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Clean slate: Tips for charitable giving in 2024

Clean slate: Tips for charitable giving in 2024

A new year is such a great time to plan and reboot. Cliché as it may be to talk about resolutions this time of year, it’s tough to deny that January represents a clean slate for “to do” lists, goals, and your overall mindset.

As you think about your 2024 charitable giving goals and priorities, here are a few items to consider: 

You may have more capacity to give to charity.

The IRS issued inflation adjustments for important thresholds such as the standard deduction, Social Security cost-of-living adjustments, annual exclusion gifts, Required Minimum Distributions, Qualified Charitable Distributions, and levels of income for each tax bracket. Talk with your advisors about how these adjustments might impact your charitable giving goals–or even create opportunities for you to do more to support your favorite causes in 2024.

You may soon get a charitable deduction even if you do not itemize.

Many eyes are on the Charitable Act, which, if passed, would allow even non-itemizers to deduct certain charitable gifts on their income tax returns. This legislation has generated strong public support; 77% of Americans are reportedly in favor of the proposed “universal” charitable deduction.

You’ll likely still receive requests to fund disaster relief efforts.

Disaster giving is likely to remain high on the fundraising radar, meaning you will likely continue to get requests for donations to support disaster-related causes. As always, please reach out to The Community Foundation to strategize about effective deployment of your charitable dollars to help people who need it most in the wake of disasters and humanitarian crises. 

This is a good time to review your estate plan without being rushed.

The beginning of the year is an excellent time to be sure your estate plan is in order. Many people scramble at the end of the year to execute tax planning transactions, which is understandable, but this often leaves little time for a thoughtful, strategic evaluation of the various components that make up a comprehensive estate plan, including financial planning, retirement planning, tax planning, investments and wealth management, business succession planning, planning for disability, evaluating wills and trusts as children get older and needs change, and, of course, charitable planning. 

Reach out to the team at The Community Foundation as you and your advisors evaluate the steps you’d like to take in 2024. We’re here to help ensure that you achieve your charitable giving goals in the most tax-savvy and impact-minded way possible so that you can continue to help the causes you care about the most.

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Providing guidance for loved ones about your charitable giving

Providing guidance for loved ones about your charitable giving

Whatever their age or health status, most people are aware that they need to document important financial and personal information for loved ones, just in case the unexpected occurs. We’ve all heard stories about someone’s family member who passed away and left little, if any, information about where to find bank accounts, passwords, estate planning documents, life insurance policies, and other information. No one wants to leave their loved ones in the lurch with scant information, but it’s often hard to get motivated to write it all down in one place.

The start of a new year is an excellent time to get organized and provide your next of kin or key advisors with the information they’d need to take care of your affairs if something were to happen to you. The list of “must haves” includes the obvious: Will, trust, power of attorney, birth certificate and marriage license, titles to cars and boats, deeds to property, car keys, bank accounts, investments and advisor contact information, life insurance policies and contact information for the agent, funeral wishes, and, critically, passcodes and passwords to devices and accounts. 

What might not be obvious, though, is that you also ought to leave your loved ones with information about your charitable giving, including details about favorite charities you’ve supported over the years and information about your donor-advised or other type of fund (or funds) at The Community Foundation. In many instances, one member of a family has managed a family’s or a couple’s donor-advised fund, for example, while others have not been as involved in the mechanics. Be sure to include your funds at The Community Foundation on your list of key information, and include The Community Foundation’s contact information. You might also like to include a copy of your donor-advised fund agreement outlining successor advisors, as well as login credentials to The Community Foundation’s online fund portal. 

The team at The Community Foundation is happy to help you put together documentation about your donor-advised fund and charitable wishes to include with the information you provide to your loved ones so they are not completely lost as they navigate how to carry out your philanthropic wishes. Even better, we’re happy to work with you anytime to show your family members exactly how your donor-advised or other type of fund works so that they are involved and participating with you in your philanthropic pursuits during your lifetime.

Making it easy for you to share the joy of giving, and also helping ensure that family members have the information they need, are priorities at The Community Foundation. We are honored to work with you to help make your philanthropy easy, effective, and rewarding for everyone involved.

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Planned giving pointers

Planned giving pointers

As you’ve chatted over the years with the professionals working at your favorite nonprofits, you’ve likely heard the term “planned giving.” You may have even wondered what the term means–even if you have already structured so-called “planned gifts” to support your favorite charities!

Here are a few pointers to help break down the concept of planned giving, along with ways The Community Foundation can help you achieve your charitable goals.

It may help to think of “planned giving” in contrast to what’s sometimes called “current” or “annual” giving. For example, when you write a check (or, ideally, give highly-appreciated stock) to a charitable organization such as your fund at The Community Foundation, you’re transferring those funds right away in a relatively straightforward manner. You also may be making annual gifts to several charities, and from time to time you may also make gifts to a favorite charity’s endowment or reserve fund at The Community Foundation.

By contrast, a “planned gift” is more complex and forward-looking than current or annual support of your favorite charitable causes. Making structured future transfers to charity is often referred to as “planned giving” because, well, these gifts require planning. Here are examples of common “planned gifts”:

 

–A bequest in your will or trust allows you to name a charity, such as your fund at The Community Foundation, to receive a certain dollar amount, or a percentage of your estate, following your death. The team at The Community Foundation can work with you and your advisors to include a bequest in your estate plan using the proper bequest language.

 

–Beneficiary designations on life insurance policies, and especially on retirement plans, can be effective tools for making bequests. The team at The Community Foundation can work with you and your advisors to complete the paperwork required to properly designate your fund at The Community Foundation as the beneficiary of life insurance or IRA assets, including reviewing with you the many tax benefits of using retirement plans to fund your bequests.

 

–Setting up a charitable trust, such a charitable remainder trust, is often an effective way for you to ensure that money will flow from your estate to a charity, such as your fund at The Community Foundation, in a way that meets both your philanthropic intentions and your financial goals (including retaining an income stream and triggering an up-front charitable income tax deduction). A charitable gift annuity is another type of “split interest” arrangement, whereby you can retain an income stream and designate a charitable beneficiary to receive a future gift. Charitable trusts are complex, and we’re here to walk you and your advisors through the process every step of the way.

 

Please contact the team at The Community Foundation. We’d love to work with you to set up planned gifts to support your favorite causes, as well as work together to ensure that you’ll meet your charitable goals for current giving in 2024.

 

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Tax law twists and turns: Five developments impacting charitable giving

Tax law twists and turns: Five developments impacting charitable giving

2023 was a busy year! We understand that charitable giving topics may not always be at the top of your reading list. That’s why we’re here! The team at The Community Foundation is committed to keeping you up-to-date on what you need to know. Here’s a recap of five key developments last year that are most certainly worth keeping an eye on in 2024.

NIL Collectives

The IRS has had a lot to say lately about NIL collectives. In addition to offering insights for athlete recipients of NIL (name, image, and likeness) dollars, the IRS has also issued guidance pertaining to organizations that help develop NIL opportunities for athletes, suggesting that the activities of these entities, known as “collectives,” may not qualify as “charitable.” This development could be problematic for your clients who believe that their contributions to NIL collectives will qualify for a charitable tax deduction.

 

Donations of Cryptocurrency 

At least a few of your clients are likely still invested in cryptocurrency. You should know that in early 2023, the IRS published guidance confirming that a taxpayer cannot take a charitable deduction for a gift of cryptocurrency over $5,000 without submitting a qualified appraisal. Cryptocurrency, in the eyes of the IRS, is treated as property, not cash. And it is not a security, either. Note that the IRS also said that a price quotation from a cryptocurrency exchange (such as FTX!!) doesn’t count; a qualified appraisal is still required.

 

Charitable Act

Senate Bill 566, which is still pending, was introduced in early 2023 to address what is sometimes called the “universal charitable deduction,” meaning that even taxpayers who do not itemize their deductions would be able to claim a charitable deduction, potentially in an amount up to one-third of the taxpayer’s standard deduction. Keep an eye on this; the bill enjoys broad support and, if it becomes law, could be a real perk for both your clients and the charities they care about.

 

Exempt Purpose

It seems that at least once a year, the IRS issues guidance on what it means for an organization to be organized for an exempt purpose under Section 501(c)(3). In Private Letter Ruling 202349014, we are once again reminded that personal activities that have no direct public benefit simply will not be viewed by the IRS as exempt. While private letter rulings are of course not binding, they are nevertheless useful tools to provide to a client to show specific examples of what the IRS considers to be non-exempt. Estate planning attorneys and CPAs tell us that every few months, a client comes to them with an idea for starting a nonprofit, and it’s easier to tell a cautionary tale than it is to recite Internal Revenue Code sections!

 

Proposed Regulations

Proposed regulations issued by the IRS are not binding, and often they are revised–or even shelved or canceled entirely–before they go into effect. Still, the team at The Community Foundation is always keeping an eye out for these and other forms of IRS rulemaking that could potentially affect your work with your charitable clients. A recent example of this type of IRS activity is a set of proposed regulations concerning donor-advised funds, issued in November 2023. The public comment period ends in mid-January 2024, and then the IRS will take time to review the comments, so we won’t know anything definitive for quite some time. For those who are interested, there is detail provided in this podcast series on the topic. You can take a long winter walk and learn everything you want to know about what’s being proposed!

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Unrestricted giving, the trust factor, and why it matters to your clients

Unrestricted giving, the trust factor, and why it matters to your clients

The gifts Americans give to charity every year provide critical support for more than a million organizations that are helping sustain the quality of life in our communities. Philanthropy equates to 2% of GDP–that’s a little more than the home health care services sector! And, trust is growing as a must-have prerequisite before your clients decide to give to an organization, increasing from 63.9% to 69.9% between December 2021 and December 2022.

With trust in charitable organizations driving so many giving decisions, it’s important for you and your clients to be aware of The Community Foundation’s role and commitment to stewardship. Every day, the team at The Community Foundation works with members of our board of directors, civic leaders, and nonprofit organizations to deeply understand the areas where the people in our community need the most help. Today, the most pressing needs might be for emergency assistance in response to a disaster. Tomorrow, our community might need scholarships for Harrisonburg and Rockingham youth, or investments in research to improve access to healthcare for the underserved. Indeed, the needs of our community are ever-changing. The Community Foundation always has its finger on the pulse of the community’s top priorities and the best way to address them. Through its convening power, community knowledge, and perpetual mission, your Community Foundation is an unparalleled resource to make our community better for everyone.

 

As you talk with your clients about their philanthropic plans, keep in mind that many individuals and families establish multiple funds at The Community Foundation to meet all of their various charitable giving needs. For example, a family might establish a donor-advised fund to organize their regular annual giving, making it easy to track gifts of appreciated stock and support for a large number of individual charities. A member of this family might also set up a charitable remainder trust with The Community Foundation to accept a gift of highly-appreciated real estate and retain an income stream for life. And, this family might also establish an unrestricted fund or make gifts to existing funds that are specifically designated by The Community Foundation and its board of directors to address the most critical needs of our community. For example, your client may decide to:

–Contribute to an unrestricted fund at The Community Foundation to support the foundation’s long-term grant making.

–Donate to The Community Foundation’s operating fund to support the foundation’s mission for years to come.

–Support a special initiative fund to help people who need assistance right now to get back on their feet, relying on The Community Foundation’s network and expertise to invest the dollars where they’re needed most critically.

 

Whatever ways your clients choose to get involved, you’ll know that you and your clients can trust The Community Foundation to make a lasting difference in the community we all love.

 

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Big gifts, bullish portfolios, and kids who move away

Big gifts, bullish portfolios, and kids who move away

If you’re not talking about charitable giving with your high net-worth clients, 2024 is the year to start doing it! Recent studies show that 85.1% of affluent households give to charity. Certainly many of your clients are among them.

Take a few minutes this month to scan your client list for three common scenarios and related opportunities for charitable giving solutions.

Clients who made significant charitable gifts at year-end. 

You’re probably aware of at least a few clients who increased their charitable giving at the end of 2023. Perhaps you worked with a client to establish a donor-advised or other type of charitable fund at The Community Foundation, or maybe you helped a client structure a Qualified Charitable Distribution to a field-of-interest or designated fund at The Community Foundation. Now that the dust has settled on year-end planning activities, go back to these clients to find out more about their overall philanthropic plans. You may discover that a client would like to work with you to update their estate plan to include a bequest to their fund at The Community Foundation, set up a charitable remainder trust with highly-appreciated stock, or proactively plan their charitable gifts for 2024 to get a jump on tax strategies.

Clients whose stock portfolios have rallied.

2023 brought good news and record highs for the stock market. As always (and perhaps especially now!), giving appreciated, publicly-traded stock to charitable organizations is a highly effective tax strategy. This is because capital gains tax is avoided when your client transfers long-term, marketable securities to a fund at The Community Foundation or other public charity. The client is typically eligible for an income tax deduction at the fair market value of the securities, and when the charity sells the securities, the charity does not pay capital gains tax. This is a win-win for your client and the charity. Scan your client list for clients who are holding long-term stock positions that have appreciated substantially since they bought them, especially with the market’s latest rally.

Clients whose children have moved away. 

Children of affluent parents tend to move away. This means many of your clients may be seeking ways to stay in close communication with their children. Remember that while The Community Foundation can help your clients maximize the impact and tax benefits of their local giving, The Community Foundation’s tools are also very geographically flexible. This means, for example, that your clients can use their donor-advised fund to support 501(c)(3) organizations across the country, including in communities where their grown children are living. When you demonstrate your interest in your clients’ charitable giving priorities, you not only are strengthening your client relationships, but you’re also helping clients strengthen relationships with their children.

 

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Philanthropy keeps your clients sticky

Philanthropy keeps your clients sticky

Regardless of your business or industry, retaining your clients or customers is a key to success. And as the saying goes, it’s easier and less costly to retain or get more work from a current client than it is to find a new client.

As an attorney, accountant, or financial advisor who helps clients with tax and estate planning matters, you’re well aware of the fragile transition phase after a client passes away. Not only are many tax planning techniques activated (and validated!) after a client’s death, but you’re also navigating the understandably stressful and emotional factors that impact your work with the heirs to administer the estate, transfer assets, and file tax returns.

It’s no wonder that the death of a client presents business retention challenges. You’d love to continue representing the client’s children, but that can be a difficult discussion immediately following their parents’ death. It’s no surprise that the rate of advisor disconnect and abandonment from one generation to the next is remarkably high. The numbers behind this churn are staggering. Historically, studies have found that 75% of parents report that their advisor had never met their children, and 10% or fewer of heirs retain their family’s advisor post-inheritance.

The solution is, of course, for the advisor to establish a connection with the next generation well in advance of a client’s death. Certainly there are many ways to cultivate a next-generation connection—starting young, sending birthday or holiday cards, encouraging clients to include children in meetings where appropriate, offering to counsel children on career choices, and making networking introductions or job referrals. Few touchpoints, however, are as substantive and meaningful as philanthropy. After all, in most clients’ view, inheritances are about more than money. They’re about values, humanity, multi-generational connections, understanding wealth’s origins, and more.

Children who get to know their parents’ advisors begin to appreciate the advisors’ roles in not only making family wealth last across generations, but also leaving a family legacy to the community. The Community Foundation can help advisors create opportunities to discuss philanthropy with clients and their children and grandchildren. Here are a few examples:

  • Suggest that your clients consider working with The Community Foundation to establish easy-to-understand charitable giving tools, such as a family donor-advised fund, field-of-interest fund, or designated fund.
  • Encourage your clients to take advantage of The Community Foundation’s services for families, which include researching family members’ favorite causes, arranging site visits at local charities, and educational sessions about the basics of charitable giving and what’s going on in the community.
  • Share with your clients and their children materials provided by The Community Foundation describing tax-savvy charitable giving, including the benefits of giving highly-appreciated stock instead of cash to a fund at The Community Foundation to avoid capital gains taxes.
  • Ask The Community Foundation to help facilitate family discussions so that all family members  see how they can support causes that have been important to their parents and grandparents over the years as well as causes that are contemporary, relatable, or meaningful to them.

While any conversation with a client’s child or grandchild can increase the likelihood of retaining the family as a client across generations, the topic of philanthropy is an especially effective tool to create a common bond that keeps the family from becoming your former client.

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Three things every philanthropist must know about the gift and estate tax sunset

Three things every philanthropist must know about the gift and estate tax sunset

The shorter days of fall and winter aren’t the only sunsets creeping up on people these days. If you’ve met with your estate planning attorney and tax advisors recently, you’re probably aware that the gift and estate tax exemption–the total amount you can leave to family and other beneficiaries during life and at death before the hefty federal gift and estate tax kicks in–is about to drop, rather precipitously.

Without legislation to prevent it, on January 1, 2026, the exemption will drop from $12,920,000 per person (that’s the 2023 exemption) to about half of that amount, depending on annual inflation increases. As the date gets closer, tax planning decisions get tougher. Make aggressive moves now to activate gifts to family members? Or hold out to see if legislation intervenes to prevent the sunset?

Understandably, some philanthropists are beginning to get concerned about what their legacy might look like when (and if) the exemption drops. Add to that uncertainty the fact that a person’s date of death is among life’s great unknowns, it’s no wonder that for the relatively few taxpayers who may be impacted by gift and estate taxes—at least for now—there’s both concern and confusion.

Here’s a quick review of the facts:

  • For 2023, the estate tax exemption is $12.92 million per individual, $25.84 million per married couple, and for 2024, the exemption rises to $13.61 million and $27.22 million, respectively, adjusted for inflation, as recently announced by the IRS.
  • The IRS will issue inflation adjustments for 2025, too.
  • For 2026, the exemption is scheduled to fall back to 2017 levels, adjusted for inflation, which would roughly total $7 million per person.

Here are a few strategies you might consider evaluating with your tax advisors now to advance your estate plan and your philanthropy plan:

  • If you are a business owner, you could explore launching a gifting program to transfer shares of your business not only to heirs, taking advantage of the higher exemption, but also to your donor-advised or other fund at The Community Foundation. The objective here would be to begin intentionally reducing the value of your estate, assuming that the estate tax exemption will rise, while also executing a business transition plan that meets your overall intentions regardless of the tax laws. (As with any gift of a hard-to-value asset, securing a qualified appraisal is essential, as is timing; shares can’t be gifted to a charity if a sale is effectively already in process. The IRS watches both very closely.)
  • Annual exclusion gifts ($17,000 per gifting spouse per recipient in 2023, increasing to $18,000 in 2024) to family members and other individuals are an effective way to reduce the value of a taxable estate without eating into the lifetime gift and estate tax exemption. Indeed, many philanthropic individuals use the annual exclusion technique as inspiration for their charitable gifts. Gifts to charities are deductible for gift and estate tax purposes (as well as for income tax purposes) and therefore also serve to reduce the value of a taxable estate without eating into the exemption. Some philanthropists report that they like the idea of making annual exclusion gifts to each family member and then using their donor-advised fund at The Community Foundation to make annual exclusion-amount gifts to each of the charities they support.
  • Work with your tax advisors and the team at The Community Foundation to run various financial scenarios to determine whether the exemption sunset will affect you and if so, to what extent. If you find yourself looking at a potentially significant taxable estate in a couple of years, consider increasing your bequests to your donor-advised or other fund at The Community Foundation. Amounts passing to The Community Foundation or other qualified charity upon your death are not subject to estate tax. This means your charitable priorities will receive 100 cents on every dollar in the taxable portion of your estate, while your family and other beneficiaries could receive 60 cents on the dollar–or even less.

As always, the team at The Community Foundation is here to help you navigate the opportunities and pitfalls presented by changes in the tax law. It is our pleasure to work with you and your advisors to maximize your charitable goals.

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Charitable giving tips for clients’ golden years

Charitable giving tips for clients’ golden years

The rising popularity of the Qualified Charitable Deduction–”QCD”–appears to be inspiring an increasing number of retirees to re-evaluate their charitable giving plans. Before the clock winds down on 2023 giving opportunities, be sure you’re familiar with the various charitable giving techniques that are most appealing to retirees and the various ways The Community Foundation can help.

Here are four characteristics of retirees and their charitable giving situations that will help you serve your retired clients.

Greater connection to community. Retirees often feel a greater connection to their community and favorite charities than your clients who are not retired. Whether it’s because a retiree’s income and corresponding giving capacity are more predictable, or because a retiree has more time, getting involved with favorite charities can help retirees stay active and even avoid loneliness. The team at The Community Foundation stays connected with the many nonprofit organizations in our region, and we are happy to serve as a sounding board for your retired clients who want to get involved.

Less likely to itemize deductions. Many retirees apply the standard deduction on their income tax returns because they don’t have many expenses that qualify for itemization, such as business expenses and mortgage interest deductions. Help your retired clients evaluate whether itemizing deductions in certain years could be beneficial. Through a donor-advised fund at The Community Foundation, your clients may be able to concentrate charitable contributions into particular tax years and benefit from the deductions above and beyond the standard deduction. This is called “bunching,” and a donor-advised fund can help your client take advantage of itemizing tax deductions while still allowing them to provide steady support to nonprofits in years that follow the itemizing year.

More interested in involving children and grandchildren in their philanthropy. The Community Foundation is happy to help your retired clients fulfill their desire to stay connected with their children and grandchildren, including formalizing roles for these family members as advisors and successor advisors of the retiree’s donor-advised fund at The Community Foundation. This is often an excellent and easy way to structure philanthropic priorities for generational wealth as well as create positive, authentic communication channels across an extended family.

Excellent candidates for Qualified Charitable Distributions. Your clients who are at least age 70½ can direct a tax-free distribution (up to $100,000 per spouse in 2023) from an IRA to a qualified charity such as a field-of-interest or designated fund at The Community Foundation. For your clients who must take Required Minimum Distributions (RMDs), the Qualified Charitable Distribution (QCD) is especially beneficial. This is because the distribution to charity counts toward the RMDs and therefore never lands in the client’s taxable income.

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Structured philanthropy: A process relieves the pressure

Structured philanthropy: A process relieves the pressure

Helping families create a meaningful structure for their philanthropy has long been a hallmark service of The Community Foundation. That structure and the resulting discipline are increasingly important as both wealth and charitable giving more frequently span multiple generations. Indeed, spontaneous and unstructured conversations around wealth and philanthropy can be a source of family discord.

By being part of the discussion–whether formally or informally, at the table or behind the scenes–the team at The Community Foundation can help families resolve issues and smooth out the edges around common intra-family challenges, including communication, decision-making, and charitable giving.

Here are a few of the ways the team at The Community Foundation can help:

–Serving as a coach to foster thoughtful, intentional, and inclusive family conversations, even if The Community Foundation team member is serving simply in an “ice-breaker” role.

–Offering guidance from the position of a facilitator to assure that all voices are heard, particularly as views across generations can differ.

–Helping a family structure a series of discussions that employ a phased-in or “dimmer-switch” approach, beginning with values-centered discussions to identify common ground and progressing to systematic funding and allocation conversations and decisions.

 

The Community Foundation can work with a family under a variety of circumstances. For example:

–Some families enjoy organizing their charitable giving through both a private foundation and a donor-advised fund at The Community Foundation. The team at The Community Foundation can serve as a sounding board for grant making from both vehicles and also work with a family’s tax advisors to help optimize the role and use of each vehicle.

–Many families have found that a donor-advised fund at The Community Foundation meets all of their charitable giving needs, and they appreciate The Community Foundation taking on the administrative burden associated with tax filings and administration. In some cases, a family decides to close their private foundation altogether and transfer the assets to a donor-advised fund at The Community Foundation.

–Some families leverage The Community Foundation for the full suite of its charitable giving services, often using a donor-advised fund in much the same way they’d use a private family foundation, only with increased privacy and no need to create a separate legal entity, thanks to The Community Foundation’s umbrella 501(c)(3) status.

 

By consulting with the team at The Community Foundation, and leaning into the structure that’s right for them, families can help their favorite community causes—and keep the peace across generations.

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.