Choose Your Own Adventure
(JULY 29, 2019) - MEET CORNERSTONE. Over the last five years, Cornerstone has seen a major growth in its congregation. In fact, the growth has been so significant that the church is preparing for a capital campaign to build additional facilities. While new infrastructure is a more immediate need, they know that they also need a plan for their long-term outlook, which includes funding ministries and the upkeep of their facilities to impact future generations.
Their pastor, Carl, recently attended a regional meeting for church leaders. While there, he heard about HighGround Advisors and the bundle of services they offer to churches such as his. Carl then invited HighGround to come and give a presentation to his leadership team.
In addition to educating church members on how they can give, HighGround was able to assure Carl and his team that we can help them plan for the long-term outlook that they know is crucial to the church’s success.
The church’s leadership team brought HighGround on board to help educate its members about various giving options available to them so they can help their church grow today and in the future. While annual giving comes out of a member’s income, or the money they have available now, it doesn’t include a legacy gift.
“It’s false to believe that donors cannot support you now while also supporting you later with a legacy gift,” Joe Hancock, Vice President and General Counsel for HighGround, said. “In fact, the two are complementary.”
Carl agreed with Joe during the meeting, stating that annual giving and legacy giving aren’t an either/or situation—meaning members will not choose either annual giving or legacy giving. The fact that they support the church with their annual giving now is more likely to entice them to leave the church a legacy gift.
“We need to be thinking about both when we approach this,” Carl said.
By designing custom-made documents to meet Cornerstone’s philanthropic needs, Joe and his team of legal experts were able to educate the church’s members on the various ways they can impact the capital campaign now, but also support other endeavors, like missions and education, in the future.
“By creating ministry funds and giving guides for the church, we are helping them in a more tailored way,” Joe said. “They are addressing their immediate needs and looking down the road – that’s what wise charities do.”
MEET MIKE. Mike serves as the Vice President for a large corporation in a large metropolitan city. He also has two children, ages 13 and 15, and serves as a deacon at his church.
There are a lot of changes happening in Mike’s life. As a deacon, he is preparing to assist his church in its latest fundraising campaign to expand the campus—a campaign he intends to support. Mike is also in the process of cashing out of the corporation he has worked at for the last 20 years. Unless Mike finds a creative solution for his money, he will be faced with transfer taxes that will reduce the amount he can pass to his children.
After meeting with trust and legal experts at HighGround Advisors, Mike decided to establish a charitable lead trust.
A charitable lead trust is a giving vehicle that provides an income stream to a nonprofit of the donor’s choice. In this case, Mike chose to anonymously donate the income to his church’s building fund. At the end of the trust term, the assets are then transferred back to the donor or to other individuals, usually family members. Mike chose to name his children as remainder beneficiaries of the trust.
Over the 15-year period of the trust, Mike donates $525,000 of income to his church and then, after the 15 years, transfers the remaining trust assets to his children who are now settling into adulthood and planning families of their own. The charitable lead trust enables Mike to significantly reduce the transfer taxes he would otherwise owe to pass assets to his children.
“Planned giving vehicles allow us to work with donors and increase benefits passing to family members and charitable organizations,” Joe Hancock said.
MEET FAITH. As a religiously affiliated nonprofit, Faith’s goal is to provide churches in its designated region with resources and assist them in growing their congregations. To achieve their mission and grow their assets, they have historically utilized the HighGround Endowment Fund. The HighGround Endowment Fund represents HighGround’s most advanced and most popular solution for endowment clients. The Fund is a unitized “fund-of-funds” which gains its investment exposure from underlying HighGround Asset Class Funds.
The HighGround Endowment Fund has served Faith well as their long-term investment solution for many decades. However, recently, Faith’s investment objectives changed for their reserve fund and they expressed the need to find a lower-cost solution with a shorter time horizon and different return requirements.
As an organization, HighGround is committed to being responsive to the needs of our partner organizations. We sat down with Faith, reviewed their current investment strategy and new objectives to determine what customized solution would best meet their needs.
Through transparent communication, our investment experts were able to present tailored portfolios for their reserve fund in order to better achieve its objectives and set our partner up for long-term success.
“The investment solutions we developed represent our best thinking based on our professional experiences and acting in the role of an Outsourced Chief Investment Officer, or OCIO,” Senior Vice President and Chief Strategy Officer David Slover said. “However, we can also function solely as an investment product provider and provide a low-cost investment solution of the client’s choosing.”
HighGround’s open architecture and flexible investment platform enabled us to develop new options for our partner organization that better met its needs – all while delivering excellent business results with a spirit of service.
MEET BOB. Bob has invested in real estate across his city for the past 20 years. Earlier this year, he sold several holdings that have increased in value. Bob started to consider how he might minimize his tax burden and increase his impact to charity. Bob supports many charities through his annual giving, and he would like to learn more about their major projects and ongoing funding needs before he determines where to direct his charitable giving. However, he needs to complete his gifts during this year in order to offset his higher taxable income.
Bob’s primary goals for his charitable giving are ease of administration and flexibility.
Bob learned about HighGround’s donor-advised fund program and decided that establishing a donor-advised fund would be the best way to accomplish his charitable giving goals. A donor-advised fund is a flexible giving solution that allows the donor to recommend, on an ongoing basis, which charitable organizations should receive distributions of income and/or principal from the fund they establish. This giving strategy provided Bob with a tax deduction for the amount he used to establish the fund, and it will enable him to take time to research the causes and charities he is most interested in supporting. Plus, the contributions Bob makes to the donor-advised fund can grow tax-free, potentially providing more distributions over time.
“We were able to work with Bob to navigate the giving process and he was able to maximize his tax benefits and do something great for several charitable organizations,” Joe Hancock said.
MEET EDUCATION. As a nonprofit organization, Education’s goal is to manage and grow the private assets entrusted to them through endowments, gift planning and property in order to support their mission. Accomplishing these goals, however, is a large task for Education’s limited resources.
Education realized their best chance for a solution was to fully outsource all their needs—preferably to an organization that could provide gift planning and accounting services in addition to managing and investing its endowment. After learning about HighGround Advisors, Education decided we were the perfect fit for them.
Education opened three types of accounts with HighGround, including endowments, a building fund and a gift annuity program, all of which work together to meet the needs of the organization and its donors. In addition to receiving monthly performance reports for each group of assets, Education also receives specialized reports that provide composite performance for their three groups of accounts.
Recently, HighGround’s Investment Team helped Education write an Investment Policy Statement (IPS). An IPS allows an organization and its investment manager to work together to define the goals and objectives of an investment program. It typically also includes the strategies a manager can utilize to achieve the investment’s goals.
HighGround’s trust and legal department were essential in establishing the gift annuity program for Education, including preparing all the required documentation. A gift annuity is a contractual agreement between a donor, where he or she is guaranteed a set amount of income, or annuity, for life and receives a charitable tax deduction. At the end of the donor’s lifetime, the remainder of the annuity’s balance is given to the charity of their choice – in this case, Education. Gift annuities are regulated on the state level, which means the applicable laws vary from state to state.
HighGround’s trust and legal team were able to build Education’s gift annuity program from the ground up while ensuring that they were compliant with state laws. The team also established the reserve requirements for an annuity, drafted agreement templates and reviewed the Education’s promotional materials for their discussions with donors. Education has found annuities to be a popular giving vehicle and, over the past three years, has been able to instruct donors on an annuity’s benefits and establish additional gifts. Our experts were able to work with those donors to establish a personalized gift plan and provide the greatest impact for Education.
In order to grow the confidence of Education’s donor-facing members, including employees and board members, Joe Hancock, Vice President and General Counsel of HighGround Advisors, provided gift planning training. The information enhanced Education staff member’s knowledge about investment and gift planning options for its donors.
With HighGround’s help, Education is able to focus on scholarships, campus infrastructure, student recruiting and other programs at the university.