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April 2024
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Money, mortality, and family relationships. Each of those topics alone can be tough for anyone to address head on, and when you combine them, it’s no wonder so many people put off setting up or updating their estate plans. Establishing a will, trust, and beneficiary designations forces a person to confront decisions about the ultimate division of their assets, and many people think estate planning is more expensive or more of a hassle than it really is.
But, getting your affairs in order–well before you need to due to age or illness–is truly a gift to your heirs. It’s extremely stressful for surviving spouses, children, and other loved ones to be faced with the emotional stress and workload of financial disorganization and uncertainty, on top of dealing with grief. Updating your estate plan also allows you to make arrangements for gifts upon your death to your favorite charities. Many people choose to support their favorite charities in an estate plan through a beneficiary designation. As you work with your attorney and other advisors, be sure to review the beneficiary designations on your insurance policies and retirement plans. Pay close attention to tax-deferred retirement plans such as 401(k)s and IRAs. Typically, you’ll name your spouse as the primary beneficiary of these accounts to provide income following your death and to comply with legal requirements. But as you and your advisors evaluate whom to name as a secondary beneficiary of these tax-deferred accounts, don’t automatically default to naming your children or your revocable trust. You and your advisors may determine that naming a charity, such as your fund at the Community Foundation, is by far the most tax-efficient, streamlined way to make gifts to your favorite causes upon your death and establish a philanthropic legacy. A bequest like this avoids not only estate tax, but also income tax on the retirement plan distributions. Please reach out to the team at the Community Foundation as you work with your advisors on your estate plan. We can:
We’ve all heard stories about the sad consequences of someone not having an estate plan, or even having out-of-date beneficiary designations. Estate planning documents, including wills, trusts, and beneficiary designations, often turn out to represent generous acts of clear distribution and conflict avoidance. An estate plan allows you to demonstrate how much you care about the people in your life as well as your charitable passions. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Simplicity, efficiency, and effectiveness have long been cornerstones of working with the Community Foundation to carry out charitable goals. Time and time again at the Community Foundation, we see how easily donors who’ve established a donor-advised or other type of fund are able to not only fulfill their big-picture charitable goals, but to act quickly to respond to critical needs in the community as they occur..
The flexibility of working with the Community Foundation allows you to support the causes you love at a financial level that meets your charitable giving budget. Early in the year, many of our fund holders transfer highly-appreciated stock to their donor-advised fund, for example, at the Community Foundation so that they are prepared to activate their annual giving right away. At every level of giving, philanthropy is a catalyst for improving quality of life. Indeed, anyone with a willingness to give can be a philanthropist. Whether you’re using your donor-advised fund to give $250 to a college or university, $2,500 to an animal rescue, or $25,000 to the art museum’s endowment, you’re making a difference. Consider that small donations from a large number of people can make a huge difference. This is especially true for responses to disasters and humanitarian tragedies. On the other end of the spectrum, very large donations to an organization can transform its ability to scale and serve a much greater population. In so many ways, whether gifts are large or small or somewhere in between, philanthropy creates the margin of excellence that helps communities, families, and individuals thrive. The team at the Community Foundation is here to help you achieve satisfaction and impact with your giving at any level. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Many donors and fund holders at the Community Foundation have updated their estate plans to leave a bequest to their donor-advised or other type of fund.
Some bequests take the form of a “specific bequest,” which means that the fund at the Community Foundation receives a specific amount of money from the donor’s probate estate or trust. For example, for a specific bequest, your advisor might include a provision in your will as follows: I bequeath $15,000 to The Community Foundation (taxpayer ID number and/or mailing address), a tax exempt organization under Internal Revenue Code Section 501(c)(3), to be added to the [Name of Your Fund], a component fund of The Community Foundation, and I direct that this bequest become part of the Fund. In these situations the Community Foundation will be ready to receive your bequest, typically as soon as the estate is settled. In other situations, you may want to leave a bequest of a portion of the remainder of your estate after all specific bequests, expenses, and taxes have been paid. These types of bequests are called “residuary” bequests. The language can look something like this: I leave all the rest and residue of my property, both real and personal, of whatever nature and wherever situated, and assets, including all real and personal property, tangible or intangible, to The Community Foundation (taxpayer ID number and/or mailing address), a tax exempt organization under Internal Revenue Code Section 501(c)(3), to be added to the [Name of Your Fund], a component fund of The Community Foundation, and I direct that this bequest become part of the Fund. Because the amount of a residuary bequest cannot be determined until all of the assets in an estate have been identified and valued, and all expenses and taxes have been paid, the designated charity (in this example, your fund at the Community Foundation) will not receive the full amount of a residuary bequest until the estate is completely settled. Typically, however, the estate’s personal representative or trustee will make what is known as a “partial distribution” to the residuary beneficiary (or beneficiaries as the case may be), as soon as the personal representative has enough information about the assets and liabilities to confidently do so. When you leave a residuary bequest to your fund at the Community Foundation, our team will be involved at various steps during the administration of your estate until final distribution. For example, the Community Foundation will receive regular communications about the estate related to assets, expenses, taxes, and periodic accountings. The Community Foundation will execute documents, such as receipts, related to distributions and other estate transactions. The team at the Community Foundation looks forward to working with you and your advisors to establish bequests to fulfill your charitable legacies. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. As you review your donor lists and plan 2024 cultivation activities, pay particular attention to donors you know are over the age of 70 ½. That’s because these donors are eligible to make what’s known as a “Qualified Charitable Distribution,” or “QCD,” to your organization’s endowment fund at the Community Foundation directly from the donor’s IRA.
You’ve likely heard a lot about QCDs because they are becoming a very popular financial and charitable planning tool. At the same time, QCDs are growing as the source of more and more confusion. Here are answers to the questions donors might ask you about QCDs so that your team can be prepared to answer them. As always, please do not hesitate to reach out to the Community Foundation for assistance. “Is an IRA (Individual Retirement Account) the only eligible source for Qualified Charitable Distributions?” Short answer: Almost. Long answer: An individual can make a Qualified Charitable Distribution directly to an eligible charity from a traditional IRA or an inherited IRA. If the individual’s employer is no longer contributing to a Simplified Employee Pension (SEP) plan or a Savings Incentive Match Plan for Employees (SIMPLE) IRA, the individual may use those accounts as well. In theory, a Roth IRA could be used to make a QCD, but it is rarely advantageous to do that because Roth IRA distributions are already tax-free. “What is the difference between a QCD and an RMD?” Short answer: Quite a bit! But a QCD can count toward an RMD. Long answer: Everyone must start taking Required Minimum Distributions (“RMDs”) from their qualified retirement plans, including IRAs, when they reach the age of 73. RMDs are taxable income. The Qualified Charitable Distribution, by contrast, is a distribution directly from certain types of qualified retirement plans (such as IRAs) to certain types of charities. When a taxpayer follows the rules, a QCD can count toward the taxpayer’s RMD for that year. And because the QCD goes directly to charity, the taxpayer is not taxed on that distribution. “Can a donor make a Qualified Charitable Distribution even if the donor is not yet required to take Required Minimum Distributions?” Short answer: Yes–within a very narrow age window. Long answer: RMDs and QCDs are both distributions that impact retirement-age taxpayers, and it would seem logical that the age thresholds would be the same. Under the SECURE Act, though, the required date for starting RMDs was shifted from 70 ½ to 72 and is now up to 73 (which is better for taxpayers who want to delay taxable income). A corresponding shift was not made to the eligible age for executing QCDs; that age is still 70 ½ (which benefits taxpayers who wish to access IRA funds to make charitable gifts even before they are required to take RMDs). The IRS’s rules for QCDs are captured in Internal Revenue Code Section 408 and summarized on pages 14 and 15 in Publication 590-B in its FAQs publication. “Can a donor direct a QCD to a fund at the Community Foundation?” Short answer: Yes, if it’s a qualifying fund. Long answer: While donor-advised funds are not eligible recipients of Qualified Charitable Distributions, other types of funds at the Community Foundation can receive QCDs. These funds include endowment funds established by nonprofit organizations. “How much can a donor give through a QCD?” Short answer: $105,000 per year. Long answer: A Qualified Charitable Distribution permits a donor (and a spouse from a spouse’s own IRA or IRAs) to transfer up to $105,000 each year from an IRA (or multiple IRAs) to a qualified charity. So, a married couple may be eligible to direct up to a total of $210,000 per year to charity from IRAs and avoid significant income tax liability. The Community Foundation is here to help you and your team tap into the potential of QCDs to grow your endowment fund. Please reach out! We’d love to talk about a QCD strategy for 2024 and beyond. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. A new year is such a great time to plan and reboot. Cliche as it may be to talk about resolutions this time of year, it’s tough to deny that January represents a clean slate for “to do” lists, goals, and your overall mindset.
Whatever their age or health status, most people are aware that they need to document important financial and personal information for loved ones, just in case the unexpected occurs. We’ve all heard stories about someone’s family member who passed away and left little, if any, information about where to find bank accounts, passwords, estate planning documents, life insurance policies, and other information. No one wants to leave their loved ones in the lurch with scant information, but it’s often hard to get motivated to write it all down in one place.
The start of a new year is an excellent time to get organized and provide your next of kin or key advisors with the information they’d need to take care of your affairs if something were to happen to you. The list of “must haves” includes the obvious: Will, trust, power of attorney, birth certificate and marriage license, titles to cars and boats, deeds to property, car keys, bank accounts, investments and advisor contact information, life insurance policies and contact information for the agent, funeral wishes, and, critically, passcodes and passwords to devices and accounts. As you’ve chatted over the years with the professionals working at your favorite nonprofits, you’ve likely heard the term “planned giving.” You may have even wondered what the term means–even if you have already structured so-called “planned gifts” to support your favorite charities!
Here are a few pointers to help break down the concept of planned giving, along with ways the Community Foundation can help you achieve your charitable goals. It may help to think of “planned giving” in contrast to what’s sometimes called “current” or “annual” giving. For example, when you write a check (or, ideally, give highly-appreciated stock) to a charitable organization such as your fund at the community foundation, you’re transferring those funds right away in a relatively straightforward manner. You also may be making annual gifts to several charities, and from time to time you may also make gifts to a favorite charity’s endowment or reserve fund at the Community Foundation. Keep these five tips in mind as you consider your year-end giving:
This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. As a nonprofit, two constants you likely face are (1) more demand for your services and (2) rising operating costs. Fundraising can help satisfy the “more demand” part of this equation, but that typically requires more budget, which means more marketing and … well, you get the point.
The community foundation team is your partner! We are here to help you grow your endowment at the community foundation in both traditional and creative ways. That means we’re here to help you accept and administer gifts of complex assets, such as closely-held stock and real estate, as well as help your board understand the importance of an endowment and best practices for investment and spending policies to ensure that your mission stays strong for generations. The shorter days of fall and winter aren’t the only sunsets creeping up on people these days. If you’ve met with your estate planning attorney and tax advisors recently, you’re probably aware that the gift and estate tax exemption–the total amount you can leave to family and other beneficiaries during life and at death before the hefty federal gift and estate tax kicks in–is about to drop, rather precipitously.
Without legislation to prevent it, on January 1, 2026, the exemption will drop from $12,920,000 per person (that’s the 2023 exemption) to about half of that amount, depending on annual inflation increases. As the date gets closer, tax planning decisions get tougher. Make aggressive moves now to activate gifts to family members? Or hold out to see if legislation intervenes to prevent the sunset? Perhaps you established a donor-advised fund at the community foundation years ago, or you set up a donor-advised fund more recently. Or maybe you are considering establishing a donor-advised fund at the community foundation this year to help you keep your giving more organized and involve your children and grandchildren in your philanthropic priorities.
Whatever the case may be in your situation, it’s a great idea to consider a few best practices for ensuring that your donor-advised fund is making the biggest difference possible for the causes you care about. Life gets busy, the months fly by, and it's tempting to put your donor-advised fund on autopilot. But that would be a missed opportunity. |