les: Which is very unusual. Most people use non-cash assets to fund CRT’s and that’s one of the powers of the tool.
Todd: Yes, no capital gains avoidance, nothing. It was very frustrating. We see a plethora right now of businesses being sold in anticipation of capital gains taxes going up. Unfortunately, a lot of the advisors who are working right now, who are 10 or 15 years of law school, never worked with a CRT! When interest rates were so low, the incentives were so low, capital gains were low and they didn’t know what a CRT was.
Les: That leads me back to Route 664. Everybody knows what a 401k is, everybody pretty much knows what a 529 is, if you’re in the real estate business you know what a 1031 is, life insurance is 1035. Everybody knows these individual sections of the tax code but really don’t understand that they are sections of the tax code. What we are trying to brand is a concept where people will know that if they’re in that kind of a situation, they should be looking at that as a solution – naturally.
I think it is going to be a very long road until we get past this gap in the early adapters to the early majority. When you’re in the CAP® study groups, Todd, of course you are influencing the advisors. At Route 664, we have a public campaign. That is one of the reasons why we have these interviews on Route 664 radio. Todd’s interview today will be replayed on the Route 664 radio. We hope that people will tune in and listen. The issues that we’re raising are so vital to our country today. Especially with regard to trying to reverse this humongous debt that we have. We have to take some of the burden off of the government and put it back into the community. As well, we have to support through direct payments, as opposed to taxes turned into charitable gifts by the government. Kind of backwards don’t you think?
Todd: Absolutely, yes. We see that the national debt has doubled in 10 years, and the wealth gap is getting bigger. It has to come from somewhere. You know, we anticipate the national debt is going to double again in the next 10 years. The way things are going, it’s just going to get worse.
Les: Right, and that causes all sorts of other problems. This is not a short road, obviously, this road to human kindness. We’re hoping that by 2050, there’ll be that kind of a significant change in the country – if everybody gets behind this concept of 664, charitable remainder trusts and social secharity concept, using pooled income funds and charitable gift annuities. There are great tools and it’s not unusual for me to hear a professional philanthropic advisor say that people just don’t know how to use them and they don’t know where they come from.
So what motivates you every day when you get up?
Todd: I truly love what I do. I am sure you hear it a lot.
I have absolutely no intention of retiring. I see the impact we’re having on our clients. I see the awareness they experience as we talk to them about different tools and techniques. And they truly don’t know. Because we follow tax law and post-tax law changes so closely, we can easily assume everybody knows. But they don’t. Business owners are worried about making payroll, they’re worried about their customers, and they have no clue what’s going on. So a lot of what we’ve tried to do in the last few years is to educate them. We do videos. We use an application called Bombbomb and we do one-on-one videos we can send out. We’re sending one out today entitled “my mother-in-law is about to be 99, that’s the good news, the bad news is, her policy died when she turned 95.” …. Because the contracts didn’t go beyond that. That is the same thing that is happening with products that are underfunded based on higher interest rates.
That is what motivates me, Les, getting up and making people aware of the problems that they don’t know they have. Plus, getting to the point where they say, “Yes I want to solve it, I want to do something about it.” Then putting together options. And working with the advisors, I mean that’s our biggest challenge, trying to use cooperation and collaboration.
As Dave Holliday says, you go from communication, to cooperation, to collaboration. That’s what we try to do with the team of advisors we work with.
Les: So it’s another C3.
Todd: There you go! Exactly.
Les: My guest is Todd Healy from the great state of Texas. Todd is the founder and president of C3 Financial Partners.
Les: Folks can reach you on the website, C3fp.com. You can also find C3 Financial Partners on our roster of professional philanthropic advisors. Go to socialsecharity.org. Don’t mean to step on you on your advertising Todd, but we do list our professional philanthropic advisors there all around the country. Todd will be there and so will this interview. You can find out more about Todd there, but you can also go directly to C3 Partners Financial website which is C3fp.com.
Thank you very much Todd Healy, for joining us on Route 664 The Road to Humankindness and glad to see you. Take care.