Tara (00:50):
Welcome back to the Art of Estate Planning Podcast. It's your host, Tara Lucke. And today's episode is all about charitable gifting in wills and the conversations that we are not having as lawyers.
(01:06):
So this episode was sparked by Myles Kehoe reaching out to me. So Myles, you'll hear from him today in this episode. He is a retired lawyer and financial advisor and he is now acting in the role as a liaison for the Variety the Children's Charity in the Queensland branch. And Myles wanted to reach out to me to basically have a conversation about how can we encourage lawyers to raise charitable giving in our estate planning meetings. So Myles and I have a great chat and I will definitely share that with you. But before we dive into our conversation with Myles, I know that some of you love statistics and I wanted to dive into the actual stats and numbers. And a really good place to start is a document called The Bequest Report. So that's put together by JB Ware. They released it in July 2024 and it basically looks at firstly the intergenerational wealth transfer that is going on in Australia, but tying that into what is the state of play with the full purpose or charitable sector in terms of the number of charitable requests that are being made by Australians and how our Australian for purpose industry compares overseas.
(02:44):
So I've linked the report in the show notes if you want to have a look. It is a great read. There's some interesting estate planning statistics overall. I'm going to focus on the statistics and some of their recommendations from the report in a charitable bequest context. And then we will hear from Myles with the boots on the ground about what the charities themselves are considering. So we know that Australian's population growth is slowing. In the J.B. Ware report, they also say that in combination with our growth slowing but our population ageing, the annual number of deaths is going to increase from about 180,000 currently to over 330,000 by 2064. So that's an annual rate of people passing away. Aligned with that is that total inheritances currently or as of 2024 are about 150 billion and that is expected to increase to about 5.4 trillion over the next 20 years.
(04:01):
So there's a statistic that you might often hear from the Productivity Commission from their 2017 report of 3.5 trillion over two decades. So JBWare is even more bullish on that, estimating $5.4 trillion. I can't even picture how many zeros that is. In the report, they also confirmed that only about 1% of gifts are for charitable purposes. I think that's fascinating because obviously in the report, J.B. Ware comment on how high Australia ranks on wealth and the proportion of people writing a will. But the proportion of wills, which gift to a charity is so much lower compared to our counterparts like the United States and the United Kingdom. So for instance, only 1% of inheritances are left to a charity in Australia, comparing that to 4% in the US and 3.7% in the UK. So we're less than a quarter of what the UK and the US are doing.
(05:25):
Interestingly, when you look at the population of people who have a will in Australia, they estimate about 60% of Australians have a will comparing that to 32% in the US and 44% in the UK. So we have a much higher take up of will making but a much lower proportion of actually giving charitable bequests. Those numbers are also more stark when you look at people over 70. So in Australia, more than 90% of people over 70 have a will compared to 72% in the US and 78% in the UK. So benchmarking us against other very wealthy nations, our charitable giving is a lot lower. Now, the JBWare report really emphasises that there are things that our industry can do to try to increase this take up. So things like practise culture and a lack of discussion by professional advisors are really easy opportunities to increase this level.
(06:38):
On page 15 of the report, they have a really powerful quote by Jodi Kennedy. She's the general manager of philanthropy and community trusts at Equity Trustees. And she says, "The bequest report outlines the significant scale of the generational wealth transfer, which creates an immense opportunity for us as a country to increase our giving up to the level of our global peers. We need to collaborate as a sector to help more Australians to invest in the sector if we want to achieve greater social change. And what I really like about this report is the holistic view of what legacy is. So they go into detail about how most people are really just leaving their inheritance to their spouse and then to their children and not giving a lot of thought to the broader legacy goals for the family. And they propose some alternate meanings of wealth to try to encourage families to take a deeper meaning of legacy, one that transcends tangible assets and ties closely to the concept of a life well lived.
(07:57):
So instilling values of generosity, aligning the inheritance with strong family values and a desire to contribute positively to society. And you'll hear from our conversation with Myles, we touch on this as well. I think it is really worth reflecting when you're meeting with clients to have an assessment of have they actually given a lot of thought to their legacy goals and what they want to leave behind as their own personal legacy, or are they just sort of defaulting to what they might have seen other people doing? Because the reality is many people might only approach making their will one or two times in their lifetime. I know if you're an estate planning lawyer, you're probably updating your will multiple times. I seem to be revisiting mine every couple of years, but for a lot of Australians, they might have never made a will before. They might not have sophisticated examples of how to approach crafting a legacy and making a will, particularly if their parents just did a very basic, "I love you, I hate you will," and that's the only modelling they know.
(09:18):
On this podcast, you will have heard Carrie and I have spoken about it and I've also covered it in lots of episodes that our role is as a guide, not just a scribe. So we really do have a responsibility to support and guide our clients through these decisions, particularly decisions that they have never had to approach before. Now, obviously we can't be influencing them in an undue way, but I definitely think it is worth having the conversation and turning their minds to any philanthropic objectives they have and factoring in what would be the impact, if any, on including or increasing a charitable bequest. In the report, there's some statistics basically highlighting that the age that people are receiving their inheritance and the greatest amount of inheritance effectively peaks at the age of 60. And this is obviously connected to people having children later and an increased life expectancy.
(10:29):
And in JBWA, they raised the question, what is the need of a beneficiary at the age of 60 compared to when they're younger? So obviously we need to be cognizant of the cost of living and the fact that many people are relying on an inheritance to get into the property market and for their financial security. And I would put forward that if you're dealing with a smaller estate and beneficiaries with high needs, then it's probably not right to be influencing them to make significant charitable gifts. But for higher net families, it may be that they can contemplate a gift in their will without really impacting on their beneficiaries. On page 13 of the report, they put forward this example. So consider a family with three children whose net wealth has risen over their lifetime to $5 million. If they left 10% of that wealth to charity, each child is still going to receive $1.5 million, down from the 1.67, but in addition to those children still receiving more than adequate provision of $1.5 million, there is also a continuing of the family's values through the legacy of their parents' for purpose gift.
(12:01):
So for old clients who their beneficiaries may not have a huge need and may be well established, it is really worth, I think, asking the question and just having the conversation, have you thought about including charitable bequests and tying that into the legacy that they want to leave? So we're going to talk to Myles, who is from Variety the Children's Charity, and he's going to share some of the things they do there as well. But if you find that you start having this conversation and the clients actually aren't aligned closely with any particular charities, I came across this great website in Australia called includeacharity.com.au and that actually is a directory where you can type in or search the cause that is close to heart and then the jurisdiction and then it actually puts forward a directory of registered charities that fit that criteria, which can be a really helpful resource to just help guide a client.
(13:18):
If they know they have particular causes that are important to them, they're not quite sure which exact organisations. This can be a really handy tool to try to narrow that down. So make sure you check out this report from JB Ware in the show notes. But to round out this episode, we now have the privilege of hearing from Myles. So as I said, he's a retired lawyer and financial advisor. He joined me for this conversation in his role as a liaison for the Queensland branch of Variety the Children's Charity to share his insights about rethinking our approach to our conversations with clients around charitable giving in estate planning. So welcome Myles.
Myles (14:00):
Thank you, Tara. My pleasure.
Tara (14:02):
We were trying to work out how far back we go. It's been a long time and we have worked together for many years through the lawyer platform and estate planning. Myles, to give everybody a bit of context about how you found yourself in your role at Variety, can you let everybody know your varied and diverse background?
Myles (14:26):
Yes. Well, I was a lawyer for many years. I decided to transition to become a financial planner and in my 20 years of planning, I combined my planning role as a life insurance and risk specialist, buy-sell agreements, life cover. I combined that with my knowledge of estate planning because I thought that it was a very easy conversation to discuss with someone if they get amount of life covered. Well, what's going to happen to it when you pass away? So in many ways, it might look like a career change, but it's merely a continuation of the same work. So I work with families on some of life's most important conversations, death, incapacity, vulnerable beneficiaries, their legacy. And what I came to realise that estate planning is never really about documents, it's about people. It's about certainty and it's about protecting those we care about. So when an opportunity in 2024, my wife and I left to live in Italy for six months and when I came back, I had this opportunity came up to work for Variety and I've been involved with Variety for over 14 years in the events to raise money for children and that's how I ended up there.
(15:40):
So I suppose in today's meeting, I just want to highlight three takeaways and as you know, when you take will instructions, the question of whether you want to donate to a charity isn't something that is the foremost of a lot of lawyers, some it might be, but a lot I don't think it is. So I always frame my discussion with clients is that, are there any causes or organisations that have mattered in your life that you may wish to support a part of your legacy? Not because lawyers are selling anything, but I think clients often never raise charitable giving unless they're given permission to do so by the lawyer. Lawyers may think that the client will raise it if they want to give, but that's generally not the case. And secondly, I want to make it easy for lawyers. So I don't want lawyers to have to reinvent the wheel and I'd just like to finish with one thing.
(16:33):
I'm not a lawyer and a planner anymore, so I don't give legal advice or planning advice. I should always check with the appropriate professional, but I'd like to guide people with some knowledge that they might not have before that might help them in their practise.
Tara (16:47):
Thanks, Myles. That sounds incredible. And I mean, you make some really good points about a lot of will makers haven't, it just hasn't crossed their mind to think about adding a philanthropic element to their estate plan, either perhaps they don't know how much they're worth and what their estate will look like when they die, or it's their first time doing this and they just haven't had that coaching or experience or seen other people introduce a charitable element. So I'd really excited to hear your thoughts on firstly, why lawyers should be raising this with their clients and any tips on how they can approach the conversation.
Myles (17:34):
Sure. Well, first of all, one of the main reasons why I'm talking to you, Tara, is because of your reach to estate planning professionals. I am constantly amazed about the level of, how would I put this? There are a lot of lawyers out there that don't have estate planning as a specialty and they think doing a simple will is good enough or even more of a worry to me is that a lot of charities think that an online will that where a client gets online, does their own will is acceptable and you and I and your listeners will know that the disasters and the problems that can raise is enormous. So I'm glad that you run your programme so that lawyers can get proper advice on how to conduct estate planning. Estate planning, it's not just about the transfer of wealth, it's often a transfer of values and some families want a quality, some want protection, some want opportunity for their children, but someone leave something meaningful behind.
(18:34):
And I think that it's important that lawyers ask the question now I might ask, "Why don't lawyers raise charitable giving?" I don't think it's because they oppose it. I think sometimes it might feel awkward about asking it as they might only, they assume if a client wants to, they'll bring it up,
(18:54):
But all they need to ask is, "Are there any causes or organisations that have mattered in your life that you would want to assist on your passing?" Now I wouldn't say, "Would you like to leave money to a charity?" I'll have some wording in my pack, but maybe the wording could be some clients will choose to leave a legacy gift to causes aligned with their values. Is that something you'd like to explore and leave it at that?
Tara (19:18):
Yeah. And I just think there's a lot of people who are used to having a family value and philosophy of giving and donating, but there's also lots who they're used to donating with their time and showing up in the community at the local clubs or sporting organisations and it just isn't a muscle that they're used to exercising when it comes to actually giving money. So I think a little bit of a nudge or just planning the seed and sort of saying even if it was a small percentage of your estate, then that actually still equates to a significant contribution to these causes without taking away from your main beneficiaries and sort of showing leadership in terms of your family. It obviously depends on the size of the estate and the needs of the beneficiary. And look, if you've got a blended family where there's not really enough money to go around as it is, I probably would be tabling it, but for others, it's worth planting the seed.
Myles (20:25):
Well, in my particular circumstance, remember that I came from a planning background. So most of the clients I spoke to had several million dollars in super because I organise that. I understand a lot of clients aren't in that position, but even you don't want to make the bequest and this is where your audience, it's so important to get it right. You don't want to give a bequest that's going to make the gift invalid for a whole range of reasons as you know. And I don't like putting percentage on it, but I normally recommended that clients look at 5%. 5% can make an enormous difference to a charity continuing with their good work in the future, but it has very little impact on the family's overall wealth. And I think that for those people that already asked the question about charitable giving in their will instructions, I think it's important that my role in variety is to explain what we do and how we do it and the really good work we do and I'll get into that later.
(21:24):
But for those lawyers who aren't asking the question, there was a study in the UK done just recently and by lawyers just asking that simple question, some clients choose to leave a legacy gift causes align with their values as something you'd like to explore. Just that one question, there was 120% increase in people leaving a bequest to a charity.
Tara (21:45):
Wow.
Myles (21:46):
It's enormous. So in the context where in the next 20 years, I think there's $5 trillion worth of intergenerational wealth, good work that can occur through a charitable giving is just enormous. And there's so many good charities out there, the Royal Flying Doctor Service, the guide dogs, the animal shelters, there's a whole range of them that people feel obliged or would like to give to those causes because they've been involved with it. I just happen to deal with the children's charity and a lot of good children's charities around, but I just want the lawyers to start asking the question.
Tara (22:22):
And Myles, from the charities perspective, have you got any tips for lawyers listening to this in terms of the preferred way that they like to be provided for? Is it just a cash gift, a lump sum? And what are you seeing that lawyers are doing that actually makes it hard for the charity to manage that inheritance or receive it?
Myles (22:48):
Sure. Well, on our website there will be clear wording. So if they want to leave a gift to the variety of children's charity, there'll be clearer wording on the nature of the request. But of course there's lots of ways, lots of charitable options exist. Now I think your podcast 48 with Denise Chung was a brilliant overview of the living trusts, charitable trusts, the public ancillary funds, the private ancillary funds. I'm not here to discuss those today, so I'll just keep it simply to fix some bequests or percentage gifts or residual estate gifts. That's the wording that I'll have in the charitable trust is a whole section all by itself and today I just want to focus on taking well instructions and having a discussion about leaving something to the charity that aligns with the values. But I think you asked what problems there were. I think getting the name wrong, having gifts fail because incorrect wording or the charity doesn't exist anymore.
(23:48):
So I'll have some tips on my website. Remember, I don't give legal advice. I just give commentary. I'll leave the legal advice up to the lawyers, but it's just a matter of making sure the instructions are clear and making sure that the gift doesn't fail for lots of reasons, which I won't go into at the moment.
Tara (24:08):
I mean, it is, I think, helpful as part of it when we do raise the conversation with the client and they go, "Oh, sure, it sounds like a good idea. I haven't really thought of who to give it to. " And I think it's helpful for us as lawyers, obviously not to influence who they choose, but perhaps to give them some parameters around the types of charities where you know that the gift is going to make an impact. So would you like to talk to us about that in terms of what we should be looking for? Like you have to be registered, perhaps a history of a longstanding history of operations. Are there things like that that we can just help clients go, "Why don't you go have a look at which charities might be suitable, but I'd probably just measure them against these benchmarks?"
Myles (25:01):
Well, we have to be registered. We're a registered charity in Queensland. Variety is actually Australia wide. It's just they all run different tents in their own state. So when I say variety, I represent variety of Queensland, but of course varieties all across Australia and it started in America about almost a hundred years ago now. If we're in the fortunate position where they think we're worthy to accept their money, they need to know that it's going to the right place at the right people at the right time. And as I said, there are a lot of good charities out there. So whilst I have a variety hat on, I appreciate that lawyers can't lawyers need to ask their clients what their values are and what they want to do and take their instructions and it has to be independent and that's what I want to focus on.
(25:42):
I just want boys to ask the question and if they're not asking it, can they please ask it? So one of our success stories was a child that was playing the volleyball, but his shoes were taped up when he was young. So we gave the family $5,000 for him to get his shoes and New Jerseys and a flight around to a session where there were other coaches looking at him playing. From that, he's now playing in the Olympics
(26:08):
He's a guest speaker. So there's so much good work that we do and it's really my mission at the moment is to make sure people are aware of what Variety does, the good work we do and if we can get help in any way, we appreciate it.
Tara (26:21):
So one of the messages I'm hearing you saying is it's always worth when you're drafting a will with a charitable gift to connect with the charity. And that might be as simple as going to their website and just making sure that you use their preferred wording that they've published on the website about how to describe the organisation. And if you've got a client who actually wants to give to more substantial gift like your example about gifting the property in Brisbane for families who need to travel and stay in Brisbane for medical care, I'd probably recommend, do you think opening up a communication channel with the charity to check, is this a suitable gift that the charity has a purpose for and will be able to manage? And just checking that type of thing before just going ahead and drafting it.
Myles (27:14):
Well, one of the metrics or what I'll put in place is I'll be approaching a lot of estate planning lawyers that I know and maybe now on your podcast and might want to reach out. I'll be asking them to give me some feedback that if they know what client wants to leave money to variety that anonymously they'll let us know not who the person is, but approximately how much it might be in the timeframe we're looking at and what the gift is because we don't mind having gifts that are for a particular purpose. Like for example, we have our financial literacy programme. We feed through the YMCA about 200,000 children a year that don't get regular meals. We have programmes for children to have a day out with their families that can't afford it or need support. There's a whole range of things we do.
(28:03):
So some donors want to specifically target the money to a particular purpose and that might be fine now, but if we don't run that particular purpose in say five years time, then it might be an idea for them to let us know what they want to do. It might be just as easy for the money to go into our account and we can use it for the purposes of helping disadvantaged children at the time. But if they really want a specific gift that's out of the norm, ringing us that would be important to make sure that one, the gift doesn't fail. So I'll give you an example. When we apply for grants and that's part of our daily function, not only do we give grant money out to children that we support, we also apply for government grants. It's a normal part of living in a fundraising world.
(28:53):
Some of those grants will be for a specific purpose. We have to prove through audits that we've used that money for a specific purpose and if we can't spend that money, we have to give the money back. So that's the level of auditing and due diligence we have to treat clients money. So yes, it would be very good if, of course, if the clients wanted to give a bequest, we'd love to hear from them.
Tara (29:15):
Myles, thank you so much for coming on the podcast today. It's been so insightful to hear this from the perspective of being in the charities shoes and it's also been great to hear about what Variety Queensland is doing as well. I hope you enjoyed that conversation with Myles and this episode has got you thinking. I just love the concept about a deeper meaning of legacy and how you can create a stronger connection with the community through charitable bequests in a well. We have spoken really high level about charitable giving and we haven't really touched on the type... Of charitable trusts out there. If you want to learn more about that, I would really recommend having a listen to episode 48. We had Denise Cheng speak with us and she dove into a lot of options around private ancillary funds and the types of sub-trusts for charitable giving that are out there.
(30:21):
In terms of keeping it simple, I wanted to just round this out with some tips and tricks on how to include just a simple gift bequest in the will. So my tips and tricks are firstly, always look up the website for the charity that you are including as a gift recipient and check if they have any wording on their website that they would like you to use because they will therefore make sure they have named the charity in their proper way. They'll have the ABN there and you don't end up with any kind of confusion or needing to apply to court for directions because there's uncertainty around the identity of the gift recipient. Also, make sure that your precedent has the sort of standard clauses in there about the receipt by the organisation being a proper discharge to the executor and the types of purposes.
(31:25):
As you heard Myles touched on including a general purpose for the bequest is probably the way to give the most freedom and flexibility to the charity so that they can align the spending with their initiatives in place at the time. We always have this issue around the uncertainty of timing when we're looking at gifts and wills. I would also encourage, and Denise touched on this in her episode 48. If you are planning on leaving a specific gift like a property, which can be really well appreciated, I think it would be important to liaise with the charity first to make sure that it is a gift that they can accommodate and will be able to be used by them rather than perhaps them not having the resources or the skills to be able to manage it. And lastly, I think you've got to consider is it better to give a fixed sum, perhaps adjusted for CPI, or is a percentage of the estate going to be better?
(32:31):
So those are some pointers when you're drafting. Overall, I hope this episode has inspired you to add into your conversations with clients a reminder or a prompt to check in. Do they want to give a charitable bequest, add it to your meeting agenda templates and just plant the seed. We don't have to influence them, but a lot of people haven't been through this process before. It might not cross their mind. And if you can plant the seed, we are growing the social good of bequests and also creating a deeper meaning of legacy. Thanks for tuning in. I hope to see you next week.
