 As you and other attorneys, CPAs, and financial advisors put the finishing touches on implementing clients’ year-end charitable giving plans, you may have a moment when it hits you: “Wait, how exactly does a Qualified Charitable Distribution work?”
That’s a great question, and you are not alone if you’re asking. Even though QCDs are well-covered in financial media, they’re complex enough that it’s hard to remember the nuances when you’re hit with a situation where a client might benefit. The team at the Community Foundation is here for you! Please reach out with any of your charitable giving questions, including the most common questions about QCDs: “Is an IRA 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 retirement plans (such as IRAs) to certain types of charities. 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 taxpayer make a Qualified Charitable Distribution even if the taxpayer 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 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). “Can my client 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 unrestricted funds, field-of-interest funds, designated funds, and endowment funds established by nonprofit organizations. “How much can my client give through a QCD?” Short answer: $105,000 per year in 2024, increasing to $108,000 in 2025. Long answer: A Qualified Charitable Distribution permits a client (and a spouse from a spouse’s own IRA or IRAs) to transfer up to $105,000 in 2024 (and $108,000 in 2025) 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 in 2024 to charity from IRAs and avoid significant income tax liability. The Community Foundation is here to help you and your clients tap the potential of QCDs. Please reach out! We’d love to talk about a QCD strategy for your clients’ immediate gifting needs and beyond. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  As attorneys, CPAs, and financial advisors, you’re very aware of potentially significant upcoming changes to the tax laws that could impact your high net-worth clients. Whether or not a post-election Congress takes action to prevent the estate tax exemption sunset at the end of 2025 will potentially affect the way you design your clients’ wealth transfer strategies.
During this phase of uncertainty, it may be useful to reflect on historical estate tax changes to see how similar situations have been resolved in the past, while at the same time taking a practical approach and advising clients that, while commentators may speculate, it is still impossible to accurately predict what might happen. Estate taxes certainly will continue to be on the minds of leaders in the charitable sector for many months to come. As you and other tax planning professionals watch and wait, it is important to keep charitable planning high on your list of strategies that could help blunt the impact of a lower estate tax exemption if the sunset were to occur. That’s because gifts to charities are deductible from a client’s taxable estate. Even during this era of uncertainty, be sure to keep in mind an important planning technique for your charitably-inclined clients that delivers multiple tax benefits and offers some degree of flexibility: Naming a charity, such as a fund at the Community Foundation, as the beneficiary of an IRA or other qualified retirement plan. Here’s why this is such a powerful technique, especially now: Income tax savings. When your client designates a fund at the Community Foundation as the beneficiary of an IRA, the fund receives the assets without having to pay income taxes. This is because charities are tax-exempt entities, allowing them to receive funds from qualified retirement accounts tax-free after your client’s death. This is not the case with qualified retirement plans flowing to heirs; the income tax hit can be significant. Estate tax deduction: Naming a charity as a beneficiary of a retirement plan results in an estate tax charitable deduction, which reduces any applicable federal estate taxes. This means that the full value of the IRA can flow into your client’s fund at the Community Foundation free from the estate tax burden. Flexibility. Clients can revise IRA beneficiary designations anytime during their lifetimes. So, as the end of 2025 draws closer, a client can update an IRA beneficiary designation to name a fund at the Community Foundation, which would protect against a drop in the estate tax exemption. If the sunset does not occur, the client could of course revise the beneficiary designation to leave a greater portion of retirement plan assets to heirs. Remember, though, that the income tax hit will still apply to proceeds flowing to heirs. That’s why many of your charitable clients will choose to leave IRAs to their funds at the Community Foundation even if the estate tax exemption does not sunset. And, of course, many clients truly want to leave a legacy and would love to incorporate charitable giving into their estate plans regardless of what happens with the tax laws. As tax and estate planning advisor, it is your responsibility–and opportunity–to help clients achieve their philanthropic wishes. Please reach out to the team at the Community Foundation to dive deeper into the ways you can help your clients fulfill their charitable goals, especially during this time when future tax laws are up in the air. We are here to help! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Charitable giving is always an important strategy to discuss with your clients. Many high net worth individuals are philanthropic, of course, and charitable gifts reduce taxable income and avoid estate taxes. Charitable giving strategies are particularly relevant as you and your clients address the possibility of increases in income and capital gains taxes for high earners as well as increased estate taxes due to the looming exemption sunset.
What’s also notable is research indicating that the number of “ultra high net worth" families (over $30 million) has increased dramatically over the last two decades. Globally, 157,000 individuals represented $14.2 trillion in 2004 and by 2024, 426,000 individuals represented $49.2 trillion of wealth. Fast forward to 2027, and this group is expected to grow to over 500,000. America alone is home to 756 billionaires and many of the world’s millionaires–nearly 22 million people. So why does this matter to you? It matters because wealthy families will rely increasingly on their attorneys, CPAs, and financial advisors to help them navigate savvy tax planning strategies, including charitable giving. And many of these families are very generous, so don’t underestimate your clients’ desire to get involved in charitable giving. Indeed, you may already be working with families who use private foundations to fulfill their charitable giving goals. In many instances, these private foundations were established by previous generations before donor-advised funds became widely available. As donor-advised funds become more popular, for lots of good reasons, please reach out to the team at the Community Foundation to explore a parallel strategy where your clients can carry out their charitable intentions using both a donor-advised fund and a private foundation. In some cases, your clients may want to consider closing a private foundation and transferring the assets to a donor-advised fund because of the many administrative and tax benefits, as well as the value of being able to lean on the knowledgeable team at the Community Foundation. Our team can help walk through the steps for shutting down the private foundation, which include securing board approval, making sure final expenses will be covered, transferring the assets to a donor-advised fund, filing the appropriate dissolution documents with the state, and submitting the private foundation’s final tax return reporting its dissolution and transfer of assets. Whether your client pursues philanthropic goals through a private foundation, donor-advised fund, or combination of both, we are here to help! Please reach out to our team to discuss the ways your clients can support causes that align with their values and passions, create a lasting legacy that extends beyond their lifetime, involve multiple generations in philanthropic efforts, and foster an overall sense of family unity and shared purpose. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Many eyes are on the election aftermath seeking clues about what might happen to the tax laws. Of particular interest is the much-analyzed sunset of the higher estate tax exemption, scheduled for the end of 2025 absent intervening legislation. “Absent intervening legislation” is the key, of course. The November 2024 elections will not immediately change estate tax laws, and it’s a long road from here to there.
For starters, the new Congress will not be sworn in until January 2025, and only after the session begins will Congress initiate the budget reconciliation process which is ultimately required to make tax law changes. The budget reconciliation process typically starts with the President submitting a budget to Congress. Then, both chambers of Congress pass budget resolutions with reconciliation instructions. Then, committees draft legislation to meet the budget targets, and the budget committees consolidate the bills into a single omnibus bill. Then, each chamber votes on its respective omnibus bill. What all of this means is that the status of the estate tax exemption is still very much up in the air. And this means that financial, tax, and estate planning is going to be difficult for many more months. With the estate tax exemption set to drop from $13.61 million per person in 2024 to approximately $7 million per individual on January 1, 2026, a lot is at stake. Should a high-net worth taxpayer start making aggressive gifts now to family members and a donor-advised or other type of fund at the Community Foundation, anticipating that the sunset will indeed occur? Or take a “wait and see” approach? Planning is further complicated by the dangers of waiting until the last minute. Not only is it tough to pull off a complex estate plan or business succession plan quickly, but it’s also dicey because the IRS likely will be on the lookout for situations to invoke the step transaction and reciprocal trust doctrines. So what can you do? First and foremost, if you are working with charitably-inclined families who would be impacted by the estate tax exemption sunset, please reach out to the Community Foundation right away to start looking at options. And if you aren’t sure whether a client is charitably inclined, you absolutely must ask them. It’s always important to talk about charitable giving, and especially right now when the stakes are so high. We look forward to many conversations with you and your clients as estate tax developments unfold! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  You’re busy as 2024 draws to a close! The team at the Community Foundation is committed to researching, curating, and keeping you up-to-date on the latest trends and developments that could impact your clients’ charitable giving strategies. If you only have 60 seconds, we recommend scanning these two quick updates.
Charitable giving can help bridge generations’ definitions of “wealthy” The recently-released Bank of America Private Bank Study of Wealthy Americans is a must-read (or at least a must-skim) report because it offers insights into shifting views on wealth, and it also highlights a disconnect in inheritance expectations. Notably, younger individuals tend to rally around a definition of “wealthy” in terms of having the means to live a life of purpose and make a difference. Older generations are more likely to define “wealth” in financial terms. Important for charitable planning is the finding that older generations may not be planning to leave the inheritance that their children and grandchildren expect. Working with the Community Foundation to help clients establish a multi-generational charitable giving plan makes it easier to get expectations out in the open and keep the entire family meaningfully involved in the family’s wealth over the long term. Must-know tips for clients’ year-end giving We know you’ve got a lot on your plate as the end of the year approaches. Even if charitable giving does not appear on the surface to be a burning issue in client meetings, it’s still crucial that you keep in mind a few essential charitable giving techniques because your clients do care. Please scan these three important techniques, and please reach out to the Community Foundation on any matter related to charitable giving.
Reach out to the Community Foundation team today! November is the time to set things in motion so you don’t get caught up in the year-end rush. We are here for you. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Attorneys, CPAs, and financial advisors certainly are not strangers to tough questions. Indeed, the mix of money, family, and mortality is a potent combination that almost always creates an emotionally-charged planning environment, whether the matter at hand is tax planning, updating wills and trusts, or structuring retirement portfolios.
Why, then, are so many advisors reluctant to bring up charitable giving during client meetings when the topic itself is so uplifting? In some cases, you may feel like you don’t know enough about the technical tax planning aspects of charitable giving to be able to offer sound advice. In other cases, you may be concerned about taking the planning process off course into areas where the client doesn’t want you involved. Or maybe you don’t feel you have a good enough grasp of the client’s big picture to truly recognize opportunities for charitable planning that are a win-win for the client’s favorite causes and the client’s tax and financial plan. Guess what? There is no need to worry! The Community Foundation has you covered. Consider the following: Clients are expecting you to bring up charitable giving; studies reveal a disconnect between what clients and advisors assume and perceive. So if you think to yourself, “Oh, I asked about that,” think again because the client may disagree. Did you approach the question with sincere interest, or were you just checking a box? What’s important here is that the Community Foundation team is your technical back up! You absolutely do not need to know the ins and outs of the charitable deduction rules, the details of Qualified Charitable Distributions, or how a donor-advised fund or charitable remainder trust operates. If you’ve built an expertise around charitable giving in your practice, that’s terrific, but it is not necessary. Our team is just an email or a phone call away. Please reach out the moment a client expresses interest in charitable planning. We’re happy to support you and be part of the team to meet the client’s objectives. And this does not need to be hard. While plenty of resources offer excellent suggestions for how to bring up charitable giving in conversations, many advisors tell us that they have to keep it even more simple. We understand that you don’t have time to ask a briefcase full of questions. That does not mean, however, that you can’t have a meaningful conversation. Even just two minutes is plenty if you show genuine interest in the client’s intentions and connect the client to the Community Foundation. For example, the charitable planning part of a client meeting could be as simple as this: “Okay! Now that we’ve taken a look at your retirement projections, beneficiary designations, and portfolio allocation, let’s check in on charitable giving. Bring me up to speed on your involvement with community organizations.” Then, let them talk. If they’re not involved in any community organizations, they’ll tell you. And if they are, they’ll tell you that, too. If the client is indeed involved in community organizations, let them know that you are happy to connect them to the team at the Community Foundation, or, better yet, tell the client that you’d be happy to invite a professional from the Community Foundation to your next meeting. Your priority as their advisor is to bring professionals to the table to help achieve their charitable giving goals. Of course, this sample dialogue is over-simplified for illustration purposes. But truly, it does not need to be much more complicated than that. Next time you meet with a client, give this simple approach a try. You might be surprised at how easy it is, and how much the client appreciates your interest in areas of their lives that go beyond dollars-and-cents transactions and legal documents. It is the Community Foundation’s honor to work with you and your charitable clients. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Many of your philanthropy-minded clients certainly enjoy attending fundraising events for their favorite charities. Especially as community events start ramping up this fall, you’ll want to be aware of a little wrinkle in the IRS rules that may surprise your clients so much that they ask you about it.
Here’s how this might go. Client: “We wanted to buy a table at the fall gala through our donor-advised fund, but the team at the Community Foundation said that’s not possible and they suggested alternate ways of meeting our goals. What’s up with that?” You: “Ummmm ….” And no one could blame you for that response! The rules behind this are obscure and confusing, even by IRS standards. Here’s what’s going on: The IRS frowns on donor-advised funds paying for any part of an event ticket to a charitable fundraiser–even if a portion of the ticket is tax-deductible. Big picture, the IRS is likely striving for administrative simplicity to enforce the longstanding tax principle that a taxpayer cannot deduct value given to a charity that is effectively transferred back to the taxpayer. At a typical event, of course, your client receives food, drinks, entertainment, and even t-shirts and other fun swag. The IRS knows this! The IRS’s commentary on this topic is not new; IRS Notice 2017-73 addresses a concept known as “bifurcated gifts,” meaning a portion of a gift is tax deductible and the other is not. The background here is that the IRS has taken the position that Internal Revenue Code Section 4967 prohibits donor-advised grants from conferring “more than incidental” benefits to donor-advised fund holders. In its 2017 Notice, the IRS expresses its opinion that donor-advised fund grants that enable attendance or participation in a charity-sponsored event (such as buying tickets or a table) do indeed provide more than just an incidental benefit, even if the taxpayer pays out-of-pocket for the non-deductible portion of the ticket. Ever since the notice was released, it’s been on the radar of tax professionals, and many predict that the IRS will eventually formalize its opinion by issuing new regulations. It’s wise to keep an eye on this because the penalties certainly are not negligible and include excise taxes imposed on the donor advisor and potential penalties for donor-advised fund programs that knowingly authorize such payments. There is good news, though! The team at the Community Foundation is on it! We understand the rules inside and out, and we are here to help your clients stay compliant and achieve their charitable goals. In situations like this, we help your clients structure gifts from their donor-advised funds to support general event sponsorships if the client declines all benefits, or even recommend that the client pay the ticket portion from their personal funds and use donor-advised funds to give separate and additional amounts for general support unrelated to the event specifically. We can also talk with your client about how to participate in rallies for outright donations during a fundraising event and ensure that the client is not receiving any benefit in return. Please reach out anytime! We’re happy to help! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  The Community Foundation team keeps a finger on the pulse of current events and legal developments that could impact the way you work with your charitable clients. Below are three notable items that you’ll likely want to keep in mind this fall.
Election year implications Naturally, as a financial, legal, or tax advisor, you’re very interested in how the results of the November elections could impact tax laws. What you might not know, though, is how significantly an election cycle can impact nonprofits’ fundraising efforts. Keep this dynamic in mind as you meet with clients who serve on nonprofit boards. These clients will appreciate the fact that you’re aware of the challenges. They’ll also be glad to know that you’re happy to loop in the Community Foundation team as a resource to structure and accept complex gifts as charities double down on fundraising efforts this year. Snapshot of giving trends If it feels like more clients are asking about giving techniques such as crowdfunding, using appreciated stock to support charities, and setting up donor-advised funds, you are not imagining it. These trends are real! It’s smart to stay up-to-date at a high level so that you’re generally aware of what’s going on with philanthropy. Beyond that, the only information you need is the Community Foundation’s phone number. Our team is here for you! We are honored to be your first call anytime a client mentions that they’d like to launch or update a charitable giving plan. In most cases, the Community Foundation can provide tools and services that will help your client achieve their goals. In any event, we’ll help you figure out a solution, whether or not the Community Foundation ultimately plays a role. For your calendar If you’re in search of tools to help motivate clients to move forward with financial and estate planning, be sure to note that National Estate Planning Awareness Week is coming up. October 21 - 27, 2024 is this year’s designated timeframe to help the public understand the basics of estate planning and the reasons it’s so important. The original House of Representatives resolution includes key points that may spark messaging ideas for your client outreach. And of course, on all things related to charitable planning, please reach out to the Community Foundation. We’re happy to share best practices for encouraging clients to get serious about planning all aspects of their estates, including the legacies they’d like to leave to their favorite causes and the community they love. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Giving stock is an important strategy for any private business owner to explore. Not only can these gifts help implement a business succession plan that calls for transferring the business to the next generation if that is your client’s goal, but gifts of stock can also help your business owner client achieve charitable goals and avoid estate tax.
In light of recent legal developments and pending tax law changes, more and more financial and estate planning advisors are encouraging their clients to consider implementing gifts of closely-held stock to a fund at the Community Foundation or other public charity. Notably, two developments could have a big impact on your work with these clients:
Please reach out to the Community Foundation to learn more about how our team can help as you work with your business-owner clients to navigate legal and tax developments that could significantly impact future plans for their privately-held companies. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  “Nothing is so fatiguing as the eternal hanging on of an uncompleted task.” –William James
Procrastination is a drain in ways that go far deeper than the incomplete task itself. We know this intellectually, but it can be so hard to break the procrastination habit. It seems that the more daunting the task, the harder it is to tackle. This surely is a major reason some of your clients routinely put off important planning discussions. And of course, many of those discussions are tax-sensitive, which means year-end can get very hectic and stressful for clients who wait until the last minute. As the year begins to wind down, consider tapping into your clients’ philanthropic interests as a catalyst to motivate them to start addressing year-end planning items right now rather than waiting until November or December. You may discover that the uplifting topic of philanthropy makes it easier to at least start a conversation. Then, the conversation can evolve to include not only charitable giving topics, but also other tax planning topics that need attention. Here’s how this could work with a client:
The Community Foundation team is here to help you serve your charitable clients every step of the way, every month of the year. We understand that late-December transactions are often unavoidable. The net-net is that we’re happy to work with you according to your clients’ schedules, whether that means getting a jump on a new year and processing stock gifts in February, helping you plan in September for year-end, or preparing fund agreements in December. It’s our pleasure to assist! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  We’re hearing from more and more attorneys, accountants, and financial advisors that your clients are expressing interest in giving real estate to charity. This is wonderful news!
You’re certainly aware that gifts of real estate to a fund at the Community Foundation, just like gifts of other long-term capital assets, can be extremely tax-efficient. That’s because your client is typically eligible for a charitable deduction based on the fair market value of the property. Because the Community Foundation is a public charity, when it sells the donated property, the proceeds will flow into the fund free from capital gains tax. To achieve the best tax outcome and overall charitable result, though, it’s critical to undertake a careful process along the general lines of the following (depending of course on the specific situation):
Whew! That’s a lot! The bottom line here is that gifts of real estate can be a wonderful tool for both your client and the charities they want to support through their fund at the Community Foundation. Our team can help you through the process, every step of the way, to ensure that your client’s real estate gift is handled without a hitch, opening the door to bring their charitable goals to life. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  How much is too much? That’s a question many parents ask as they structure lifetime gifts and bequests to children in their financial and estate plans. Wealthy clients are sometimes concerned that leaving millions of dollars, or even hundreds of thousands, to their children could backfire and hinder their kids’ ability and motivation to achieve financial independence.
In addition to concerns about fostering entitlement and dependency, many parents are concerned that their children will miss out on the satisfaction of knowing they built wealth on their own. These parents believe that the challenges and struggles along the way will ultimately enrich their children’s lives with intangible benefits that are far greater than the obvious benefits that come with gifts or an inheritance of significant financial resources. As you work with clients who feel this way, please reach out to the Community Foundation. Every day, our team works with families who are in this exact situation. We’ll help you evaluate strategies such as:
Many clients are attracted to this type of structure because not only could it avoid estate tax, but it also allows their children to stay involved with all of the family’s wealth, work together and keep sibling bonds strong, and get involved in the community. Please reach out to the Community Foundation team anytime. We look forward to exploring strategies to help your clients meet their financial and tax goals, as well as honor their wishes for children to live happy and productive lives. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Over the years, you’ve no doubt experienced a wide range of what clients perceive as “wealthy.” You’ve likely also observed that clients have different assumptions about what it takes to be a “philanthropist.” The interplay between a client’s perception of personal wealth and charitable giving capacity presents interesting opportunities for client engagement. You may find yourself helping a client get comfortable with pursuing their charitable objectives while remaining secure in the knowledge that their financial plan is on track.
Whether clients choose to give to charity or not depends on a lot of factors. Here are a few themes to keep in mind as you work with clients who skew toward the more frugal end of spending practices, especially during national Make-A-Will month when estate planning may be top of mind. Stay within budget. A client’s fear of running out of money may be preventing them from investing more meaningfully in the causes they care about. When savings-minded clients express charitable intentions, you can certainly guide the conversation toward showing them that their assets, income sources, expenses, and long-term projections are in good shape and leave them plenty of room to make charitable donations. When you lay out the big picture, even your historically cautious clients may see that they truly have more flexibility than they realize. Every gift counts. Some clients who watch every penny are concerned that giving modestly doesn’t really rise to the level of “philanthropist” and might not make a difference. These clients may not realize that everyone can make a difference through small gifts, large gifts, and everything in between. The Community Foundation team is happy to help your clients get started with charitable giving at a level that makes the most sense for them, whether that’s setting up a donor-advised or other type of fund at the Community Foundation, arranging for a bequest to a fund, or, for your clients who are 70 ½ and older, structuring a gift from an IRA to a designated fund to support a favorite nonprofit. Bang for the buck. The team at the Community Foundation can help show your clients how gifts of highly-appreciated stock to a fund at the Community Foundation can avoid capital gains taxes, thereby freeing up more resources to support favorite charities than if the client had sold stock, paid the tax, and then given the proceeds to charity. Our team can also help identify meaningful giving opportunities based on each client’s budget and areas of interest. See results. By activating philanthropy plans during their lifetimes, your clients can experience the joy of giving and witness tangible returns on their investments. The Community Foundation team can arrange for a client to meet with nonprofit leaders and hear first hand the impact their money is making to improve peoples’ lives. This real-time feedback also allows your client and the Community Foundation team to adjust giving strategies to more closely align with your client’s evolving intentions. We look forward to working with you and your clients. Philanthropy is meant to be fun and rewarding for everyone involved. Our team is here to help make that happen! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Without legislation to prevent it, the sunsetting of current estate tax laws at the end of 2025 will dramatically reduce the federal estate tax exemption from $13.61 million per person in 2024 to approximately $7 million in 2026 (this includes adjustments for inflation). This change would affect many high net-worth individuals and families, likely exposing many more estates to federal estate taxes.
It is impossible to predict whether or not legislation will prevent the sunset. Even so, it is important for advisors to prepare for client discussions and start considering estate planning strategies now, especially techniques that incorporate multi-generational gifts and charitable planning. Indeed, for a client who is charitably-inclined, making larger lifetime gifts to charity and arranging for charitable bequests will help reduce the client’s taxable estate because of the charitable estate and gift tax deduction. Donor-advised, field-of-interest, designated, unrestricted, and endowment funds at the Community Foundation are flexible and effective charitable recipients of both lifetime and estate gifts. For some clients, you may wish to begin exploring a comprehensive, multi-generational wealth transfer plan, potentially using key tax-planning vehicles: Charitable lead trust Charitable lead trusts (CLTs) may be particularly effective in the current environment. These trusts can provide income to your client’s fund at the Community Foundation for a set period of time, with the remaining assets passing to family members. Right now, the higher exemption allows for potentially significant initial funding of such trusts. This is because the value of the remainder interest counts toward the client’s estate and gift tax exemption. Generation-skipping trust A generation-skipping trust is an irrevocable trust that can benefit a client’s grandchildren and later generations. This trust utilizes a client’s generation-skipping transfer (GST) tax exemption (which parallels the estate and gift tax exemption). This type of trust could allow a client to take advantage of the higher exemption before it potentially decreases in 2026. It is possible under some states’ laws for these trusts to go on for many generations in a “dynasty” format, such that each generation benefits from the trust’s income (and potentially principal for health and education) without the trust’s assets being included in the beneficiaries’ estates for estate tax purposes. Multi-generational fund at the Community Foundation Alongside a charitable lead trust or generation-skipping trust, or as a standalone, a client can establish a donor-advised fund at the Community Foundation that can function much like a family foundation, with successive generations serving as advisors, or the Community Foundation stepping in after the first or second generation, to recommend grants from the fund to carry on a tradition of supporting the causes that have been most important to the client during the client’s lifetime. The team at the Community Foundation looks forward to working with you to achieve your clients’ long-term charitable goals, even in the midst of uncertainty concerning the estate tax laws. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Your clients who are corporate executives have likely wondered at some point about the benefits of aligning their companies with philanthropy, whether specific causes or particular organizations.
In general, a community engagement strategy can be good for business, if well-executed. For example, almost half of consumers view a brand favorably when the brand supports a charitable cause. Community engagement programs can help with employee retention, too. But what are the risks involved in mixing business with charity? In the spirit of aligning doing good with doing well, some companies would love to set up their own nonprofit organizations as “charitable arms” of their enterprises. Corporate leadership may like the idea of efficiency, control, and tight alignment between the company’s offerings and the charity’s mission. For example, a company that makes swimming pools might think it’s a great idea to set up a charity to build swimming pools at community centers to give more kids access to water sports. The company would like to donate tax-deductible dollars to the charity and ask its suppliers and customers to do the same. The company’s executives would serve on the board of the charity, and the charity would purchase swimming pools from the company to carry out its mission. Is this a good idea? No. This strategy plays fast and loose with the rules. Beyond setting up an obvious conflict of interest, this practice would mean that a company effectively would be using charitable funds to benefit itself. This is not a “charitable purpose” in the eyes of the IRS and could result in the loss of the charity’s tax exemption. Plus, if the news got out about this structure, the company could suffer reputational damage. The company, its executives, and the community are all better off if the company pursues more transparent and ethical charitable strategies such as establishing a corporate fund at the Community Foundation, setting up a volunteer program for employees, establishing a matching gifts program, or aligning with wholly-independent charities on cause-related marketing partnerships. Reach out to the Community Foundation to learn more about effective corporate philanthropy strategies. We are here to help as you work with your clients to achieve their charitable goals both at home and in the workplace. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  You’re well aware that donating highly-appreciated stock to a fund at the Community Foundation offers significant advantages for your clients over making cash gifts. Communicating this benefit, however, can be challenging when clients have emotional attachments to their shares.
How can you overcome this hurdle and help optimize your clients' charitable giving strategies? Start by understanding the reasons a client might be reluctant to part with certain stocks in the first place:
Emotional ties like these can create psychological barriers to effective charitable planning. There is, however, a potential solution that can satisfy both your clients' emotional needs and their philanthropic goals: The client donates shares of the highly-appreciated, emotionally significant stock to their fund at the Community Foundation, and then the client purchases shares of the same stock in their personal investment portfolio. Here’s why this can be such an effective strategy:
As you share this strategy with a client, be sure to acknowledge the emotional value of the stock and emphasize the client’s opportunity to maintain ownership in the company. Building on this, you can show the client how the tax benefits of giving stock allow the client to make an even bigger difference than if they’d given cash instead. As always, the Community Foundation can help you assist your clients with selecting the best assets to give to charity, evaluate tax implications of various giving strategies, and structure gifts to achieve strong community benefit. We look forward to a conversation! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  As your go-to resource for charitable giving techniques, the Community Foundation team pays close attention to best practices in addressing the broad range of your clients’ charitable intentions to support both near-term and long-term community needs. This includes tracking legal developments that may impact philanthropy broadly, impact specific giving vehicles, and everything in between.
For example, we pay attention to the IRS’s plan to increase audits of wealthy taxpayers so that our team is better positioned to help you and your clients understand the requirements of valuing gifts to charity. And we’re gearing up to help you and your clients incorporate charitable giving vehicles as a way to blunt the potential impact of the anticipated estate tax exemption sunset. And we’re watching the IRS scrutinize aggressive techniques using annuities inside charitable lead trusts. And so much more. Another issue we’re watching closely is the latest news on the IRS’s proposed regulations of donor-advised funds. We’ve studied the transcript from the public hearings in early May, and it was inspiring to see so many community foundation leaders share their recommendations urging that any new regulations not disrupt the positive and productive working relationships between community foundations and advisors who are helping their clients achieve philanthropic goals. At this point, no one can predict what will happen with the proposed regulations - whether and how they will be revised or when they might become effective, if ever. As always, our team is staying on top of the issues. We’ll keep you informed. Of course, a donor-advised fund is just one of many types of funds your clients can establish at the Community Foundation. We offer donor-advised funds, endowment funds, field-of-interest funds, scholarship funds, designated funds, and a wide range of planned giving and legacy options for clients who want to invest in the community’s long-term needs. The donor-advised fund is popular because it allows your client to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, the client can recommend gifts to favorite charities from the fund to meet community needs as they emerge. What’s especially rewarding for our team is to work with you and your clients to explore a diversified portfolio of giving vehicles. It’s possible that a client's portfolio would include a donor-advised fund, and perhaps also one or more of a variety of other tools, such as a bequest, unrestricted gift, charitable trust, and endowment gift. Above all, we are confident in our ability to continue to work collaboratively with you and other advisors for years to come to help fulfill your clients’ philanthropic wishes. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  It’s relatively straightforward to see how philanthropy figures into the financial and estate plans you build for individuals and families. After all, many of these clients are already supporting their favorite community causes, and it’s your job to make sure they know about all the options for structuring both their near-term and long-term plans to give to charity using techniques that achieve both philanthropic goals and tax goals. The Community Foundation works with attorneys, accountants, and financial advisors every single day to help meet clients’ needs.
What you might not always consider, though, is that many of your clients are executives in companies whose leaders want the company itself to lean into charitable giving. That’s why it’s wise to be aware of best practices in corporate philanthropy and know the ways the Community Foundation can help. For example, establishing a corporate donor-advised fund - essentially functioning and named as a corporate foundation - helps corporate executives organize the company’s giving in a convenient, 501(c)(3)-qualified structure, avoiding the time and expense that would be required for the company to establish and maintain a separate foundation entity. The company can fund the corporate donor-advised fund each year (especially in really good years!), thereby organizing charitable donations to a wide range of nonprofits through a single source of funds. This structure can help maintain historical corporate giving levels even when the company experiences a down year. What’s more, many companies coordinate with community foundations to offer donor-advised funds to employees, especially to take advantage of company stock gifts. A program like this is a perk for employees who’ll enjoy organizing their giving and using the Community Foundation’s many tools and services. The program also helps inspire employees to get more involved in the community, which is good for everyone. In many instances, the Community Foundation takes on a back office role for a company’s matching gifts program, grant administration, and giving strategy. For example, the Community Foundation can help guide corporate leadership in creating and administering a program that matches employees’ volunteer time with dollars. In addition, the Community Foundation can help a company create and implement a strategy for responding to and evaluating funding requests to align with the company’s goals for supporting and prioritizing causes. Finally, the Community Foundation can help establish and administer employee giving and disaster relief campaigns. The Community Foundation’s tools to receive and process donations can help a company and its employees respond quickly and meaningfully to disasters and other urgent community needs. Note that many companies appreciate the community’s foundation’s infrastructure, reporting practices, and compliance protocols to ensure that all tax laws and other IRS requirements are met. Instead of the company bearing these responsibilities, it’s the Community Foundation’s job. Corporate executives regularly view the relationship with the Community Foundation as a very wise outsourcing move. The team at the Community Foundation looks forward to working with you and your clients who are corporate executives, or even local small business owners, who are excited to give back to the community where they’ve built businesses and developed lasting relationships with employees and customers. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  At the end of 2024’s first quarter, an estimated 485,000 Americans could count themselves among the so-called “401(k) millionaires,” meaning the balance in their employer-sponsored retirement plans has reached the $1 million level. Thanks in part to stock market rallies during the first part of the year, that’s a larger number than ever before. Many of these 401(k) accounts will be rolled over into IRAs after retirement and the assets will continue to grow.
With so many of your charitably-inclined clients holding large sums of money in 401(k)s and IRAs, now is an important time for a brief refresher course on the benefits of deploying these accounts toward achieving clients’ philanthropic goals. Indeed, although a charitable bequest of any type of property can help achieve a client’s estate planning and legacy goals, retirement accounts are especially powerful. When your client names a public charity, such as a donor-advised or other fund at the Community Foundation, as the beneficiary of a traditional IRA or qualified employer retirement plan, your client achieves extremely tax-efficient results. Here’s why:
So, if your client is deciding how to dispose of stock and an IRA in an estate plan and intends to leave one to children and the other to charity, leaving the IRA to charity and the stock to children is a no-brainer. Remember, the client’s stock owned outside of an IRA gets the “step-up in basis” when the client dies, which means that the children won’t pay capital gains taxes on the pre-death appreciation of that asset when they sell it. Speaking of savvy giving techniques using IRAs, a client who is 70 ½ or older can make tax-efficient gifts directly from an IRA to a qualified charity (including certain types of funds at the Community Foundation), up to $105,000 per year! This is known as a “Qualified Charitable Distribution.” The Community Foundation is always happy to work with you to ensure that your clients are maximizing their assets to fulfill their charitable giving goals, both during their lives and through legacy gifts. We look forward to the conversation! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Charitable Giving in an Election Year
While charitable giving historically has been resilient in the midst of elections, it’s worth bearing in mind that some sources predict that political donations will eat into your clients’ budgets for charitable gifts. As you talk with clients about their philanthropy plans for 2024, you might pass along these trends so your clients can factor into their target gift amounts the potentially greater demand for funding community organizations. This is also a good time to remind clients that political donations are not tax deductible. This may seem elementary, but it still trips up some people who don’t track the rules closely. Rounding Up at the Register Although the majority of your clients’ charitable giving is likely strategic, including giving through a donor-advised or other type of fund at the Community Foundation, there are definitely exceptions in any household. One of those exceptions for many of your clients may be a form of giving called “checkout charity.” The spare change really does add up–to the tune of $749 million nationwide in 2022 alone! Legal Pitfalls for Nonprofits As you counsel your clients who are on the boards of nonprofit organizations, or perhaps even lead them, be aware of a handful of legal issues that are surfacing as areas of concern, including the always-relevant topics of employees versus independent contractors and unrelated business activities, as well as emerging issues related to artificial intelligence. The team at the community foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  When your client is getting ready to make a contribution to a fund at the Community Foundation or other charity, remind them not to automatically reach for the checkbook! Here are other (and typically more tax-savvy) options to consider.
Marketable Securities Gifts of long-term appreciated stock to a donor-advised or other type of fund at the Community Foundation is always one of the most tax-savvy ways to support favorite charitable causes because capital gains tax can be avoided. Gifts of publicly-traded stock, for example, are easy to transfer to a fund. The Community Foundation team can provide you and your clients with transfer instructions to make the process simple. As is the case with a cash gift, the Community Foundation will provide a receipt for tax purposes, and the gift of stock will be valued at the shares’ fair market value on the date of transfer. When the Community Foundation sells the shares, the proceeds flow into the client’s fund without any reduction for capital gains taxes. This is because the Community Foundation is a 501(c)(3) charitable organization and therefore does not pay income tax. That would not have been the case, however, if the client had sold the stock first and then transferred the proceeds to a fund at the Community Foundation; the client would owe capital gains tax on the sale. Especially in cases where the client has held the stock a long time and it’s gone up significantly in value, the capital gains hit can be big. Closely-Held Business Interests The Community Foundation team is happy to work with you and your client to explore how the client might give shares of a closely-held business to a fund at the Community Foundation. Not only will transfers be eligible for a charitable deduction during the year of transfer (and at fair market value if the shares are held for more than one year), but also these gifts could potentially reduce income tax burdens triggered upon a future sale of the business. Be sure to talk with our team well before any potential sale is in the works; otherwise, you could lose out on tax benefits. Gifts of closely-held business interests are powerful but can be tricky to administer. QCDs from IRAs As always, keep in mind that the Qualified Charitable Distribution (“QCD”) is a very smart way to support charitable causes. If your client is over the age of 70 ½, the client can direct up to $105,000 (in 2024) from an IRA to certain charities, including a field-of-interest, designated, unrestricted, or scholarship fund at the Community Foundation. If your client is subject to the rules for Required Minimum Distributions (RMDs), QCDs count toward those RMDs. That means your client avoids income tax on the funds distributed to charity. Our team can work with you and your client to go over the rules for QCDs and evaluate whether the QCD is a good fit. Real Estate Your client’s fund at the Community Foundation can receive a tax-deductible gift of real estate, such as farmland or commercial property, in a variety of ways. An outright gift is always an option; lifetime gifts of real estate held by the client for more than one year are deductible for income tax purposes at 100% of the fair market value of the property on the date of the gift, which also avoids capital gains tax and reduces the value of your client’s taxable estate. Other ways to give real estate include a bargain sale or a transfer to a charitable remainder trust which produces lifetime income for the client and the client’s family. Life Insurance Don’t overlook life insurance as an effective charitable giving tool, whether by naming a client’s fund at the Community Foundation as the beneficiary or, in the case of whole life policies, naming the fund as beneficiary and transferring the policy itself. If your client transfers a policy, the client may be able to make annual, tax-deductible contributions to the Community Foundation to cover the premiums. Other “Alternative” Assets The Community Foundation is happy to work with you and your clients to explore options for giving other non-cash assets to funds at the Community Foundation, including:
We look forward to working with you to explore all the options! The team at the community foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  The Community Foundation is committed to providing timely updates on legal and policy developments to help you and other professionals who advise philanthropic clients stay on top of best practices in charitable planning. In that spirit, donor-advised funds and the rules governing these vehicles are topics that are popping up more frequently in financial and even mainstream media. Our team is closely watching these regulatory developments.
As background, in November 2023, the Internal Revenue Service issued proposed regulations that would change the way donor-advised funds are defined and how they operate. Especially leading up to the May 6, 2024 public hearings, the proposed regulations have created quite a buzz. If you’d not yet heard about the proposed regulations, the April 19, 2024 letter to Treasury Secretary Janet Yellen, signed by 33 members of Ways and Means, might have grabbed your attention. The letter lays out concerns that “these regulations could have the unintended consequence of impeding charitable giving in our communities, particularly at our local community foundations.” You’ll hear from us when (and if) the proposed regulations, or some version thereof, go into effect and what to do about it. As you track the issue, however, it’s important to remember that a donor-advised fund is just one of many types of funds your clients can establish at the Community Foundation. Consider:
We look forward to helping you serve your charitable clients regardless of where the proposed regulations ultimately land. And we’ll keep you posted! The team at the community foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  Getting a jump on a future “to do” list is always such a good feeling. The team at the Community Foundation can help you with your clients’ long-term charitable giving plans by putting in place the structures to receive bequests decades from now.
Consider a case where you’re finalizing an estate plan for a client who would like to leave bequests to multiple charitable organizations, but the identity of those specific organizations may be a moving target over the years because of the client’s evolving level of engagement with various charities as a donor, volunteer, or board member. In other words, this client likely will want to make small changes to the estate plan’s provisions for charitable giving but leave everything else as is. For example, a client’s trust could be drafted to provide that 10% of the remaining estate be divided equally among five charities, which of course could be listed in the trust document. But what if, a few years from now, the client wants to add another charity to that list? Even a small change like this would require an amendment, which can be time-consuming for both attorney and client. Instead, the client’s trust document could name a fund at the Community Foundation as the beneficiary of 10% of the remaining estate. Then, the client can work with the Community Foundation to draft a fund agreement that lists the charities that will share the 10%. When the client wants to add new charities or switch out charities from the list, the client can reach out to the Community Foundation and execute simple documentation of the client’s updated intent for the fund. This process is fast and simple, and it allows clients to ensure that their bequests are in line with ever-changing needs in the community. In some cases, the client may not intend to use the fund during their lifetime. That’s perfectly fine; the Community Foundation can establish a fund to sit dormant and receive assets only after the client passes away. Your client can still name the fund whatever they’d like, and the fund agreement can be modified anytime before the client’s death. Please reach out to the Community Foundation to learn how funds and other planning tools can help your clients achieve their charitable goals both during their lifetimes and beyond. The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  No matter how frequently you remind clients to pause before they automatically reach for the checkbook to make their charitable gifts, many clients still give cash! As an attorney, accountant, or financial advisor, you are well aware that giving long-term appreciated assets is often one of the most tax-savvy ways your clients can support their favorite charities. Nevertheless, it’s sometimes hard to convey that message to clients with words that stick. Next time, consider using illustrations to help clients see the benefits.
Below are three simple examples* to help you show your clients the benefits of giving appreciated stock. Sally and Bob Jones give $100,000 Sally and Bob Jones plan to give $100,000 to their donor-advised fund at the Community Foundation to organize all of their giving for the calendar year. Let’s assume Sally and Bob have a combined adjusted gross income of $600,000, which lands them in the 35% federal income tax bracket. If they gave $100,000 in cash to their donor-advised fund, they could realize an income tax savings, potentially, of $35,000. What if instead of giving cash, Sally and Bob gave highly-appreciated, publicly-traded stock, valued currently at $100,000, to their donor-advised fund. Let’s assume they’ve been holding the stock for many years, and the shares have a cost basis of $20,000. Not only are Sally and Bob eligible for a potential income tax deduction that will save them up to $35,000, but they have also potentially avoided $12,000 of capital gains tax that they would have owed if they’d sold the stock (using a long-term capital gains tax rate of 15%). So, it’s easy to see why Sally and Bob should consider giving highly-appreciated stock instead of cash. Jenny and Joe Smith give $1 million Jenny and Joe Smith plan to give $1 million to community causes this year. They’ll do that by adding $500,000 to their donor-advised fund at the Community Foundation, which in turn they will use to support their favorite charities. They’ll also be making a $500,000 gift to an unrestricted fund at the Community Foundation to help address the region’s greatest needs for generations to come. Let’s assume that Jenny and Joe are in the highest federal income tax bracket because they earn multiple seven figures. If they were to give $1 million in cash, they could save, potentially, up to $370,000 in income tax. If they gave publicly-traded stock instead of cash, assuming a $200,000 cost basis in stock valued currently at $1 million, they would still potentially save up to $370,000 in income tax, and they would also potentially avoid $160,000 in capital gains tax (based on a long-term capital gains tax rate of 20%). Tiffany and Brett Thomas give $5 million Tiffany and Brett Thomas plan to give a target amount of $5 million to charity as the cornerstone of their overall philanthropy plan. They would like to use publicly-traded stock that they’ve held for many years, valued currently at $5 million. They would love to receive a lifetime income stream from these assets, so that the remaining assets will flow to their fund at the Community Foundation after their deaths. In this case, you’ll explore setting up a charitable remainder trust that pays out an income stream to Tiffany and Brett while they are both living and then to the survivor for the survivor’s lifetime. Let’s assume that TIffany and Brett are both 55 years old. And let’s assume that the stock has a very low cost basis–just $500,000–because the Thomases have held it for so long. Depending on the IRS’s applicable rates, and assuming a 5% annual payout rate paid at the end of each quarter, here’s an approximate tax result if you worked with the Community Foundation to help Tiffany and Brett establish a charitable remainder trust:
Following the death of the survivor of Tiffany and Brett, the remaining assets will flow to the Thomas Family Fund at the Community Foundation, which Tiffany and Brett have already established and which, upon their deaths, will split equally into two funds. The first fund will be a donor-advised fund for which their children will serve as advisors, and the second fund is an unrestricted endowment fund to support the Community Foundation’s priority initiatives in perpetuity. Of course, no client’s circumstances will exactly match those of Sally and Bob, Jenny and Joe, or Tiffany and Brett. The net-net here, though, is that we are happy to discuss the various tax-savvy options for charitable giving in any client situation. Please reach out. It is our honor to help you serve your charitable clients. *These examples are for illustration purposes only. Every client’s situation is different, and, therefore, the tax strategy and tax impact will be different for each client. For example, these illustrations are based on federal income tax rates only, and you’ll need to evaluate, among many other factors, the impact of state taxes and potential tax credits. The team at the community foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.  On an ongoing basis, the team at the Community Foundation tracks legislation, legal developments, trends, news, and innovative strategies for all types of charitable giving so that we can keep fund holders and their advisors up to date.
Recently, donor-advised funds have been the subject of conversation within financial and estate planning circles, as well as a trending topic in philanthropy, related to a set of proposed regulations issued by the IRS late last year. The IRS has scheduled public hearings on the proposed regulations, set for May 6, 2024. As just one of many types of funds your clients can establish at the Community Foundation, the donor-advised fund is popular because it allows your client to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, the client can recommend gifts to favorite charities from the fund to meet community needs as they emerge. Our team has compiled a list of articles we’d recommend if you’d like to dig deeper into the topic of donor-advised funds.
While these materials are useful to gain an understanding of the current situation, at this point, no one can predict what will happen with the proposed regulations--whether and how they will be revised or when they might become effective, if ever. As always, our team is staying on top of the issues. We’ll keep you posted! The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. |
Visit Us |
Contact Us
Office Hours: Monday - Thursday, 10am - 4pm
Remote/Virtual Hours: Friday, 10am - 4pm Meetings by Appointment |
|
Accredited by the National Standards for U.S. Community Foundations®
© Community Foundation of Grand Forks, East Grand Forks & Region. All rights reserved.
Privacy Policy | SMS Terms & Conditions | EIN: 45-0448088