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Community foundations: Unparalleled resources

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Community foundations: Unparalleled resources for local giving with major impact 

As economic times get tough, more and more people are asking how they can make the biggest difference right in their own backyard. Indeed, local giving is a topic that has even made its way into the opinions of the mainstream media, causing many charitably-inclined people to pay more attention to the impact their dollars are having on the causes they love.

Sometimes the greatest needs really are right here at home. As donors explore charitable giving opportunities and receive requests for funding from charities near and far, it can be helpful to read first-hand accounts of why other philanthropists have been so inspired by uncovering local needs that they simply were not aware of.

Over the years, researchers have consistently validated the important emotional elements of giving to familiar and nearby organizations to foster the rewarding sense of connection that is such an important driver of repeat philanthropic behaviors. Today’s donors want to be able to actually see the results of charitable investments.

Here are three suggestions for anyone who wants to get started on a “give local” journey.

First, scan the local news. Many people are very accustomed to scrolling the news feeds on phones and catching the national and international headlines. Local news can be hard to find, but those outlets do still exist! In particular, many television stations’ websites include a local news tab. Spend five minutes scrolling through the local news for three days in a row, and you might be surprised at how much you learn about your own community. Make a mental note of issues that raise your eyebrows or make you ask yourself “I hope someone is doing something about that.”

Second, with this research in hand, run a few quick Google searches with the key words you’ve identified, along with the terms “nonprofit,” “charity,” and the name of your town or city. Sometimes these searches will illuminate organizations you might have heard of or even be involved with already. At the very least, you will begin to frame your own description of the local causes you care about.

Third, reach out to the team at The Community Foundation. The Community Foundation’s mission is to improve the quality of life in our region, and that is possible through the work of nonprofit organizations and people like you who support them. The Community Foundation team will know which nonprofits are addressing the issues you’d like to learn more about and can provide advice about how your charitable dollar can make the greatest possible difference.

The Community Foundation is unparalleled in its ability to be flexible and responsive, providing outstanding, personal service designed around your needs while at the same time working closely with legal, tax, and wealth advisors to ensure that you are maximizing the financial elements of your charitable giving plan.

We look forward to working with you to make as big a difference as possible in the causes you love and make our community an even better place for everyone.

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

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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

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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.  

 

Ring in the new year with new charitable giving tax laws

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Ring in the new year with new charitable giving tax laws

If you’ve been tracking federal legislation, you’re likely aware that on December 29, 2022, President Biden signed a $1.65 trillion-dollar omnibus spending bill known as the Consolidated Appropriations Act of 2023 (“CAA”).

A component of this legislation, known as “SECURE 2.0,” includes many provisions that make it easier for people to build retirement savings, ranging from required enrollment in employer-sponsored 401(k) plans to larger “catch up” contributions to enable workers nearing retirement to add more to their retirement accounts each year.

Three of the new law’s provisions are particularly interesting to people who give to charities, especially related to a planning tool called the Qualified Charitable Distribution (QCD). Many charitable individuals who are 70½ or older have already been taking advantage of the QCD. This technique allows a taxpayer to make an annual transfer of up to $100,000 from an IRA to a qualifying public charity such as a field-of-interest fund, scholarship fund, or unrestricted fund at The Community Foundation. The taxpayer does not need to pay income tax on the distribution and, for taxpayers who must take RMDs from their retirement plans, the QCD counts toward that year’s RMD.

Here’s what’s new, thanks to SECURE 2.0:

More time to accumulate retirement assets

Under the new law, the required minimum distribution (RMD) age (previously 72) increased to 73 on January 1, 2023. RMDs are the IRS-mandated distributions from qualified retirement plans. The RMD age will further increase to 75 beginning on January 1, 2033. This provision is a boost to retirees’ financial plans and may mean more dollars available for charitable giving, especially in the form of a tax-savvy beneficiary designation of retirement plans to charity.

Note that the age for QCD eligibility is still 70½, and, still, donor-advised funds are not eligible recipients of a QCD.

“Legacy IRA” opportunity

SECURE 2.0 makes QCDs even more attractive because taxpayers may now make a one-time $50,000 QCD transfer to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA). These components of the new law are called the “Legacy IRA” provisions.

Bigger QCDs

The annual per-taxpayer $100,000 QCD cap is now slated to be indexed for inflation, which will allow taxpayers to give even more from their IRAs directly to charity.

The team at TCFHR would be happy to talk with you about how the new laws can enhance your charitable giving plans. Reach out anytime!

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

 

Invest in impact built on trust

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Invest in impact built on trust

If you’ve supported a particular charitable organization for many years, and perhaps even served on its board of directors, you are likely familiar with some basic concepts of “trust-based philanthropy,” even if you didn’t know that’s what it is called.

As a devoted supporter of the nonprofit organizations you love, you know that an organization’s chances of success are greatest when the organization’s leadership and talented staff are able to deploy the organization’s resources in the ways they believe will best fulfill the mission. This, in turn, sometimes translates into the organization placing a high value on what are called “unrestricted” donations, meaning that the organization can use the dollars in whatever way it sees fit. An example of this, grossly oversimplified to illustrate the point, is when a donor writes a check to a food pantry and instructs that the money be used to purchase canned goods, but the food pantry’s leadership knows that what they really need at the moment is to fix the roof or hire a staff member to help with sorting food before the pantry will be in a position to accept more canned goods.

Unrestricted gifts are only one component of the overall trust-based philanthropy concept. The broader model is designed to increase the impact of philanthropy by encouraging collaboration, communication, and information-sharing among all stakeholders, including not only donors and the nonprofits they support, but also the community as a whole.

Trust-based philanthropy has become somewhat of an academic phenomenon, and it is not without some controversy. Still, the fundamentals make sense, such as listening to community stakeholders and lifting some of the administrative burdens on nonprofit organizations who receive funding.

Trust-based philanthropy is nothing new to TCFHR. In many ways, TCFHR’s mission already embodies these principles: Deeply understanding the needs of the community, building strong relationships across all stakeholders, helping donors maximize the value and impact of their charitable giving, establishing permanent support for the community to address whatever needs may arise, connecting donors more deeply to the causes they care about through personal service and education, and leading on critical community issues.

We look forward to working with you as you get even more involved with the causes you care about.

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

 

Intentional philanthropy is critical in a downturn

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Intentional philanthropy is critical in a downturn

Your family may be among those who are taking their charitable giving budgets more seriously this year, given the stock market’s challenges, rising interest rates, economic concerns, and anticipated cash crunches.

At the same time, not surprisingly, community needs tend to rise during uncertain economic times. As 2023 gets into full swing, inflation, housing challenges, and economic uncertainty are pressuring people who are already vulnerable due to financial insecurity, illness, or disability. Nonprofit organizations serving these populations need additional resources—and even more support from charitable giving—to meet the escalating demands.

 

A budget has benefits

Here are a few steps to consider in building a 2023 budget for charitable donations that can help you continue to support your favorite causes and remain fiscally cautious.

–Review all your charitable donations from the last three years and compile totals for each organization. This can be an easy exercise for people who use a donor-advised fund at The Community Foundation because the data can typically be pulled directly from TCFHR’s donor portal or requested from TCFHR’s team.

–Carefully review the list of organizations you’ve supported over the last three years. Regardless of your donation levels, which are the most important to you? Are you serving on the board of directors of any of these organizations? Do you regularly volunteer at any of them? Is there a personal connection?

–Are there any organizations on your list that you supported primarily because the organization was raising money for a capital campaign, or because you were helping out a friend who is involved with that organization? These may be organizations to possibly put on hold and then revisit supporting in future years when the economy picks back up.

–Add up your total giving over the last three years and then divide it by three to get your average. Is that number doable this year? If not, reduce it to a level that fits within your financial situation to arrive at your tentative 2023 giving budget. Remember to consider the value of publicly-traded stock gifts you could make this year if preserving cash is a priority.

–Consider whether to keep certain organizations at historic levels of giving, such as those you’re personally involved with. Or on the flip side, you may decide to temporarily reduce your level of giving to organizations for which you are providing other types of support, including volunteering or board service.

–Review the list to see if there are any organizations you’ve supported that you’d like to learn more about. The team at TCFHR is extremely knowledgeable about nonprofits in our region and would be happy to provide information on how a particular organization spends its money and how it measures impact.

–Finally, do the best you can to set targets for the amount of support you’d like to provide to each organization—and perhaps even set targets for the timing of your gifts. You can change these targets at any time, of course. The point here is that the planning and budgeting process is a great way to create more intentionality around your giving. Intentional giving is not only more rewarding for you but is also likely to increase your level of engagement with the recipient charities and enhance your understanding of how dollars are being deployed to meet the mission. This, in turn, helps your favorite organizations get better at carrying out their programs and serving those who rely on their work.

 

Consider taking a year-long view of your giving 

As compelling as year-end giving may be, perhaps even more compelling are the reasons for planning and launching a charitable giving strategy early in the year, starting with January. Benefits of a year-long giving strategy include:

–Helping nonprofit organizations meet their budgets all year long, which can save them from worrying as much about whether constituents’ ongoing needs can be addressed.

–Leveraging employer matching gifts programs early in the year when dollars are available and there is plenty of time to process the paperwork.

–Increasing predictability of cash flow and therefore being proactive, not reactive, in supporting the causes you love. You might even consider setting up automatic contributions to a donor-advised or other type of fund at TCFHR by working with your financial advisor to formalize this component as part of your ongoing plan.

–Taking advantage of plenty of time to learn more about the charities you plan to support so that you can be an even more informed and impactful donor, including fully utilizing TCFHR’s expertise and resources.

–Giving yourself time to include children and grandchildren in the charitable giving conversation as a learning experience for the whole family.

–If you are over 70 ½, being able to avoid the year-end scramble to process a Qualified Charitable Distribution (QCD) from your IRA directly to an eligible charity by executing a QCD in the first quarter.

–Leaving enough time to explore options for more complex giving tools that might provide tax benefits as well as meet your charitable goals, rather than waiting until the last minute when it may be hard to get on the calendars of your attorney, financial advisor, and accountant to map out the best strategy for your situation.

As always, TCFHR is here to help. Please reach out to our team to learn more about how you can make the biggest difference with your charitable dollars, including how you can use an existing or new donor-advised fund, or other type of fund, to carry out your 2023 charitable wishes. You’ll be glad you planned ahead to help your favorite organizations fulfill their missions throughout the entire year, as well as maximizing your own tax benefits and avoiding December’s crunch time.

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

 

The gift of giving, community foundation style

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The gift of giving, community foundation style

The Community Foundation can work with you to create and package a gift of a community foundation fund, pre-established and pre-funded, personalized in the name of your gift recipient. Your gift recipient can be a partner, child, grandchild, colleague, or friend. Frequently taking the form of a donor-advised fund, a gift of a fund empowers the recipient to experience the benefits of working with The Community Foundation to support their favorite causes.

Whether you are a current fundholder at The Community Foundation or just considering it, the team at The Community Foundation can help you create a gift fund from soup to nuts, including granting the recipient online access to recommend grants from their new fund. You can literally put a bow on the carefully rolled up fund document, sign a card listing the login URL and credentials to view the fund online, and present the package to the child, grandchild, friend or colleague as a gift. Both giver and receiver will love the experience.

When the recipient is a child or grandchild, educational opportunities are a natural follow up. For example, you can work with The Community Foundation to find resources on The Community Foundation’s website and structure a family giving session over Zoom where participants learn the basics of charitable giving and are introduced to key issues facing communities in our region and across the country. This type of experience helps the family’s values stay intact across generations.

We look forward to hearing from you soon about creating a gift of giving for someone you love! 

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

 

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

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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

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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].

 

Local Nonprofits Receive Funding from The Community Foundation

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Harrisonburg, VA – It feels like Christmas over at The Community Foundation of Harrisonburg  and Rockingham County (TCFHR)! No, it is not quite time for the holiday, but TCFHR is in the giving spirit since they are soon issuing Fall 2022 grants to nonprofit organizations. This year’s grants total $152,235 to 13 local nonprofits, more than TCFHR has given out in years past. The largest distribution ($55,000) coming from the Earlynn J. Miller Fund for the Arts. Dr. Earlynn J. Miller was honored posthumously at AFP Shenandoah’s National Philanthropy Day for her contributions at JMU as well as her generously giving approximately $5 million to establish three endowments at The Community Foundation that will support the arts forever.

The monies will go to organizations addressing needs in:
Animal welfare (Anicira, Cat’s Cradle, and Wildlife Center of VA) made by Hildred Neff Memorial Fund
Arts & Culture (Arts Council of the Valley) made by Mary Spitzer Etter Endowed Fund, (OASIS Fine Art & Craft) made by Valley Arts & Culture Fund, and (Arts Council of the Valley and Harrisonburg Dance Cooperative) made by Earlynn J. Miller Fund for the Arts
Children and Youth of Divorced Parents (Family Life Resource Center) made by Sean Warner Memorial Fund
Healthcare (Adagio House, Blue Ridge Free Clinic, and Strength in Peers) made by Alvin V. Baird, Jr. Program Housing (Central Valley Habitat for Humanity) made by Janet Sohn Endowed Fund
Greatest benefit to Harrisonburg and Rockingham County (Blue Ridge CASA and First Step) made by The Community Endowment Fund

Grant distributions come from funds held at TCFHR and are determined by Grants committees. Nonprofit organizations awarded all participated in a competitive application process. Per TCFHR policy, grants are made without regard to factors of gender, race, religion, national origin, or sexual orientation. For more information, contact Ann Siciliano at [email protected].

 

Read more about Community Foundation grant awards.