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Happy May!
Springtime has arrived in our region! We hope you are enjoying the change in seasons and warmer weather. On April 25 we completed our very successful one day of giving which we call “Give Local 757”. I am happy to report that we raised over $1.8 million for more than 200 local nonprofits. Thank you for helping make this a wonderful day and for strengthening our nonprofit community. In this newsletter, we're covering three topics that have recently risen to the top of conversations with our fund holders.
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- Questions about Qualified Charitable Distributions (QDCs) continue to flow in. We're taking a shot at clearing up the confusion; that said, we hope you'll continue to call and ask questions about QCDs and everything else related to your charitable giving.
- Third, we're excited to dive deeper into the benefits of using your traditional IRA to fund your charitable bequests.
Thank you for all you do. We are honored to work with you.
Michael Monteith
CEO, Peninsula Community Foundation of Virginia
Have your cake and eat it too: A dual approach to charitable givingThe change of seasons is often an opportunity to catch our breath and reassess. We’re done with taxes, really done with cold weather, and we feel a sense of renewal as our attention turns to gardening and other growth-oriented, warm weather pursuits. And, many of us are wondering how in the world it can already be May. Wasn’t 2022 just five minutes ago?
Soon enough, the seasons will change yet again. Just as springtime is limited, so is the time any of us has to build a legacy for our families and communities and make a difference through charitable giving. Planning–and acting–with a sense of urgency is helpful, given life’s unpredictability and the many good causes we want to support. |
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So, how can you take action now to ensure that you will experience both the joy of seeing first-hand the difference you’re making, as well as the joy of knowing that you’re leaving a legacy to further the community priorities you’ve supported your whole life? A donor-advised fund with a bequest provision, established at the community foundation, is a great solution for many donors.
Here’s how this works:
What you might not know, though, is that we can work with you to include provisions in your donor-advised fund document to name your children or other family members as successor advisors to make recommendations following your death and you can provide that certain organizations or causes receive a portion of the grants each year after you're gone.
If you are a current fund holder at the community foundation, we look forward to working with you to include bequest provisions in your existing donor-advised fund documents. If you are not yet a fund holder, we’d love to work with you to achieve your goals for lifetime giving and leaving a legacy. Please reach out anytime.
Here’s how this works:
- Donor-advised funds are popular and important tools to help charitably-minded individuals organize their giving and support their favorite causes.
- If you are a current fund holder or if you are considering establishing a fund, you already know that a donor-advised fund is easy to start and easy to use.
What you might not know, though, is that we can work with you to include provisions in your donor-advised fund document to name your children or other family members as successor advisors to make recommendations following your death and you can provide that certain organizations or causes receive a portion of the grants each year after you're gone.
- In this way, a donor-advised fund is not only a convenient giving vehicle during your lifetime, but it is also flexible enough to accommodate your wishes for leaving a legacy after your death.
- You can even name the Peninsula Community Foundation to receive all or a portion of your donor-advised fund following your death. Bequests to the community foundation help keep our institution strong.
If you are a current fund holder at the community foundation, we look forward to working with you to include bequest provisions in your existing donor-advised fund documents. If you are not yet a fund holder, we’d love to work with you to achieve your goals for lifetime giving and leaving a legacy. Please reach out anytime.
QCDs: Clearing up confusionIf you’ve been involved with the community foundation for a while, you’ve heard of the Qualified Charitable Distribution (“QCD”) because we mention it a lot. And with good reason!
If you are aged 70 ½ or older, it is well worth your time to investigate whether a QCD might be right for you. Actually, if you are not yet 70 ½ but know people who are, it is well worth your time to mention the tool to them! You will be doing them a great service. Not a day goes by without our team talking with fund holders (and potential fund holders!) about philanthropy in our community and all the ways charitable giving can make life better for everyone who lives here. Recently, we’ve noticed an uptick in interest on a few important topics. |
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Ripple effects of banking’s bumpy road
Understandably, our team has fielded a lot of questions from fund holders working with their advisors about transferring bank and especially tech stocks to their donor-advised or other funds at the community foundation. Although the current market climate may be rough, we are nevertheless encouraged by evidence suggesting that technology is increasing the opportunity and efficiency of charitable giving overall, and certainly we are hearing about (and talking with) more and more donors who are deploying their business and financial success toward charitable initiatives. Silver linings do indeed appear to be a real thing! Unfortunately, we hear from many donors and fund holders that they don’t understand how the QCD works. We totally get it. The QCD is a product of the Internal Revenue Code, after all, which does not always have a reputation for clarity. For starters, the name itself–Qualified Charitable Distribution–is long and not user-friendly.
If your head spins when you see the letters Q-C-D, here are two options for cutting through the complexity. Your first and best option is to call us! The team at the community foundation is here to help. We talk with people about charitable giving techniques–including QCDs–literally all day long. We love this stuff. Reach out, and we will explain the QCD and help you figure out whether it could be useful to you or useful to a 70 ½-aged friend or relative.
If you are a DIY-type or love learning about tax techniques, here are a few quick bullets to help get your head around it:
Understandably, our team has fielded a lot of questions from fund holders working with their advisors about transferring bank and especially tech stocks to their donor-advised or other funds at the community foundation. Although the current market climate may be rough, we are nevertheless encouraged by evidence suggesting that technology is increasing the opportunity and efficiency of charitable giving overall, and certainly we are hearing about (and talking with) more and more donors who are deploying their business and financial success toward charitable initiatives. Silver linings do indeed appear to be a real thing! Unfortunately, we hear from many donors and fund holders that they don’t understand how the QCD works. We totally get it. The QCD is a product of the Internal Revenue Code, after all, which does not always have a reputation for clarity. For starters, the name itself–Qualified Charitable Distribution–is long and not user-friendly.
If your head spins when you see the letters Q-C-D, here are two options for cutting through the complexity. Your first and best option is to call us! The team at the community foundation is here to help. We talk with people about charitable giving techniques–including QCDs–literally all day long. We love this stuff. Reach out, and we will explain the QCD and help you figure out whether it could be useful to you or useful to a 70 ½-aged friend or relative.
If you are a DIY-type or love learning about tax techniques, here are a few quick bullets to help get your head around it:
- You can make a QCD if you have reached the age of 70½, and as such you can direct up to $100,000 annually from your IRA to a qualified charity (which includes, for example, a designated, unrestricted, or field-of-interest fund at the community foundation).
- If you’ve reached the age-73 threshold for IRS-mandated Required Minimum Distributions (RMDs) from qualified retirement plans, a QCD counts toward your RMD.
- QCD transfers are not included in your taxable income.
- QCDs are even more popular now that the $100,000 cap will be indexed for inflation under the new laws. Also, a one-time, $50,000 distribution to a charitable remainder trust or charitable gift annuity is now permitted.
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Supersize your legacy: Stock to the kids, IRA to charityTo say that the total dollar amount in Americans’ retirement accounts is massive would be an understatement. Accounting for 30 percent of all household financial assets, at the end of 2022 total retirement assets in the United States topped more than $33 trillion dollars, including assets in IRAs, defined contribution plans such as 401(k)s and 457 plans, pension plans, and annuities. IRAs topped the charts at $11.5 trillion–the most assets of any category.
The large balances in traditional IRA accounts are partially due to the fact that many taxpayers have rolled over–tax-free–assets from their employer-sponsored qualified retirement plans to IRAs after retiring or changing jobs. If you have one or more traditional IRAs, you’re probably familiar with the basics: |
- An IRA can have multiple beneficiaries following your death, and you can designate a dollar amount or percentage of assets.
- You can change your IRA beneficiaries as often as you like, and beneficiaries can differ across your multiple IRA accounts.
- If a beneficiary dies before you do, and you don’t change the beneficiary designation, the assets will be proportionately reallocated to remaining beneficiaries when you die.
Why is it so beneficial to leave your IRA to charity and other assets to your family? Three words: taxes, taxes, and taxes.
- IRAs are included in your estate for federal estate tax purposes when you die. The current exemptions are set at such high levels (right now) that they do not affect as many taxpayers as they used to, but for many families, estate taxes are still an issue. If you leave your IRA to charity, estate taxes do not apply to that balance.
- The bulk of the balance in an IRA (sometimes the entire amount) is counted as income when IRA withdrawals are taken by your estate or your heirs. If a charity receives your IRA, the charity will not pay these income taxes.
- Highly-appreciated stock and other non-retirement assets you own outside of your qualified retirement plans when you die get a “step up” in basis. This means that your beneficiaries who receive and then sell the assets won’t pay capital gains tax on the appreciation that occurred before you died.
The bottom line here is that if you are choosing between stock and an IRA to leave to your children and to charity, leaving the IRA to charity and the stock to your children is very probably a good plan.
Have questions? Please reach out to the team at the community foundation. We are happy to help!
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.
