Valuable conversations: Why it’s smart to talk with your clients about charitable giving

Valuable conversations: Why it’s smart to talk with your clients about charitable giving

January is a good time to start helping your clients plan for their annual giving. With the year-end flurry of donations still fresh in many clients’ minds, you may discover that clients will welcome your suggestion to make 2023 the year to get organized early, particularly as economic headwinds make planning especially important.

A conversation that benefits everyone

Among the many benefits of discussing charitable giving with your clients is that your clients will see you as an expert about local community needs and nonprofits, especially when you have a close working relationship with TCFHR team. Your philanthropic clients want to learn how they can make a difference through their charitable activities, and they are expecting their advisors to be ready to help them structure and plan their giving. Indeed, for years, research has shown that a proactive advisor who offers options for incorporating philanthropy into financial and estate plans inspires client loyalty, even across client generations.

The Community Foundation advantage

Advisors frequently comment that they’re surprised to discover the many ways The Community Foundation can help their clients, especially compared with national donor-advised fund programs affiliated with brokerage houses or financial services firms.

Sometimes the greatest needs really are right here at home, and working with TCFHR is often the very best option for ensuring that your clients are informed and impactful philanthropists. The team at TCFHR works with local nonprofits every single day and thoroughly understands how organizations are meeting community needs.

In addition, TCFHR is unparalleled in its ability to be flexible and responsive, providing outstanding, personal service designed around your clients’ needs while always respecting your role as your client’s primary advisor.

Options for every client’s unique situation

Our team welcomes the opportunity to work with you and your clients to implement their charitable giving goals. Here are just a few of the ways we can work with you as you plan for 2023:

Wills and trusts

A client can establish a bequest to a fund at TCFHR through a will or trust or through a beneficiary designation on a qualified retirement plan or life insurance policy. TCFHR will provide proper bequest language.

Retirement plan beneficiary designations

Bequests of qualified retirement plans can be extremely tax efficient. Funds flowing directly to a client’s fund at TCFHR from a retirement plan after the client’s death will not be subject to income tax or estate tax.

Family philanthropy

Consider encouraging clients to involve their children and grandchildren in philanthropy, especially when the clients are working with TCFHR through a family donor-advised fund or other collaborative vehicle.

Income tax planning

Remind clients that they are eligible for an income tax deduction for lifetime charitable gifts, and the gifted assets are no longer subject to future estate taxes.

Complex giving

Consider more complex giving vehicles, including charitable remainder trusts, charitable gift annuities, and gifts of closely-held stock. TCFHR can work with you to establish these structures to help facilitate your clients’ charitable giving goals and meet the clients’ financial and tax goals at the same time.

We look forward to working with you in 2023! 540-432-3863

The team at TCFHR 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 just keeps getting better: Why charitable gift annuities are having a moment

It just keeps getting better: Why charitable gift annuities are having a moment

Charitable gift annuities (CGAs) are becoming more attractive to philanthropists, making this planned giving vehicle a good fit for your clients who like the idea of an up-front tax deduction, a steady lifetime income stream, and a remainder gift to charity.

If you are not already doing so, now is a good time to consider talking with clients about CGAs. A CGA, like any other annuity, is a contract. Your client agrees to make an irrevocable transfer of cash or assets to a charitable organization. In return, the charitable organization agrees to pay the client (or a designated beneficiary such as a spouse) a fixed payment for life. Your client is eligible for an immediate income tax deduction for the present value of the future amount passing to charity.

The popularity of CGAs is increasing for a few reasons.

Increase in payout rates

First, in late November 2022, the American Council on Gift Annuities voted to increase the rate of return assumption it uses in its suggestions for maximum payout rates for CGAs. Effective on January 1, 2023, the rate of return assumption moved from 4.50% to 5.25%. This increase translates to a significant boost in payout rates for annuity contracts and is therefore good news for a client’s income stream. The new rates are now available on the ACGA’s website.

New Legacy IRA opportunities

Second, with the December 2022 passage of the Legacy IRA enhancements to the Qualified Charitable Distribution (QCD) rules, CGAs could become even more attractive. This is because the new Legacy IRA rules allow for a once-in-a-lifetime, $50,000 QCD from an IRA to a split-interest vehicle. While the law allows a taxpayer to make a QCD to a charitable remainder trust, the $50,000 statutory maximum for a Legacy IRA gift may be a deterrent. This is because minimums for CRTs are usually at least $100,000; that is not the case, however, for CGAs, which typically can be set up at much lower minimums. Because of the difference in minimums, the CGA may be more attractive for taxpayers who want to take advantage of the one-time Legacy IRA gift as part of a QCD strategy.

Note that CGAs created to receive a QCD contribution are different from other CGAs in a few important respects under the new law. For example, annuity payments are taxable, and must be at least 5%. Although the 5% requirement is not an issue at the moment due to the new, higher payout rates, this stipulation could present a challenge in the future.

Tax planning with appreciated assets

Third, gifts of appreciated assets are always a strong planning technique, especially to a CGA. When a taxpayer contributes highly-appreciated stock in a public company, for example, to a CGA, the taxpayer typically is eligible for an income tax deduction at the stock’s fair market value on the date of the gift. When the recipient charity sells the stock, the charity pays no capital gains tax. Note that the taxpayer would have paid capital gains tax had the taxpayer sold the stock. Especially if the stock was paying low or no dividends, the CGA has enabled the taxpayer to unlock a low-income producing asset and convert it to a vehicle that pays an income stream. Plus, the taxpayer gets the benefit of the upfront tax deduction, presumably in a tax year where income is higher (and therefore taxed in higher brackets) than it will be when the taxpayer retires at a future date.

Call us at 540-432-3863 or email Revlan Hill at [email protected]

The team at TCFHR 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.  

 

So long, 2022: Important charitable tax planning reminders as the year winds down

So long, 2022: Important charitable tax planning reminders as the year winds down

Now is the time to share important reminders with your clients about year-end gifts. Time is indeed of the essence!

Gifts of appreciated stock still shine

Giving in a roller coaster market may continue to be a real concern for many of your philanthropic clients, but remember, not all stocks are down. Gifts of appreciated stock to a donor-advised fund or other type of fund at The Community Foundation is still one of the most tax-savvy ways to support favorite charitable causes because capital gains tax can be avoided. And of course, a stock market rally can present timely opportunities.

Donor-advised funds help both the donor and the donor’s favorite nonprofits

Grantmaking from donor-advised funds (DAFs) continues to rise, especially as donors and their advisors pay increasing attention to the ways a donor-advised fund can help with tax planning and, importantly, keep a donor’s giving levels consistent even in lower income years. Reach out to The Community Foundation to learn more about how “bunching” at year end can maximize clients’ tax benefits, and at the same time ensure that nonprofits are supported as demands on their missions continue to grow in choppy economic waters.

Year-end giving deadlines are firm

Watch the calendar closely! Year-end can sneak up on all of us, and it’s important not to miss key deadlines for accomplishing your clients’ charitable goals. Please reach out to our team to find out when certain transactions must occur to be completed during this tax year, including checks to a fund at The Community Foundation. Gifts of marketable securities also need to be fully transferred by December 31, so please urge clients to contact us in plenty of time for our team to process and receive the transfer.

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.

Questions? Call us at 540-432-3863 or email Kristin Coleman at [email protected]

 

Five of 2022’s most-asked questions about Qualified Charitable Distributions

Five of 2022’s most-asked questions about Qualified Charitable Distributions

 

Qualified Charitable Distributions, or “QCDs,” 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 most frequently asked this year by both advisors and donors. Be on the lookout for these and other client questions, and 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 72. 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 I make a Qualified Charitable Distribution even if I am 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 (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 I direct a QCD to my 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 designated funds, unrestricted funds, field-of-interest funds, and scholarship funds.

“How much can I give through a QCD?” 

Short answer: $100,000 per year.

Long answer: A Qualified Charitable Distribution permits you (and your spouse from your spouse’s own IRA or IRAs) to transfer up to $100,000 each year from an IRA (or multiple IRAs) to a qualified charity. So, as a married couple, you and your spouse may be eligible to direct up to a total of $200,000 per year to charity from your IRAs and avoid significant income tax liability.

Questions? Call us at 540-432-3863 or email Kristin Coleman at [email protected]

 

It’s a big deal: Answering clients’ questions about GivingTuesday

It’s a big deal: Answering clients’ questions about GivingTuesday

Among the many client questions you and other attorneys, accountants, and financial advisors can be prepared to answer as year-end approaches is, “What is Giving Tuesday? And why the hashtag that often precedes it in print or online?”

Giving Tuesday–or “GivingTuesday” to be more accurate–has become a philanthropic phenomenon of sorts, generating support and enthusiasm from a wide range of people and institutions. Many of your clients are likely reading about GivingTuesday in the media, especially after the Gates Foundation recently announced its $10 million gift to support the effort.

Celebrating 10 years in 2022—and vastly different from both the Black Friday and Cyber Monday that it follows—GivingTuesday is a day of generosity. Generosity of time, effort, money, concern or any other well-intended act of giving.

Facts about GivingTuesday:

  • Started in 2012.
  • More than a day, GivingTuesday is a movement and an organization.
  • Founded at New York’s 92nd Street Y and celebrated globally.
  • Falls on the first Tuesday following Thanksgiving, always.
  • Though not strictly a fundraiser, money “moved” has grown from $28 million in 2013 to $2.7 billion in the U.S. in 2021.

Clients typically get involved in GivingTuesday by supporting their favorite charitable organizations. Many nonprofits promote GivingTuesday as an important source of funds for their organizations, and they frequently encourage their donors–your clients–to give via cash, check, online or even via cryptocurrency. Your clients also can participate in GivingTuesday by recommending grants from their donor-advised funds to favorite organizations.

Far beyond simple acts of benevolence, GivingTuesday is steeped in the idea of “radical generosity,” which the organization describes as giving to create systemic change, or to “recognize that we each can drive an enormous amount of positive change by rooting our everyday actions, decisions and behavior in radical generosity—the concept that the suffering of others should be as intolerable to us as our own suffering. Radical generosity invites people in to give what they can to create systemic change.”

Beyond monetary donations, systemic change comes from participating in activities like social media advocacy (the # in #Giving Tuesday that creates ripple-effect awareness online), sharing love, spreading kindness, supporting a food pantry, shopping local or hosting a food or coat drive.

To help clients learn more or get answers to additional questions about GivingTuesday, please reach out to The Community Foundation. Our team welcomes your call!  Call us at 540-432-3863 or email Kristin Coleman at [email protected]

 

The perfect plate: Turkey, pumpkin pie and charitable giving

The perfect plate: Turkey, pumpkin pie and charitable giving

As you prepare to gather with family and friends over the Thanksgiving holiday, we invite you to reach out to the team at The Community Foundation for suggestions on how to incorporate charitable giving into the festivities.

For example:

  • Take this opportunity to brush up on the rich history of charitable giving in America.
  • Consider asking each family member to conduct quick research on a community need that they feel strongly about, such as homelessness, early childhood education, preserving the environment, medical research, and so on. Even just 15 minutes of online research on how the issue is playing out locally can be eye-opening!
  • When your family is together, each person can briefly share what they found in their research. If the group feels strongly about one or two issues, you might consider pooling donations–whether $5 per person or $50.
  • Contact The Community Foundation to find out which nonprofit organizations in the community are most closely aligned with addressing the issues you’ve selected. Make your family donation to those organizations.

Thanksgiving is also a good time to start planning for year-end charitable giving to meet your philanthropic goals. For instance:

  • Making gifts of cash or appreciated stock to your donor-advised fund at The Community Foundation can help you streamline your charitable giving recordkeeping and still allow you to support your favorite charities with year-end gifts. If you’ve not yet established a fund at The Community Foundation, we’d love to help you set that up. There is still plenty of time to put it in place to meet your year-end tax planning and charitable giving needs.
  • If you are over the age of 70 ½, consider making a Qualified Charitable Distribution (QCD) from your IRA to one or more qualifying charities, which include an unrestricted or field-of-interest fund at The Community Foundation. QCDs, available up to $100,000 annually per taxpayer, are an excellent way to bypass required minimum distributions and the corresponding income tax liability.
  • Many families update their estate plans around the holidays. If you’re planning to review your wills and trusts, it’s a great time to check in on any bequests and adjust those provisions, especially if you’ve recently established a donor-advised or other type of fund at The Community Foundation and intend for part of your estate to flow into those vehicles.

As always, please contact The Community Foundation for charitable giving inspiration and insights. We are here to help! Call us at 540-432-3863 or email Kristin Coleman at [email protected]

 

Give a little and feel a lot better

Give a little and feel a lot better

In the classic book The Go-Giver: A Little Story about a Powerful Business Idea, authors Bob Burg and John Mann share how Joe, a young professional, uses unselfishness to ultimately find business success.

Among the philosophies:

–Your true worth is determined by how much more you give in value than you take in payment.

–Your income is determined by how many people you serve and how well you serve them.

On a personal level, we’ve all heard the adage, and to paraphrase, “It’s better to give than to receive.” Two often-cited benefits of giving are (a) that it makes you happy, and (b) it makes you healthier and live longer.

These benefits can be experienced through small gestures, like opening a door for a stranger; surprising the next-in-line at the drive through with a free cup of coffee; or checking on a neighbor before or after a storm.

Volunteering is another source of happiness and health enhancement. According to the University of Maryland Health System, volunteering can bring physical and behavioral health benefits including a broader social network, lower blood pressure (which can reduce risk factors associated with heart disease and stroke), improved mental health and stress relief.

By doing good, we feel better ourselves.

In many ways, interestingly enough, your community foundation can be a facilitator of health benefits. By helping to establish, manage and distribute your gifts of generosity to the causes you care about, The Community Foundation can simplify the giving process to your favorite organizations that power medical innovation, support equipment acquisitions and fund construction at university health centers, hospitals, and blood banks, as well as the many important services delivered by community health providers.

Quite notably, many generous and significant gifts received by health centers in 2021 referenced family foundation involvement. Among those facilities are Cedars-Sinai Health System (Los Angeles, CA); Atrium Health (Charlotte, NC); Wolfson Children’s Hospital (Jacksonville, Fla.) and Saint Barnabas Medical Center (Livingston, N.J.).

By giving through The Community Foundation, whether to an unrestricted fund, field-of-interest fund, or a donor-advised fund, and whether to health-related charitable organizations or others, a donor’s gifts to charity can go above and beyond simply meeting individual or family tax and giving goals. By serving those in need and the greater good, gifts to charity help others feel happier and healthier—donors and recipients alike.

Call us at 540-432-3863 or email Kristin Coleman at [email protected] for any questions on charitable giving.

 

Counseling your clients about nonprofits: The good, the bad, and the big leaps

Counseling your clients about nonprofits: The good, the bad, and the big leaps

 

The nonprofit sector accounts for more than 12 million jobs in the United States, and job growth in the nonprofit sector in recent years has outpaced job growth in the private sector. As an advisor, you are more likely than ever to represent clients who hold executive positions at nonprofits, serve in key roles on nonprofit boards of directors, or do business with nonprofit organizations.

Please reach out to The Community Foundation as a resource when questions about nonprofit matters arise in your client discussions. Here are three examples of the types of issues that come up in the nonprofit arena:

 

–The good: The application process for exempt status has improved dramatically in recent years, thanks to IRS enhancements to its Form 1023. This is important for you to know when you are advising clients who are involved with a new charity. For those familiar with the application process, the new Form 1023 was a huge win and a major IRS accomplishment.

 

–The bad: Watch out for exempt status issues. At the heart of a nonprofit’s favored tax treatment is the concept of “exempt purpose”–meaning, essentially, operating for the public good, not to further private interests. For charitable entities organized under Internal Revenue Code Section 501(c)(3), exempt status is crucial for an organization to remain exempt from paying income tax. Exempt status under Section 501(c)(3) also allows contributions to the organization to be eligible for income tax deductions (as well as estate and gift tax deductions).

 

–The big leaps: The nonprofit sector, powered by private philanthropy, can be, and has been, transformational for our society. If you’ve not spent some time reading up on the major societal changes that have their roots in the nonprofit sector, you might consider doing so. As always, the team at The Community Foundation would welcome an opportunity to provide big picture background and inspiration to support the ongoing service you provide your clients who are involved in the nonprofit sector.

 

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.

 

Bright spots in the midst of economic challenges

Bright spots in the midst of economic challenges

Bear markets aren’t much fun for anyone. But that doesn’t mean your charitable giving commitments have to be put on hold. If you are like many donors, you are still looking for ways to support the organizations you care about that rely on your support to achieve their missions.

Remember, not every stock is down. It’s still incredibly tax-efficient to donate highly-appreciated stock to your fund at The Community Foundation. When you give appreciated stock held for more than one year (a long-term capital asset) to your donor-advised or other type of fund, instead of selling it outright, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping your overall income tax situation.

Don’t forget about the Qualified Charitable Distribution (QCD), either. If you’ve reached the age of 70 ½, the QCD is an elegant and effective planning tool. You are still required to take Required Minimum Distributions (RMDs) from your IRA even in a down market, and the QCD can help offset this tax hit by allowing you to direct up to $100,000 to a qualified public charity, including a field-of-interest fund or unrestricted fund at The Community Foundation.

This is also a good time to make sure your estate plan is in good shape, including bequests you may wish to leave to a fund at The Community Foundation so that the causes you care about can continue to be supported for generations to come.

 

Please reach out to the team at The Community Foundation. We are here to help! Call us at 540-432-3863 or visit www.tcfhr.org.

 

Disaster philanthropy: Your clients and the important role of individual philanthropy

Disaster philanthropy: Your clients and the important role of individual philanthropy

Sadly, your philanthropic clients have likely grown accustomed to making charitable donations to support disaster relief. Individual donations provide critical resources to help communities recover from the many disasters–weather, fire, humanitarian, disease, war–that occur each year.

In the wake of Hurricane Ian, your clients may ask you about their options to support those affected by the storm. We encourage you to reach out to the team at The Community Foundation. We can connect your donors with a variety of options for giving that are trustworthy and effective. Indeed, disaster relief funding is frequently coordinated by community foundations, which are widely viewed as one of the very best vehicles to help donors provide financial support to relief efforts. Individual giving is critically important to any disaster relief effort, and The Community Foundation can help your clients make an immediate, powerful, and positive impact on the lives of those affected by Hurricane Ian or any disaster.

Especially heartwarming is that many donors are now exploring ways to help improve a community’s readiness for disaster response, including building reserve funds for future disaster relief and bolstering emergency preparedness infrastructure for medical care, food, clothing, and shelter delivered by a network of local, on-the-ground nonprofit organizations. We are happy to work with your clients to establish field-of-interest funds or unrestricted funds at The Community Foundation to ensure that the people in our region remain as safe and supported as possible when disaster strikes. Disaster-preparedness field-of-interest or unrestricted funds at The Community Foundation can be especially attractive because these funds are qualified recipients of QCDs (Qualified Charitable Distributions) from clients’ IRAs.

We look forward to helping your clients improve the lives of those affected by disasters both here in our community and across the nation and world.

 

Call us any time from 9am to 5pm Monday through Friday at 540-432-3863 for questions. www.tcfhr.org