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September 2019 Professional Advisor Newsletter Content

The Community Foundation keeps you updated to help you serve your charitable clients.

Gearing up for giving season with a family philanthropy refresher

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Tips for navigating dynamics in family philanthropy

If you’re like most advisors today, you’re seeing an uptick in clients’ questions about charitable giving techniques that go beyond the nuts and bolts of tax law. Attorneys, accountants, and financial advisors hold trusted positions with philanthropic families to offer not only suggestions for tax planning in support of favorite causes, but also to be aware of perspectives that will make the charitable giving experience meaningful for all members of the family. Indeed, not all members of a single family will see philanthropy in the same way. Here are tips for working with three common points of view within a single donor family.

  1. Impact-focused. “Impact” is in the news more and more frequently. Family members who have a strong impact focus will be interested in learning more about how to help favorite nonprofits better communicate the outcomes of donors’ charitable investments. For example, a recent study by Oracle NetSuite, Connecting Dollars to Outcomes, uncovered that only 29 percent of nonprofits are able to effectively measure the results of dollars invested. News like this is very much on the minds of impact-focused family members. 

  2. Legacy-focused. Most families have at least one member whose top concern relates to establishing charitable values and passing them along to the next generation. Family members like this are no doubt seeing behaviors in younger generations that are different from their own. For example, research indicates that 10 percent of Gen Z want to start their own nonprofit organization. Keeping up with trends like this will help you counsel legacy-focused members of your client families.

  3. Investment-focused. Family members who are interested in the dollars and cents are still going to ask about tax planning, which assets to give to charity, and how to time gifts to optimize tax benefits under the current laws. As you address these issues with investment-focused family members, it’s a good idea to also share the perspectives of legacy-focused family members and impact-focused family members. This helps the investment-focused family member see the big picture and focus on the holistic elements of the family’s entire philanthropy plan. 

The team at the community foundation is your partner as you work with families and the variety of personalities that come along with them. We’d love to help you navigate family philanthropy dynamics through our expertise, including researching community priorities and important social issues, helping you structure meetings to ensure that all voices are heard, and working with you and your clients to build multi-generational relationships with nonprofits in our community that are making a difference in your clients’ areas of focus.

Not-to-miss tax update


Disclosure of donor identity still on the regulatory radar

As an advisor, you’re likely aware of IRS requirements for tax-exempt organizations to disclose donor information on Schedule B of IRS Form 990. This rule still remains in place for 501(c)(3) charitable organizations. For other types of exempt organizations, however, the rule has been a moving target.

On July 30, 2019, a Montana federal district court judge set aside the IRS’s Revenue Procedure 2018-38. Under that Revenue Procedure, the IRS had removed the Schedule B disclosure requirements for Section 501(c)(4) and several other forms of tax-exempt entities. 

While the court’s ruling rested entirely on procedural grounds, it is nevertheless worth noting the dynamics at play here, specifically that advisors need to remain highly aware that donor information is on the radar of federal and state governments. 

Two tax tools to keep handy


Charitable gift annuities: Need-to-know bullet points

Charitable gift annuities can be very effective philanthropic planning tools for the right donor. For advisors whose practices aren’t exclusively focused on charitable planning, though, it can be hard to get up to speed quickly on what you need to know. Here is a checklist that can help.

  • Through a charitable gift annuity, a donor makes a transfer of assets to a charitable organization and in return receives a lifetime income stream and a partial tax deduction.

  • When the donor dies, the remaining funds are retained by the charity. 

  • The charitable donation portion of the transaction is calculated based on Internal Revenue Service rules for determining the amount of the contribution that is in excess of the present value of the annuity.

  • A donor can fund a charitable gift annuity with a variety of assets, including marketable securities and cash. 

  • Actuarial calculations are used to establish the payout amounts, paid in equal installment payments that are considered a partial tax-free return of the donor’s original gift.

  • Generally a large residual flows to the charity after the donor’s death. 

  • The charity’s own assets, not just the donated assets themselves, back the annuity payouts. Because of this dynamic, charitable gift annuities are regulated by most states to ensure that the charity has enough reserves to meet obligations. 

  • The American Council on Gift Annuities is a good source of additional information about this tool. 

The team at the community foundation is happy to work with you to identify whether a charitable gift annuity would be an effective tool for your client. Keeping up with the rules and regulations for charitable gifts of all types is one of the many ways we serve you, your clients, the nonprofits they care about, and the community we all love.  

Checklist: Assets to give to charity

As an advisor, you’re probably well aware of the types of assets that make great gifts to charity. That may not always be true for clients, who might underestimate the range of assets they can use to support favorite public charities, including, in many cases, funds at the community foundation. 

Here’s a simple guide to help you with your client conversations. 

For itemizers, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted in five future tax years.

Highly-appreciated stocks and other investments
Publicly-traded stocks and bonds are tax-effective gifts to charitable organizations, especially because capital gains tax can be avoided.

Qualified plans
Whether via a Qualified Charitable Distribution by a donor who is over 70 ½, or through a bequest, a qualified retirement plan can be an effective asset for charitable giving. 

Alternative assets
Real estate, closely-held business interests, collectibles, and other nontraditional assets can frequently come with strong tax benefits when given to a public charity such as a fund at a community foundation or a favorite nonprofit.

We're here! If this checklist spurs ideas for your clients, we invite you to get in touch to discuss your clients' options for giving a variety of assets to favorite causes and exploring all of the options available through the community foundation for structuring philanthropy.  

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