The tax road ahead, doing good in retirement, and life insurance as a charitable giving tool

Greetings from the Peninsula Community Foundation! 
 
On January 1, 2025, after 14 years as the CEO of the Peninsula Community Foundation, I am retiring. I began publishing this newsletter monthly in 2022. My goal was to make sure that you knew about the resources and abilities of the Foundation and how we can help you work with our nonprofit community. Each month I try to include information about tax changes and strategies that can help you make good decisions. Thank you to the many Foundation partners who have added value to my thinking and to the value of this newsletter. 

​The PCF Board has chosen a very capable individual to lead the Foundation into the future, Adelia Thompson. If you get a chance, drop Adelia a line to welcome her ([email protected]). And for more information about the transition, please go to https://www.pcfvirginia.org/pressreleasetransition.html .
It is our honor to work with you to achieve your charitable giving goals. The team at the community foundation enjoys every minute of helping individuals, families, and businesses support the community causes that mean the most to you. If you’ve not yet established a fund with us but are considering doing so, we look forward to helping you explore the various options. 
 
As your home for charitable giving, the community foundation keeps you informed of the latest developments in philanthropy. Notably, three topics are emerging as particularly important to you and other donors and fund holders:

  • It can be daunting to wrap your head around all of the potential changes (or lack of changes) that may occur in the Federal tax laws as we emerge from election season and into a new administration. The community foundation is here as a sounding board to help evaluate the planning techniques that might be most useful as you build your charitable strategy.
  •  As people approach retirement, they’re often wondering whether and how to get more involved in the community. The community foundation is happy to help you build a roadmap for your charitable giving. You might be amazed at how much “doing good” you can weave into your golden years! 
  • Life insurance is a popular and important financial planning tool. In some cases, life insurance can even be an excellent tool to support your charitable giving. We are happy to work with you and your advisors to explore how you might use your life insurance policies to further your philanthropic goals. 

Thank you for the opportunity to work together! Wishing you all the best for the holidays.
Michael Monteith
CEO, Peninsula Community Foundation

Charitable tax tips for the road ahead

No doubt you are reading plenty about potential tax planning strategies in an uncertain post-election environment. Now is a great time to lean on the team at the community foundation as you work with your attorney, CPA, and financial advisor to determine whether and how to update your estate and tax plan. Here are two examples of the wide range of charitable planning topics we’d be glad to discuss with you and your advisors as you look into the future:
 
Bunching your charitable gifts. Right now, the standard deduction is still high. It’s a good reason to consider making a gift to a fund at the community foundation this calendar year that allows you to itemize your deductions. If you give appreciated stock to your donor-advised fund, for example, you can not only avoid capital gains tax, but also use a large gift this year to support your favorite charities now and for years to come.
Use your IRAs for charitable giving. Even with all the question marks, it is reasonably safe to suspect that IRAs will remain excellent tools for charitable giving. If you are over the age of 70 ½, absolutely get in touch with the community foundation team to arrange for a tax-savvy Qualified Charitable Distribution of up to $105,000 (increasing to $108,000 in 2025) to a designated, field-of-interest, or unrestricted fund at the community foundation. And, regardless of your age, it is worth considering naming your fund at the community foundation as the beneficiary of your IRA or other qualified plan because not only is estate tax avoided, but your fund won’t trigger the income tax that would apply if IRA proceeds flowed to your heirs. 

The net-net here is that we encourage you to reach out! The team at the community foundation is here to help you support your favorite causes. It is our honor to serve as your home for charitable giving. 

 
Doubling down: More good in your retirement years 

If you’ve reached or are nearing retirement age, you may be evaluating how charitable giving fits into your life in a bigger way than it did during your working years. If you’ve found that you have more time, more money, or both, now that work and raising children are in the rear-view mirror, 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 signals that it may be time to update your philanthropy strategies with the help of the community foundation team:
  1. You’re feeling more connected to local issues. Retirees often feel a greater connection to their community and favorite charities than people who are not retired. Whether it’s because annual income and corresponding giving capacity are more predictable, or because you have more time, getting involved with favorite charities can help you stay active and even avoid loneliness. The team at the community foundation stays in close contact with the many nonprofit organizations in our region, and we are happy to serve as a sounding board as you ramp up your involvement.  
  2. You may be 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. Now is a good time to evaluate with your tax advisor whether itemizing deductions in certain years could be beneficial. Through your fund at the community foundation, you may be able to concentrate charitable contributions to your donor-advised fund in particular tax years to trigger itemized deductions. This is called “bunching,” and a donor-advised fund, for example, can help you take advantage of itemizing tax deductions while still allowing you to provide steady support to nonprofits out of that fund in years that follow the itemizing year. 
  3. You are more interested in involving your children and grandchildren in your philanthropy. The community foundation is happy to help you fulfill your desire to stay connected with children and grandchildren, including formalizing roles for family members as advisors and successor advisors of your donor-advised fund at the community foundation, or involving younger family members in site visits and other educational programs. The community foundation offers many ways to structure philanthropic priorities for generational wealth as well as create positive, authentic communication channels across an extended family. 
  4. You are ready to start making Qualified Charitable Distributions. If you are at least age 70 ½, you can direct a tax-free distribution (up to $105,000 per spouse in 2024 and $108,000 in 2025) from an IRA to a qualified charity such as a field-of-interest or designated fund at the community foundation. If you must take Required Minimum Distributions (RMDs), the Qualified Charitable Distribution (QCD) is especially beneficial. This is because the distribution to charity counts toward RMDs and therefore never lands in your taxable income.
If these ideas capture your attention, please reach out! The community foundation is here to help you make the most of your giving, no matter what causes you choose to support. We look forward to collaborating to make your retirement years fulfilling and rewarding for you and the people–and community–you love. ​

Gifts of life insurance: Securing your charitable future 

You’re likely aware of the important role life insurance can play in your estate and financial plans. Indeed, more than half of GenX and Baby Boomers hold life insurance policies, and annual payouts from these policies total nearly $800 billion! What you might not know, though, is that life insurance can be a very effective charitable giving tool under certain circumstances, offering a unique opportunity to support causes you care about as you work with the community foundation to carry out your charitable objectives. 

Consider the following strategies:
  • Beneficiary designation. It’s easy to name your fund at the community foundation as a beneficiary of your life insurance policy. Although IRAs and other qualified retirement plans are frequently more tax-effective for charitable giving, life insurance is sometimes a viable and flexible option for a charitably-minded individual who wants to leave an estate gift that can fund favorite causes for many years into the future.  
  • Estate tax planning. "Second-to-die" life insurance policies, which may become more popular if the estate tax exemption decreases after 2025, can be used to hedge against anticipated estate taxes, thereby allowing you to provide well for family members and still have plenty in your estate to satisfy a bequest to a charity, such as your fund at the community foundation. 
  • Boost your charitable capacity. Increasing coverage on an existing policy can be a cost-efficient way to include charitable giving in your estate plan. For example, if you have a million-dollar policy intended for four family members adding $250,000 in coverage typically won't increase premiums by 25%. This allows you to include a fund at the community foundation as a fifth beneficiary, each receiving an equal share.
  • Repurposing term insurance. The U.S. life insurance market is growing rapidly, expected to reach more than $4 trillion by 2033–and a lot of it is term insurance. If you've outlived the initial need for your term policy (such as covering college expenses or a mortgage), consider continuing the policy for charitable purposes. Past premiums can be viewed as sunk costs, while future premiums become a moderate "investment" relative to the potential charitable impact.
​Please reach out to the community foundation to discuss how you can use your life insurance to support your charitable priorities. Whether through a beneficiary designation, together with perhaps even a potentially tax-deductible transfer of the policy itself or ongoing dollars to pay the annual premium, we can work with you to navigate the options! The community foundation team is here to help you create a lasting legacy that supports the causes you care about most, especially while optimizing your estate planning at the same time.
The team at the community foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation. 

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For more information about establishing a fund, please [email protected]/757.327.0862 ​​​​

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