Summer reading that’s worth a forward

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Summer reading that’s worth a forward

Every week, the team at The Community Foundation works with a wide range of charitably-minded individuals and families who are either already working with The Community Foundation or are considering establishing a donor-advised or other type of fund to organize their giving. We also talk with attorneys, accountants, and financial advisors as they work alongside charitably-minded clients. Indeed, many advisors are telling us that they’re taking advantage of summer’s slower pace to get a jump on 2024 tax planning and estate plan updates.

As you work with your advisors over the next few months, be sure to let them know that The Community Foundation can serve as the hub of your family’s philanthropy by administering a wide range of charitable giving vehicles, including:

–Donor-advised funds, which may be a better fit for families than a private foundation

–Field-of-interest funds and designated funds, which enable you to support specific causes and organizations and, if you are 70 ½ or older, can receive a tax-savvy “Qualified Charitable Distribution” from your IRA

–Bequests and other legacy gifts to help ensure that the causes you’ve supported during your lifetime can continue to benefit from your generosity for years to come

–Unrestricted gifts to support The Community Foundation’s work to grow philanthropy and improve the quality of life in our region across generations, especially as community needs evolve

 

Along these lines, some of you have requested that we provide a reading list to pass along to your advisors to help them stay up-to-date on legal and tax issues impacting charitable giving. Here are a few suggestions you could forward to your advisors (or simply forward this email):

–For advisors working with clients who support higher education, it’s important to stay on top of the tax treatment of NIL collectives. The team at The Community Foundation is happy to talk with your advisors about what’s going on here and how they can follow best practices.

–It’s becoming more and more popular for philanthropists to explore giving cryptocurrency to charitable causes. Encourage your advisors to reach out to the team at The Community Foundation as they encounter this issue with clients.

–A focus on donor intent is especially important as cautionary tales emerge in case law. The Community Foundation is committed to helping advisors help their clients achieve charitable goals. Our knowledgeable staff and independent board of directors are dedicated to carrying out donors’ philanthropic wishes.

 

As always, please let us know if you’d like our team to be part of a conversation with your advisors. We welcome the opportunity to serve as the go-to charitable giving resource as you build a comprehensive financial and estate plan that includes philanthropy.

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

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

Philanthropy: It’s not one size fits all

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Philanthropy: It’s not one size fits all

Charitable giving traditions are a big part of many peoples’ lives. The ways philanthropic values translate into action and behavior, however, vary widely from person to person. And that’s a good thing! When you align your charitable giving activities with your own personality and the ways you like to do good, you’ll enjoy it a lot more and as a result, you’ll be more likely to get even more involved with your favorite causes.

Indeed, your choice of the causes you support may be based on personal experiences or even how you view your character. You may also find that philanthropy fosters personal growth and self-discovery. Some people find that getting involved in the community creates opportunities for networking and building relationships based on shared values and goals.

That’s why it’s important to acknowledge that not everyone likes to “do good” in exactly the same way. To figure out what mix of charitable activities might best suit your personality, consider reflecting on whether you tend toward an ”investor,” “connector” or “activator” profile.

 

Here’s what it might look like to be an “investor” type of philanthropist:

–You like to get involved in community activities where you can act independently, rather than scheduling dedicated time.

–You may feel that you often have more money than time.

–You’re happy to write a check or purchase a product that supports a cause.

If you tend toward the “connector” type, this may describe your preferences:

–You like community activities where you can collaborate with friends and family.

–You enjoy the opportunity to meet people who care about a variety of causes, not necessarily a specific charity.

–You like attending charities’ fundraising events, and you might even regularly promote your favorite causes on social media.

If you’re an “activator” type, here’s what that could look like:

–Your philanthropic passion lies with one or two specific causes.

–You like the idea of playing a small part in “changing the world” and impacting a single issue that could potentially benefit society on a broad scale.

–You might enjoy serving on charities’ boards of directors.

Whatever your personality type, The Community Foundation can help! Whether it’s setting up a donor-advised fund to organize your giving, working with you and your advisors to establish a legacy bequest, or getting your family and friends involved in site visits to favorite charities, we’re here for you!

 

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

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

Up in the air: Charitable planning in a shifting tax landscape

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Up in the air: Charitable planning in a shifting tax landscape 

It’s an election year, which means you may have more questions than answers as you work with your advisors to build out your financial and estate plans. In particular, the looming sunset of key provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 has created a tremendous amount of ambiguity.

For many taxpayers, the potential sunset of the TCJA’s higher estate tax exemption is top of mind. Unless Congress intervenes, the exemption is set to fall after December 31, 2025 from roughly $27 million per couple to approximately $14 million per couple (depending on inflation adjustments).

No one has a crystal ball, and it is impossible at this point to know whether or when you should implement planning strategies to address potential changes in the law. Nevertheless, if you are among those who would be affected by the estate tax exemption’s precipitous drop, it’s important to know that charitable strategies can fit nicely into a gifting plan that would help offset the sunset’s impact.

If you’re a business owner, for example, you could explore launching a gifting program now to transfer shares of the business not only to your heirs to take advantage of the higher exemption, but also to a donor-advised or other fund at The Community Foundation. With these gifts, you could reduce the value of your taxable estate while also executing a business transition and philanthropy plan that aligns with your overall intentions regardless of the tax laws.

Along those lines, some families may decide to lean into annual exclusion gifts ($18,000 per gifting spouse per recipient in 2024) to family members and other individuals to reduce taxable estates without eating into the lifetime gift and estate tax exemptions.

If you’re considering ramping up your annual exclusion gifts, you might consider adopting a parallel strategy for charitable gifts. Gifts to charities are deductible for gift and estate tax purposes (as well as for income tax purposes) and therefore will also reduce the value of your taxable estate without using your exemption. Some philanthropists report that they like the idea of making annual exclusion gifts to family members, and, while they’re at it, making stock gifts of an equal amount into a donor-advised fund at The Community Foundation.

Given the uncertainty about what might happen with the estate tax exemption, some people might consider updating their estate plans to increase a bequest to a donor-advised or other fund at community foundations. This would help blunt the impact of estate taxes, and the bequest can be adjusted during lifetime as planning goals and estate tax laws evolve.

The Community Foundation is here for you! Our team is happy to help you navigate the opportunities and pitfalls presented by potential changes in the tax law. It is our pleasure to work with you and your family to maximize your charitable goals.

 

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

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

Planning for a sunset: Lock in a higher exemption, unlock a legacy

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Planning for a sunset: Lock in a higher exemption, unlock a legacy

Without legislation to prevent it, the sunsetting of current estate tax laws at the end of 2025 will dramatically reduce the federal estate tax exemption from $13.61 million per person in 2024 to approximately $7 million in 2026 (this includes adjustments for inflation). This change would affect many high net-worth individuals and families, likely exposing many more estates to federal estate taxes.

It is impossible to predict whether or not legislation will prevent the sunset. Even so, it is important for advisors to prepare for client discussions and start considering estate planning strategies now, especially techniques that incorporate multi-generational gifts and charitable planning.

Indeed, for a client who is charitably-inclined, making larger lifetime gifts to charity and arranging for charitable bequests will help reduce the client’s taxable estate because of the charitable estate and gift tax deduction. Donor-advised, field-of-interest, designated, unrestricted, and endowment funds at The Community Foundation are flexible and effective charitable recipients of both lifetime and estate gifts.

For some clients, you may wish to begin exploring a comprehensive, multi-generational wealth transfer plan, potentially using key tax-planning vehicles:

Charitable lead trust
Charitable lead trusts (CLTs) may be particularly effective in the current environment. These trusts can provide income to your client’s fund at The Community Foundation for a set period of time, with the remaining assets passing to family members. Right now, the higher exemption allows for potentially significant initial funding of such trusts. This is because the value of the remainder interest counts toward the client’s estate and gift tax exemption.

Generation-skipping trust
A generation-skipping trust is an irrevocable trust that can benefit a client’s grandchildren and later generations. This trust utilizes a client’s generation-skipping transfer (GST) tax exemption (which parallels the estate and gift tax exemption). This type of trust could allow a client to take advantage of the higher exemption before it potentially decreases in 2026. It is possible under some states’ laws for these trusts to go on for many generations in a “dynasty” format, such that each generation benefits from the trust’s income (and potentially principal for health and education) without the trust’s assets being included in the beneficiaries’ estates for estate tax purposes.

Multi-generational fund at The Community Foundation
Alongside a charitable lead trust or generation-skipping trust, or as a standalone, a client can establish a donor-advised fund at The Community Foundation that can function much like a family foundation, with successive generations serving as advisors, or The Community Foundation stepping in after the first or second generation, to recommend grants from the fund to carry on a tradition of supporting the causes that have been most important to the client during the client’s lifetime.

The team at The Community Foundation looks forward to working with you to achieve your clients’ long-term charitable goals, even in the midst of uncertainty concerning the estate tax laws.

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

 

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

Mixing business and charity: Keep it ethical, legal, and transparent

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Mixing business and charity: Keep it ethical, legal, and transparent

Your clients who are corporate executives have likely wondered at some point about the benefits of aligning their companies with philanthropy, whether specific causes or particular organizations.

In general, a community engagement strategy can be good for business, if well-executed. For example, almost half of consumers view a brand favorably when the brand supports a charitable cause. Community engagement programs can help with employee retention, too.

But what are the risks involved in mixing business with charity?

In the spirit of aligning doing good with doing well, some companies would love to set up their own nonprofit organizations as “charitable arms” of their enterprises. Corporate leadership may like the idea of efficiency, control, and tight alignment between the company’s offerings and the charity’s mission. For example, a company that makes swimming pools might think it’s a great idea to set up a charity to build swimming pools at community centers to give more kids access to water sports. The company would like to donate tax-deductible dollars to the charity and ask its suppliers and customers to do the same. The company’s executives would serve on the board of the charity, and the charity would purchase swimming pools from the company to carry out its mission.

Is this a good idea?

No. This strategy plays fast and loose with the rules. Beyond setting up an obvious conflict of interest, this practice would mean that a company effectively would be using charitable funds to benefit itself. This is not a “charitable purpose” in the eyes of the IRS and could result in the loss of the charity’s tax exemption. Plus, if the news got out about this structure, the company could suffer reputational damage.

The company, its executives, and the community are all better off if the company pursues more transparent and ethical charitable strategies such as establishing a corporate fund at The Community Foundation, setting up a volunteer program for employees, establishing a matching gifts program, or aligning with wholly-independent charities on cause-related marketing partnerships.

Reach out to The Community Foundation to learn more about effective corporate philanthropy strategies. We are here to help as you work with your clients to achieve their charitable goals both at home and in the workplace.

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

 

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

Gifts of appreciated stock: Picking favorites

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Gifts of appreciated stock: Picking favorites

You’re well aware that donating highly-appreciated stock to a fund at The Community Foundation offers significant advantages for your clients over making cash gifts. Communicating this benefit, however, can be challenging when clients have emotional attachments to their shares.

How can you overcome this hurdle and help optimize your clients’ charitable giving strategies?

Start by understanding the reasons a client might be reluctant to part with certain stocks in the first place:

–Legacy: “These shares have been in my family for generations.”
–Professional: “I worked at this company for decades; it’s the source of my wealth.”
–Simple preference: “I just love this stock.”

Emotional ties like these can create psychological barriers to effective charitable planning. There is, however, a potential solution that can satisfy both your clients’ emotional needs and their philanthropic goals: The client donates shares of the highly-appreciated, emotionally significant stock to their fund at The Community Foundation, and then the client purchases shares of the same stock in their personal investment portfolio.

Here’s why this can be such an effective strategy:

–Maximize tax deductions: Publicly-traded securities are typically deductible at fair market value (and the tax savings could potentially help fund the repurchase).
–Reset cost basis: This transaction effectively resets the cost basis of the stock in the client’s personal portfolio to its current market price, potentially reducing future capital gains taxes.
–Emotional satisfaction: Clients can support charities while maintaining their shareholder status in the company they like.
–Community impact: The Community Foundation can sell the donated shares tax-free, thereby maximizing the proceeds flowing into the client’s fund, and the fund in turn can be used to support the client’s favorite causes.

As you share this strategy with a client, be sure to acknowledge the emotional value of the stock and emphasize the client’s opportunity to maintain ownership in the company. Building on this, you can show the client how the tax benefits of giving stock allow the client to make an even bigger difference than if they’d given cash instead.

As always, The Community Foundation can help you assist your clients with selecting the best assets to give to charity, evaluate tax implications of various giving strategies, and structure gifts to achieve strong community benefit. We look forward to a conversation!

Thank you for the opportunity to work together! Give us a call at 540-432-3863.

 

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

Legal developments: We’re watching!

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Legal developments: We’re watching! 

As your go-to resource for charitable giving techniques, The Community Foundation team pays close attention to best practices in addressing the broad range of your clients’ charitable intentions to support both near-term and long-term community needs. This includes tracking legal developments that may impact philanthropy broadly, impact specific giving vehicles, and everything in between.

For example, we pay attention to the IRS’s plan to increase audits of wealthy taxpayers so that our team is better positioned to help you and your clients understand the requirements of valuing gifts to charity. And we’re gearing up to help you and your clients incorporate charitable giving vehicles as a way to blunt the potential impact of the anticipated estate tax exemption sunset. And we’re watching the IRS scrutinize aggressive techniques using annuities inside charitable lead trusts. And so much more.

Another issue we’re watching closely is the latest news on the IRS’s proposed regulations of donor-advised funds. We’ve studied the transcript from the public hearings in early May, and it was inspiring to see so many community foundation leaders share their recommendations urging that any new regulations not disrupt the positive and productive working relationships between community foundations and advisors who are helping their clients achieve philanthropic goals. At this point, no one can predict what will happen with the proposed regulations–whether and how they will be revised or when they might become effective, if ever. As always, our team is staying on top of the issues. We’ll keep you informed.

Of course, a donor-advised fund is just one of many types of funds your clients can establish at The Community Foundation. We offer donor-advised funds, endowment funds, field-of-interest funds, scholarship funds, designated funds, and a wide range of planned giving and legacy options for clients who want to invest in the community’s long-term needs.

The donor-advised fund is popular because it allows your client to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, the client can recommend gifts to favorite charities from the fund to meet community needs as they emerge.

What’s especially rewarding for our team is to work with you and your clients to explore a diversified portfolio of giving vehicles. It’s possible that a client’s portfolio would include a donor-advised fund, and perhaps also one or more of a variety of other tools, such as a bequest, unrestricted gift, charitable trust, and endowment gift. Above all, we are confident in our ability to continue to work collaboratively with you and other advisors for years to come to help fulfill your clients’ philanthropic wishes. Thank you for the opportunity to work together! Give us a call at 540-432-3863.

 

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

Advising the charitable millionaire next door

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Advising the charitable millionaire next door

At the end of 2024’s first quarter, an estimated 485,000 Americans could count themselves among the so-called “401(k) millionaires,” meaning the balance in their employer-sponsored retirement plans has reached the $1 million level. Thanks in part to stock market rallies during the first part of the year, that’s a larger number than ever before. Many of these 401(k) accounts will be rolled over into IRAs after retirement and the assets will continue to grow.

With so many of your charitably-inclined clients holding large sums of money in 401(k)s and IRAs, now is an important time for a brief refresher course on the benefits of deploying these accounts toward achieving clients’ philanthropic goals. Indeed, although a charitable bequest of any type of property can help achieve a client’s estate planning and legacy goals, retirement accounts are especially powerful. When your client names a public charity, such as a donor-advised or other fund at The Community Foundation, as the beneficiary of a traditional IRA or qualified employer retirement plan, your client achieves extremely tax-efficient results. Here’s why:

–First, the client achieved tax benefits over time as the client contributed money to a traditional IRA or to an employer-sponsored plan. That’s because contributions to certain retirement plans are what the IRS considers “pre-tax”; your client does not pay income tax on the money used to make those contributions (subject to annual limits).

–Second, assets in IRAs and qualified retirement plans grow tax free inside the plan. In other words, the client is not paying taxes on the income generated by those assets before distributions start in retirement years. This allows these accounts to grow rapidly.

–Third, when a client leaves a traditional IRA or qualified plan to a fund at The Community Foundation or another charity upon death, the charity does not pay income taxes (or estate taxes) on those assets. By contrast, if the client were to name children as beneficiaries of an IRA, for example, those IRA distributions to the children are subject to income tax (and potentially estate tax), and that tax can be hefty given the tax treatment of inherited IRAs.

So, if your client is deciding how to dispose of stock and an IRA in an estate plan and intends to leave one to children and the other to charity, leaving the IRA to charity and the stock to children is a no-brainer. Remember, the client’s stock owned outside of an IRA gets the “step-up in basis” when the client dies, which means that the children won’t pay capital gains taxes on the pre-death appreciation of that asset when they sell it.

Speaking of savvy giving techniques using IRAs, a client who is 70 ½ or older can make tax-efficient gifts directly from an IRA to a qualified charity (including certain types of funds at The Community Foundation), up to $105,000 per year! This is known as a “Qualified Charitable Distribution.”

The Community Foundation is always happy to work with you to ensure that your clients are maximizing their assets to fulfill their charitable giving goals, both during their lives and through legacy gifts. We look forward to the conversation! Give us a call at 540-432-3863.

 

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

Philanthropy: A team sport

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Philanthropy: A team sport

At first glance, you may think of charitable giving as mostly an individual act. Certainly, most of the time, the actual money or asset that constitutes the charitable donation comes from a single person, couple, or entity. Beyond that, though, it likely makes sense to think of charitable giving as a collaborative endeavor.

Here are three examples:

–Serving on the board of directors of a charitable organization is a rewarding activity for many people. And, many people complement their board service with financial support. Dialogue among board members, leveraging board members’ talents, and collective board oversight are important components of a well-run nonprofit organization. Charities are counting on board members’ objective voices in the boardroom, board members’ constructive questions, and the board’s dedication to ensuring that public trust in the charity is maintained.

–For many people, involving other family members in charitable giving is one of the most rewarding ways to instill philanthropic values and transfer these values across generations. Whether you’re teaching young children about the importance of helping people in need, or joining with siblings to develop a grant-making strategy for a family donor-advised fund at The Community Foundation, you’re experiencing the joy of working together to make a difference in the lives of others.

–Working with The Community Foundation is itself a collaborative activity. When you organize your giving through a donor-advised or other type of fund, you are working with multiple professionals on our team to help you plan your annual gifts, evaluate impact, structure tax-savvy contributions of appreciated stock, and so much more. Plus, The Community Foundation team often works alongside your attorney, accountant, and financial advisor to ensure that both your financial and community goals are top of mind.

Thank you for the opportunity to work together to make our region a better place for everyone, now and in the future. If you’re not yet working with The Community Foundation, we look forward to exploring the options! It would be an honor and pleasure to work alongside you and your family on your charitable giving journey. Give us a call: 540-432-3863 to learn how you can be part of a philanthropy team.

 

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

Philanthropy snapshot: A global priority with local impact

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Philanthropy snapshot: A global priority with local impact 

Summertime can mean vacations, travel, a slower (or at least different) pace, and time to reflect. This year, our team is thinking quite a bit about the significant role of philanthropy across the world and how that widespread enthusiasm drives so much energy for charitable giving right here at home.

If you’re spending time this summer reflecting, you might enjoy digging into a few of the sources we found thought-provoking,

–We really like this post from “across the pond” that analyzes why people give and synthesizes a variety of research studies and articles. Altruism, ego, social dynamics, and FOMO are just a few of the reasons people are motivated to give to charity. For a broad look at the role of philanthropy across the globe, you can check out Indiana University’s research.

–Every June, Giving USA releases its annual statistics on the state of charitable giving. We are looking forward to the 2024 report and digging into the numbers from 2023. Last year’s report showed that while individual giving was down, major gifts were ticking up. We’re curious to see what’s changed!

–Some say context is everything, and that may be why we always enjoy going back to the Smithsonian’s Giving in America exhibit and online resources. Even in its semi-archived and “under construction” format, the site is captivating; every time we revisit the site, something different catches our eye. (This time, we were struck by the side-by-side images from 2014’s Ice Bucket Challenge and the collection box from the early 1800s. And by the way, how can nine years have gone by since the Ice Bucket Challenge?)

–Coming full circle back to our local community, we’d love to draw your attention to what’s going on this summer at The Community Foundation. Our 2024 community grant cycle opens on July 1 with applications becoming available for local 501(c) organizations. We encourage all nonprofits in Harrisonburg and Rockingham County to apply for grant funding. There are a variety of grant opportunities an agency can glean from. Learn more at: https://www.tcfhr.org/nonprofit-organizations/grants-available/. We look forward to partnering with you this fall 2024!

As always, The Community Foundation is here for you! We are honored to work with you and your family as you support the causes in our region that are most important to you. You are making a difference! For any questions, please reach out to us at 540-432-3863.

 

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