“Third Sector” A Term Whose Time has Passed – and, Here’s Why

It’s time to say ‘Good Bye’ to an old term. It’s time for “Third Sector” to leave our lexicon.

You see, for many years, charities and nonprofit organizations were identified as part of the ‘Third Sector.’  The term implied an understanding that government and for-profit organizations were part of the First and Second Sectors, respectively. Seems innocent enough. Historically, it may even have begun as a self-identifying term. But, alas, the ‘third sector’ has also come to imply a bit more than what may have been once intended. Or, actually, less.

Much like Orson Scott Card’s fictional character, Andrew “Ender” Wiggin, felt the impact of being identified as a ‘third’ in a society filled with mostly just two-child households, being third in just about anything carries inescapable even if inadvertent baggage.

In positioning charitable and other nonprofit organizations within the ‘third sector’ the potential – perhaps even, the real – impact on perception – and, in particular, public policy – is that this so-called ‘third sector’ may be seen generally and by decision-makers as not on par with the other two sectors of the economy. Perhaps as something less significant within our nation’s – and the world’s – economy.  Yet, the economic impact of this sector – in terms of employment and percent of GDP is consequential.

Research conducted both in the United States and Great Britain over the past 15 years consistently reveals the growing economic impact of this sector. For example, The Johns Hopkins Center for Civil Society reported in 2013 that 7.4 percent of the world’s workforce was employed in charitable and other nonprofit organizations. In the United States, the workforce includes 10.2 percent employed in this sector. At least 6.6 percent of our nation’s GDP is derived from charitable and other nonprofit organizations – making it one of the top contributors to our national economy. Total annual revenue in this sector is fast approaching two trillion dollars.

These metrics of economic impact are not often considered when thinking about charitable and nonprofit organizations. Indeed, these organizations have historically been appreciated for their good deeds but undervalued for their economic impact. From this reality come great challenges, especially when it comes to such things as impacting national – and even state-level – public policy.

It may seem like a small thing to do in trying to make a big change, but words have meaning and words are change-drivers in the world of perception. Simply, it is time to drop “Third Sector.”   In our national and global economy, there are three co-equal sectors.  The public sector, the private sector, and the voluntary sector.  Indeed, words have impact. Perception often follows from seemingly innocuous things like labels and brands.  The Voluntary Sector, one of three co-equal economic sectors – let’s do it… now!

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The Gift of Life Insurance – An Often Forgotten Asset

Perhaps you’re giving some thought to the financial resources you may have available to make a philanthropic gift.  Perhaps you’re looking for a way to fulfill a campaign pledge, or to make a year-end gift, or to just help a cause you care about in a special way. Whatever the reason you exploring the idea, one set of assets that may not come to mind quickly — if at all — is the life insurance policies you may have collected over the years. Though you may not have thought about the idea before, a life insurance policy can be an ideal asset to fund the special gift you want to make.

In fact, whether you have several life-insurance policies or just one, once you determine that the need you once had for life insurance has passed – and, for many of us the need does fade away at some point – a philanthropic gift can be the best way to put such an asset to good use.

If you have a paid-up whole or universal life policy, you can make a gift of the policy to your alma mater or any other charitable organization — and, both the accumulated cash value and the ultimate death benefit can be earmarked by you to fund a generous gift.

And, it’s easy to do.  Your insurance representative can provide you with the forms you’ll need to name the organization you wish to designate as the charitable beneficiary and owner of the policy.  Once the paperwork is completed, you would have made a thoughtful gift using an asset that you no longer need.

Even policies for which you are still making annual premium payments can be used to make a charitable gift.  When you name a charitable organization as the beneficiary and owner of such a life insurance policy, you also can make an annual charitable gift for the amount of the premium payment – and, this would ensure that your designated charitable beneficiary has sufficient funds to keep the premiums paid year after year. Turning what otherwise would be just a premium payment into a charitable contribution is an extra advantage of such a gift of life insurance.

If you have a question about ways to devise creative charitable gift plans using existing or new life insurance policies – either for yourself and your family or for a charitable organization looking to enhance its gift planning options, I would welcome hearing from you, at tsudol@bobcarterco.com.

Life insurance may be an often forgotten asset, but it’s a great way to make a special gift.

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Because You Care, Right Now is a Good Time to Act

With all the day’s events from around the world filling every available media – from newspapers, radio and TV to Twitter, Instagram and YouTube – one thing that gets lost in all the news clutter is the message about how much the charities, churches, colleges, and other causes in our lives need the support of folks who care.

Economist Arthur Brooks has asked – and answered – the question, “Who Really Cares?”  and the overwhelming conclusion he discovered during his thorough research is that the folks who care the most are the folks we all know best – our friends, families, and neighbors.  Sure, there are the big-time philanthropists we see in the news making gifts of $50 or $100 million (or more), but there’s just not a lot of Vanderbilts, Carnegies, Buffetts, and Gates around.  While such gifts can certainly transform an organization and take it to a new level of service, the many modest gifts typically are the ones that keep the doors of the organization open day in and day out.  Indeed, the lion’s share of charitable giving comes from folks of modest means – billions of dollars in charitable gifts come from millions of donors every year. And all the causes we care about are able to help make our lives and society better thanks to these folks – in fact, thanks to you.

Without a doubt, it’s easy these days to be concerned about a lot of things happening around the world – and, right in our own corner of the world.  Many of these may be quite beyond our capacity to effect the ultimate outcomes.  But, what is well within our reach is the chance – right now – to do something that can truly have an impact.  Whether it’s a gift to your alma mater to help with scholarship needs for students trying to be the first members of their families going to college, or a pledge at work for United Way, or adding a special gift in the plate at your place of worship for a mission trip, or making a commitment to the capital campaign to build a new childcare center in your town – whatever it may be, it will be greatly appreciated.

I suppose it comes down to this: If you care, this is a terrific time to act on your caring nature. Not only will the beneficiary of your generosity be appreciative, but you’ll be glad you did it, too.

And, if you have a question, or want to learn more about the impact of philanthropy in our world, just send me a note at tsudol@bobcarterco.com.

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Preserving Our Natural Resources – An Opportunity for Philanthropy

Been thinking recently about the world’s natural resources and our role – individually and collectively – as stewards of the natural world. So many issues – and, at the same time, so many opportunities for those who are philanthropically inclined to make a real difference – both domestically and around the world – that can last for generations.

We – especially we in America – have long held the belief that our natural resources are limitless. Indeed, our habits of consumption over the years have reflected this mindset. Even as others in the world have had to use restraint to preserve valuable life-giving resources, we’ve been reticent to do so. And, our resources in America show the scars of our living large. The notion of an American Way of Life immutable to the reality that we all share one planet and its resources is quite at odds with the view perhaps best captured by Thomas Friedman in his book about a ‘Hot Flat & Crowded World.’

A look back into the 18th Century finds a letter written in 1787 by Thomas Jefferson to his friend, James Madison. In it, Jefferson pointed out, “Nature has favored our country.” Who wouldn’t agree with his assessment? Perhaps, it’s time to honor such a sentiment by challenging ourselves to return the favor. Imagine all the people in all our communities across the country embracing the idea of changing behaviors and adopting new – good – habits that can help preserve the resources with which Nature has favored us.

And, as for the role of philanthropy? Well, opportunities abound with charitable organizations at work in your local community, regionally, and around the world for caring individuals to invest private philanthropic funds to seed new initiatives, support large scale recycling efforts, figure out ways to cut consumption of electricity, reduce water waste, and move about without always using cars and other personal vehicles, and ensure clean healthy water supplies.

It’s not just Carlos Santana who believes “This can’t go on… We got to change our ways.” Indeed, there are ways all of us can take on this work – as donors and as volunteers. It’s time. The time certainly seems to be upon us to act – to give money, give time, give new habits a try. If you’re interested in learning about where to turn to get involved as a donor or volunteer, please contact me.

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Bequests are #1 Gift by Those with Estate Plans

Recent research shows that 89 percent of gifts in estate plans are charitable bequests.  In fact, a charitable bequest is an ideal way to fulfill a lifetime of charitable giving for your favorite charity, church, alma mater, or other cause.  Whether you have a Will or a Trust for your estate plans, a charitable bequest is the #1 way to make a testamentary gift. If you have already included a charitable bequest in your estate plans, you have ensured your legacy gift will make a difference for years to come.  If your intention is to create an endowment by your bequest, your support will help in perpetuity. If you have not yet made arrangements for a charitable bequest, it’s relatively easy – and you don’t need to create a new Will or Trust – a Codicil (for your Will) or an Amendment (for your Trust) is sufficient.

It’s important to check with your favorite charity, college, or church about the exact language you should use for your charitable bequest – to be sure what you want to do will be done.  The key thing is to ask your lawyer to prepare the provision for your charitable bequest so you can sign the documents promptly and then rest easy in the knowledge that your desire to make a testamentary gift will be fulfilled according to your wishes.

And, in most cases, your charitable beneficiary will recognize your generosity in a special way. For example, your alma mater likely has a Legacy Society to recognize everyone who remembers the institution in their financial & estate plans.  Typically, members of Legacy Societies gather at reunions and other special events.  Hospitals, churches, and other charities also honor donors of testamentary gifts in similar ways.  Of course, if you prefer to let the charity know of your plans but otherwise keep the matter confidential, you can be sure your charitable beneficiary will respect your request for privacy.

Things like college tuition bills, mortgage payments, health care costs, and retirement savings sometimes make it difficult to do what we want to do for the charitable organizations we support during our lives.  A charitable bequest offers a way to make the gift of a lifetime at a time when doing so at last may be possible.  You don’t have to be a Vanderbilt or a Carnegie to make a difference; every charitable bequest touches the lives of others in special ways.

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Can’t Make A Charitable Gift Right Now? Okay, How About Making A Loan?

Hmmmm, a loan… “You want me to make a loan to my favorite charity?”

YES! Okay, so it goes by another name – but that’s the idea. Here’s how it works:

You want to do something for a charitable organization in your local community (or your church or alma mater) – and, it’s something that can really make a difference. BUT, you have a family to worry about – children or grandchildren…. their college educations, their first homes, their first business venture’s capital. You have some money available right now, sure – BUT, they will need that money from you in 15 or 20 years. So you’re concerned that if you give it away now, you’ll have nothing for them later.

Ah, that’s the dilemma. You’re not alone. Many families face the same situation. Here’s the solution:

Two simple steps – First, you put the assets you know you want your children (or grandchildren) to have in 15 or 20 years (or however many years later you wish) into a trust – so that the assets are safe and secure – and you name the family members you intend to help later as the ultimate beneficiaries of the trust. Second, you name the charitable organization that you want to help right now as the trust’s immediate beneficiary. You do this with a simple designation in the trust document.

Once you’ve done these two steps, the charity will receive an annual gift derived each year from the earnings on the assets in this trust – and the principal in the trust will be preserved for your family’s later use. In this way, you would effectively be ‘loaning’ the benefit of trust assets to the charity for a period of years – for example, to start a new program or get past a rough patch in the economy – until the next generation in your family needed the money for their own purposes.

You would be making a very special gift to support the charity each and every year until the trust is scheduled to terminate. And, when the trust runs to the end of the years you established when you created it, the assets in the trust will go to your designated family members for their use.

Beyond the value that these annual distributions from the trust have for the charity, you also gain a few other advantages in doing this. You see, the overall value of the assets in the trust likely will appreciate at a rate higher than the annual payout for the charitable gifts – and, this means your family members could very well end up with more at the end of the trust than you put into the trust initially – and, whatever the amount – they will receive the full amount of the principal in the trust free of taxation, if you design the plan well. And, you’ll gain a few tax-wise benefits from this plan, too.

Hard to create? No, actually it can be quite a simple thing to do. Do you have to be a Vanderbilt or a Carnegie for this to make a difference? Not at all! It just may be an ideal way to add great value in your life, for your family, and for your favorite hospital, church, college, or other charity.

P.S. TO ENTREPRENEURS – The kind of arrangement described above can be a creative strategy for conveying a privately held business to the family’s next generation. By combining this trust – which is called a Charitable Lead Trust – and a Family Limited Partnership you can strategically structure an effective way to achieve valuable family and philanthropic objectives. Something worth considering.

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Living Endowment – This LIttle Two-Step Makes a Big Impact

The financial markets seem to be moving in a good direction recently – maybe a good sign that we’re on the right track.

But, for many, portfolios are still not much above where they were in 2008 – and, in some cases, they still may be below their pre-recession levels. And, not just your portfolio has struggled – so too have the portfolios of your favorite charitable causes… you local community organizations, your hospital, your alma mater, your church. While the need for action is great, the financial resources to fuel that action remain quite limited in many cases.

Is there something creative you can do right now to make a difference?

In fact, there is something very creative you can do now – that will have a big impact both now and later.

Say you have the desire to create an endowment – a legacy gift – that will last forever, perhaps to support a special program in your local community. Or provide scholarships at your alma mater. Creating an endowment may be beyond your reach right now. In fact, it may not be something you can do until much later – perhaps not until your executor is administering the Will you leave to direct the distribution of your estate.

The truth is that a bequest is the only chance most folks have to make a large gift.

But, with a relatively small annual gift, you can make a gift now that is the equivalent of what the organization would receive as income from an endowment. Here’s what I mean: You can bring to life your ultimate bequest right now – and, you can do so with an annual gift you likely can afford to make.

Then, at the time of your death – when the bequest you provide for in your Will finally is available for distribution – the gifts you’ve been making each year will be covered by the income derived from the endowment funded by your bequest.

This little two-step is a creative way to start having an impact now AND ensuring that you will be making a difference for generations to come.

How much will it take to make this happen?

Let’s say you want to support a special program or create a scholarship at $2,000 every year. That would require an endowment of $50,000. So, you could provide for a bequest of $50,000 in your Will to create the endowment. And, if you already have a Will, a simple Codicil can be used to add this gift to the terms of your Will. Then, you can plan to make annual gifts of $2,000 each year to provide immediate support for the special program or to make this new scholarship available.

Here’s the added advantage of this plan: You’ll get to see the impact of you generosity now, while you’re around to appreciate the value of your gift. If you just made the bequest and did nothing more than that, you’d never see this impact or, in the case of a scholarship, actually meet the students whose lives you touch.

There are great needs for people to do what they can to help. If you can make even small annual gifts and arrange for a large gift in your estate, you would be a philanthropic hero.

Got a question, just use a comment to let me know.

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