Randy Fox Interviews Mark Trewitt

Randy Fox Interviews Mark Trewitt

Article posted in General on 31 August 2016| comments
audience: National Publication, Two Hawks Consulting, LLC | last updated: 2 September 2016
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Summary

Randy Fox interviews author Mark Trewitt, exploring the basic principles of his book, "Integrated Generosity".

Click here to listen to the audio version of this interview.

Randy:    Hi. This is Randy Fox from the Planned Giving Design Center, and it is late August of 2016, and I am here today with Mark Trewitt, the founder of Integrated Generosity and also an author of the book by the same name. Mark, welcome. Thanks for spending some time with me today.

Mark:    Thanks for taking the time, Randy.

Randy:    Let's talk a little bit about your inspiration for writing the book, Mark. Give me an idea where this crazy idea to write a book came from.

Mark:    I'm 35 years into a career in financial services and charitable planning and using charitable concepts for strategic action impact has always been an interest and a focus of mine, but I attended a meeting in May of 2014 where the speaker challenged everyone in the room that had been in business for decades that they all had a book inside of them waiting to get out. Whether they were willing to do what it took or not was another thing. By the end of that weekend, after I got home, I had drafted 3,000 words and a fairly robust outline, so this is really my first project as an author. I'm a first-time author but, by the end of the summer, by the end of August of 14, pretty well, the book was completed, and we had contributed chapters from various sources, the book, and went about getting the reviews, and so forth, that were very much a blessing and a surprise as to how well those came in.

The impetus of it really came out of my work experience with clients and seeing over the last few years, especially, some very significant impact in terms of current giving, as opposed to the traditional planned gift. A lot of people think of, when they think of a planned gift, it's something you give away when you die, which is not all that creative compared to some of the impact that we were able to facilitate, much of which is conveyed and communicated in the context of the book.

Randy:    Mark, I know you and I use some of the same terminology. I think some of our teachers have been the same over the years. It's interesting that one of the things you talk about is the difference between voluntary and involuntary philanthropy. Would you expand on that a little bit?

Mark:    Sure. Absolutely. Everybody of any amount of income, if they pay tax and they give $1 to charity, they are practicing both involuntary philanthropy and voluntary philanthropy, or generosity. The involuntary philanthropy, in most situations, if a person was to look at their tax return and they look at line 44, the tax paid, it's usually going to be a much bigger share than their charitable gifts unless they are the exception to the rule. Involuntary philanthropy is a giving up to the government a share of your social capital that the government is then going to use in a very inefficient manner to reach certain endpoints in society.

The two things that are important for people to realize that, from a stewardship standpoint, is that there's a significant amount of excess and waste in the government that exists before a single dollar makes it to one of those societal endpoints. The other thing is that, in most instances, the things that the government might be directing those dollars towards might not be aligned with the values that a particular individual or a family has. If a person was considering giving $10,000 to charity, they would certainly do a little bit of homework to see that they had less overhead and greater efficiency, and they would certainly want to be certain that the money and where it's going to be going is in line with their own personal values. Involuntary philanthropy is social capital that we give up to the government, and voluntary philanthropy, or what I like to refer to as directed generosity, is generosity that is in line with a person's values. It's more of a choice and a specific intentional outcome towards the charitable endpoints that they care about.

Randy:    I always find it very intriguing that the general public doesn't seem to be able to wrap their arms around this. Why do you think that is?

Mark:    I refer to it in the book as tyranny of the urgent. We deal with those things that are most urgent in our lives and, oftentimes, this kind of planning is something that gets put off. It is less than intentional and, because it's less than intentional, those outcomes don't represent good stewardship. As a matter of fact, the book title is Integrated Generosity for Faith Based Families. It has lots of good information regardless of what faith a family might be aligned towards or whether they have any faith alignment at all. The subtitle is Moving from Involuntary Philanthropy Toward Intentional Stewardship and Directed Generosity. The intentional stewardship part of that equation is what we're doing in respect of the wealth transfer planning for family.

Many people hear the word stewardship, and they think, oh, no, it's time for that sermon again in church because it's usually that type of a sermon when the word stewardship comes out. Stewardship is merely our ability to manage that which we've been blessed with, and the intentional stewardship is seeing that what you want to have go to family goes to family and what you need during your lifetime is provided. Once you've Identified those two things, you're able to identify surplus. If surplus exists, it's almost always better to bring it forward in the form of current giving, whether that's checkbook philanthropy or whether that's more strategic giving, what I refer to as, and what many refer to as, balance sheet giving. That directed generosity, sooner rather than later, makes much more impact from a tax standpoint but, from a societal standpoint, it makes a better, bigger impact now, rather than deferring a gift 20 years out or when someone dies, that whatever they have left over then is going to go to charity.

Randy:    I want to explore two concepts. Let's first talk about balance sheet giving and explain what that means, compared to checkbook philanthropy.

Mark:    Sure. The typical person that maybe makes donations to ten different charities during the year, they're writing checks, so they have to deal with ten different charitable receipts and make sure they get them all. That is checkbook philanthropy. A lot of times they succumb to the pleas that come in the fourth quarter, every charity they've ever given to is sending them one more plea for a year-end gift to generate their best tax savings, and so forth. That's the big season for charities is the fourth quarter. The checkbook philanthropy is more of an [inaudible 00:07:52]. Balance sheet giving is where you're looking at what's on the balance sheet, and it's a gift that's not coming out of current cash flow. For example, Randy, we all know that we can give an old car to charity so, if we write a check to charity for $10,000 and we get, let's say, a 30% tax deduction, our net cost of that gift from writing a check is $7,000, okay?

Randy:    Right.

Mark:    However, if we have a old car that maybe is worth $10,000 on our balance sheet that we don't need or don't use any more, and we gift that to charity, it didn't come out of cash flow. It was just sitting there. That car, valued at $10,000, gifted to charity, becomes a positive cash flow item of $3,000, whereas the check written was still a cash outflow, a negative of $7,000. That's not to say that it's necessarily negative. It's going to do some good for the charity but, from a cash flow standpoint, it's a negative, whereas a balance sheet gift is a positive.

If we take that a step further and we look at some things that typically exist on balance sheets, the majority of business interest in this company is not publicly traded stocks. It's privately held company equity so, for many business owners, the ability to take 3% or 5% or the annual amount of gross that they see in their business as a percentage of total value and give that to charity, that opportunity exists each and every year. If that represented, for example, $300,000 against someone that has an income of a million dollars. They're getting their 30% of HEI gift by gifting a piece of paper and, as a result of that, if they're in a 40% tax bracket, that's going to create $120,000 of positive cash flow back to them immediately.

The big part of the equation of what we lay out in the planning precepts in the book is, what are you now going to do with that found money that you just got back from the IRS? If that's $120,000 a year and you do that for ten years going, that's 1.2 million. What can you do with that? What are the different things that can be used for? The answer to that depends upon what a particular donor, or what a particular family's, overall planning objectives are.

Randy:    Again, there's an opportunity to magnify the matching of values there so that they're squaring up their values as opposed to giving it to the government to do whatever they want with it.

Mark:    Absolutely. Randy, in the example I gave, if all they were giving away was ten years' worth of the gross in their business and the company then redeems that stock that was gifted to charity, or maybe they purchased that stock down into a dynasty trust to further the intentional stewardship aspect of this equation, that's perfectly fine. The charities are going to be blessed, but they could take that $120,000 a year, and they could turn around and make another gift of $120,000. If they had all of their family wealth transfer planning taken care of, that's certainly within the realm of possibility.

In many instances though, where we want to start is to see if that represented in that example three million dollars of illiquid assets over ten years and we wanted to magnify that back to the family, there's wealth restoration mechanisms that can be utilized, taking the $120,000 that we got back from the government and applying that towards wealth restoration mechanisms, further wealth transfer mechanisms and devices, such that the three million dollars that ended up going to charity, sooner rather than later, is restored back to the family sometimes two, three, or four times over during the individual's full lifetime.

Randy:    You know what's really interesting to me is that, and you and I have both probably had this happen, is where people, individual clients or people we run into, say, well, I'm just not charitable. Well, they are, right? They're giving their charitable, or social capital to the government. It's a very, very hard concept for many people to explain, but it's so logical, don't you think?

Mark:    I rarely have anybody in an initial discussion that considers themselves to be a philanthropist. They might think of themselves as, yeah, I give here, I give there, but they don't think of themselves as a philanthropist. When they understand the concept of involuntary philanthropothy, they get it, and now they understand the equation, and they understand it's the beginning of an understanding that they have choices, but that a certain level of thought has to go into the process, and that's why we wrote the book, to give people some golden nuggets and some concepts that they could apply immediately in a very topical fashion, but as well to provide some structure that, if they want to take a deep, deep dive into achieving optimal outcomes in their overall family wealth planning, which includes both family and charity, and hopefully diminishing the amount that goes to government as much as possible, those outcomes are all very, very noble. Good stewardship ... Paying too much in taxes or leaving estate taxes on the table is not good stewardship by any measure.

Randy:    I couldn't agree with you more. How do we find your book? It's Integrated Generosity.

Mark:    The website address is integratedgenerosity.com, and we actually have the contributed chapters are now available on the website as an ebook. All you have to do is sign up for our White Paper Series, which are strategic excerpts that we've taken from the book. You get the ebook immediately and then, over the course of the next eight weeks, you get bite-size installments that can easily be consumed and digested over a cup of coffee once a week.

Randy:    I think any advisor out there certainly ought to avail themselves of at least the ebook. You smart guys who really want to get your arms around this and really start talking to your donors, clients, prospects, whatever you want to call them, deeply about changing their viewpoint so that they can start to see that they're not going to take money away from their family. They're really going to steward their money better by giving it to causes they believe in. There are some real nuggets, both in this conversation today and in the book that Mark has been generous enough to produce. It's integratedgenerosity.com. Mark, anything you want to say in wrapping up?

Mark:    Just in wrapping up, there's about a two-minute video on the website so, at the very least, take a look at the video. You'll find it to be pretty engaging along the lines of what we've talked about today, Randy. The other thing is that we do have bulk order discounts for charitable organizations, for ministries, and so forth, that want to take and use this book as a reach-out, as maybe even just a way of saying thank you to their board members and their major donors to help stir them further in various concepts of generosity that they may not have been exposed to.

Randy:    I think that's great. People need to really get educated about this topic. It's obvious to me that you've really thought this through really well. It's very clear, and I think everybody ought to take advantage of it. Thanks so much today, Mark. It's really been great having you with us.

Mark:    I appreciate you taking the time, Randy, and look forward to visiting with you further.

Randy:    Great. Thanks.

Click here to listen to the audio version of this interview.

About Mark Trewitt

Mark Trewitt is a recognized educator and author, specializing in estate and charitable tax planning, and is well into his second quarter century in financial services. Helping clients plan and achieve financial independence and security since 1981, Mark founded Integrated Financial Solutions Group, a family office wealth management firm located in Plano, Texas, in 2006.

With the heart of a teacher, Mark wrote Integrated Generosity to expand upon strategies learned, observed, developed, and applied over several decades of a financial services practice. Taking full advantage of government tax incentives available through charitable giving and utilizing a process that starts with optimizing tax reduction strategies, Mark helps families redirect income and estate taxes toward the more impactful endpoints of family and the causes they care about.

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