Hello from THE peninsula community foundation!We hope the end of summer has treated you well and I know you are gearing up for the busy months ahead. Already this year, you and our generous funding partners have contributed more than $3 million to local nonprofit work. But I know you are not through supporting local causes. Philanthropy is an important topic during the latter part of the year as you and other charitably-minded individuals and families plan out the support you'd like to provide to your favorite charities.
We are grateful to have the opportunity to work with so many of you who are donors and fund holders. For those of you who are considering establishing a donor-advised or other type of fund with us, thank you! |
We appreciate your consideration and look forward to meeting with you soon to put together a charitable giving plan that meets both your philanthropic goals and your goals for your financial and estate plan.
In this issue, we are covering four topics that are bubbling up in many conversations:
As always, we look forward to hearing from you! Thank you for everything you do for the community we all love.
Michael Monteith
CEO, Peninsula Community Foundation of Virginia
In this issue, we are covering four topics that are bubbling up in many conversations:
- Helping those affected by the Maui fires and Hurricane Idalia is a top priority for many of you. Our community foundation, as well as many community foundations across the country, are rallying support for people in need in the wake of these and other disasters. Please reach out. We can help ensure that your generous gifts are deployed in the most efficient and effective way.
- Several of you have reached out to ask about the Roth treatment of 401(k) “catch up” contributions for some workers over 50 that has appeared to be a moving target! What does this even mean for charitable giving–and for you? The net-net is that those of you who would have taken a tax hit now are getting a two-year reprieve, which could leave you with potentially hundreds of extra dollars, which you can now give to charity if you are so inclined.
- Retirement plans continue to be at the forefront of many donors' plans for bequests to their donor-advised funds at the community foundation. This is a good thing; donors who leave IRAs to their kids, for example, and leave their stock to charities are missing out big time on tax benefits. Call the team at the community foundation to learn how you can be even more savvy about the way you provide for both charities and your children in your estate plan.
- This is the time of year when we start to get a lot of questions from donors about food insecurity, and especially about how to involve children in the charitable giving conversation. The community foundation is happy to provide tips and insights about why food insecurity is such a big deal and how even the youngest donors can get their heads around the magnitude of the issues.
As always, we look forward to hearing from you! Thank you for everything you do for the community we all love.
Michael Monteith
CEO, Peninsula Community Foundation of Virginia
Disaster relief efforts and the community foundation’s collaborative role
Our hearts go out to the people of Maui—and all of Hawaii—in light of the tragic fires that occurred early in the month. By all accounts, those will take years, if not decades, to recover and rebuild from. Restoration costs are already estimated at $5.5 billion, although only time will tell just how much time and money will be needed.
As if that weren’t enough, much of the U.S. slogged through what has been called the hottest summer ever—and July as the hottest month ever—with uncomfortably high temperatures affecting land and sea even before the start of hurricane season. And then there was Tropical Storm Hilary and a simultaneous magnitude 5.1 earthquake that struck Southern California. To round out the month, Hurricane Idalia made landfall on August 30, with extensive damage reported and tens of billions of dollars of losses projected. Fortunately, community foundations are well-suited to facilitate and manage relief funds for disasters and humanitarian tragedies, no matter where they occur. Certainly local community foundations in the areas |
most affected by a disaster consistently jump in immediately to establish funds to accept donations, which the community foundation then deploys rapidly and effectively to high-performing nonprofit organizations that are delivering relief where it is needed most urgently.
Even community foundations and other charitable foundations that lie outside of affected geographic areas are committed to responding quickly by launching their own fundraising efforts, either promoting the funds established by community foundations in the affected areas or their own funds created to directly support relief efforts. Indeed, disaster relief funding is frequently coordinated by community foundations, which are widely viewed as one of the very best vehicles to help donors provide financial support to relief work. Community foundations understand, for example, that the most immediate needs in the wake of a disaster are often for food, shelter, water, and hygiene kits. In addition, the community foundation knows which nonprofit organizations on the ground are best qualified to meet those needs.
With a deep understanding of philanthropy and charitable giving tools to effect meaningful change, the team at the Peninsula Community Foundation is here for you. Whether your interests include disaster relief, education, the arts, social services, or other causes near and dear to your heart, we can help you fulfill your goals and intentions.
Even community foundations and other charitable foundations that lie outside of affected geographic areas are committed to responding quickly by launching their own fundraising efforts, either promoting the funds established by community foundations in the affected areas or their own funds created to directly support relief efforts. Indeed, disaster relief funding is frequently coordinated by community foundations, which are widely viewed as one of the very best vehicles to help donors provide financial support to relief work. Community foundations understand, for example, that the most immediate needs in the wake of a disaster are often for food, shelter, water, and hygiene kits. In addition, the community foundation knows which nonprofit organizations on the ground are best qualified to meet those needs.
With a deep understanding of philanthropy and charitable giving tools to effect meaningful change, the team at the Peninsula Community Foundation is here for you. Whether your interests include disaster relief, education, the arts, social services, or other causes near and dear to your heart, we can help you fulfill your goals and intentions.
Relief from catch-up requirements: More money for charitable giving?Legislation known as SECURE 2.0 contained a dizzying array of changes to the laws governing retirement plans. Passed at the end of 2022, SECURE 2.0 is 130 pages long; overall, its purpose is to encourage more retirement savings through vehicles like employer-sponsored 401(k) plans.
Lately, the buzz around SECURE 2.0 has been focused on a very specific provision addressing what are known as 401(k) “catch up” contributions. A “catch up” contribution allows a worker aged 50 and older to pump more money (an extra $7500 in 2023) into their 401(k) plans, beyond the usual $22,500 statutory maximum for employee deferrals. |
Normally, an employee’s contributions to a 401(k) are not included in adjusted gross income for tax purposes, which is a big perk. But under the provisions of SECURE 2.0, if you are at least 50 years old and earned $145,000 or more in the previous year, these catch-up contributions would be treated like Roth IRA contributions–meaning the money used to make those contributions is after tax. Essentially, you will be paying tax on the money you use to make the catch up contributions. Depending on your tax bracket, the extra tax could possibly tally into the thousands of dollars.
But! The IRS’s recent ruling has delayed the Roth treatment provision, so that it will not become effective until 2026. This means your catch-up contributions are still “pre-tax,” at least for the next couple of years.
What is the bottom line here? If this situation applies to you–if you are over 50, earn more than $145,000 a year, and want to make catch-up contributions to your employer-sponsored 401(k) plan–you now have an extra couple of years to enjoy the tax perks of these contributions. This relief, in turn, might allow you to make larger charitable gifts than you had originally planned when you budgeted for 2023’s charitable giving.
But! The IRS’s recent ruling has delayed the Roth treatment provision, so that it will not become effective until 2026. This means your catch-up contributions are still “pre-tax,” at least for the next couple of years.
What is the bottom line here? If this situation applies to you–if you are over 50, earn more than $145,000 a year, and want to make catch-up contributions to your employer-sponsored 401(k) plan–you now have an extra couple of years to enjoy the tax perks of these contributions. This relief, in turn, might allow you to make larger charitable gifts than you had originally planned when you budgeted for 2023’s charitable giving.
Rethinking inherited IRAsAs you build your estate plan and consider how to provide for your adult children, keep in mind that naming children as the beneficiary of an IRA or other qualified plan probably is not something that should be automatic.
For starters, if you are charitably-minded and have other assets, such as highly-appreciated stock, to leave your children, those assets should come first. This is because your children will inherit the stock at a “stepped up” basis, meaning their capital gains tax hit upon sale will be far less. Plus, if you name a charitable organization, such as your donor-advised fund at the Peninsula Community Foundation, as the beneficiary of your IRA, the IRA proceeds won’t be depleted by either income tax or estate tax. Your kids, on the other hand, will have to pay income tax on the proceeds of an inherited IRA. |
This dynamic became even more important to consider when the law changed a few years ago, such that a child who was named as the beneficiary of a parent’s IRA, for example, could no longer count on a relatively straightforward and tax-savvy method of withdrawals called the “stretch IRA.” With the passage of the SECURE Act, that changed for many children who inherited an IRA after December 31, 2019. Instead of taking distributions over their lifetimes, affected children now need to withdraw the entire inherited IRA account within a 10-year period as calculated under the law.
If you’re evaluating options for how to handle an IRA in your estate plan, talk with your advisors and us about leaving an IRA to your donor-advised fund or other charity via a beneficiary designation.
Importantly, if you are a child of parents who own IRAs, they will appreciate you bringing this opportunity to their attention! Your parents might not realize that their good intentions to leave their IRAs to their children could be saddled with tax burdens down the road. Encourage your parents to talk with their advisors and give us a call. We are here to help make IRAs a win for everyone–your parents, their favorite charities, and you!
If you’re evaluating options for how to handle an IRA in your estate plan, talk with your advisors and us about leaving an IRA to your donor-advised fund or other charity via a beneficiary designation.
Importantly, if you are a child of parents who own IRAs, they will appreciate you bringing this opportunity to their attention! Your parents might not realize that their good intentions to leave their IRAs to their children could be saddled with tax burdens down the road. Encourage your parents to talk with their advisors and give us a call. We are here to help make IRAs a win for everyone–your parents, their favorite charities, and you!
Community need spotlight: Food insecurityThough natural disasters and the resulting humanitarian needs are frequent but sporadic, the need for food in our community is an everyday constant. And with school back in session, the needs among the food insecure and food banks—often met through philanthropic generosity—are heightened.
Compounding the issue is that food inflation remained relatively high at 4.9% in July, despite being less than half of its mid-2022 11.4% rate. Typically second only in household budget importance to shelter, food’s nearly 5% year-over-year increase frustratingly occurred when prices for gasoline, natural gas, and airline fares registered double-digit declines, according to July’s Consumer Price Index figures. Digging deeper into the food price conundrum, food-at-home importance was more than double of food-away-from home. Deeper still, the prices for produce and convenience foods like cereal and bakery products led the price increases. |
Together, food’s high demand and prices are straining philanthropic food dollars. This reduces funding availability for other needs, especially seasonal back-to-school clothing and supplies, and also utility relief due to the scorching summer temperatures.
Many donors and fund holders like to stay up-to-date on what’s going on with the need for food. Indeed, many families discuss food insecurity with their children and grandchildren as an opportunity to learn about philanthropy . It is easy for even young children to understand how important food is to well-being and what it might feel like to be without it.
Here are three insights you can consider as you talk with your family about the importance of charitable giving to support families in your community who are faced with challenges putting food on the table:
By working with the community foundation, you and your family can learn about charitable organizations in our community that are striving to help people who are facing hunger. Whether you’d like to support a local organization, or perhaps an organization in the community where you were raised or have a particular interest such as the locale of a second home, our team can help you make a difference.
Many donors and fund holders like to stay up-to-date on what’s going on with the need for food. Indeed, many families discuss food insecurity with their children and grandchildren as an opportunity to learn about philanthropy . It is easy for even young children to understand how important food is to well-being and what it might feel like to be without it.
Here are three insights you can consider as you talk with your family about the importance of charitable giving to support families in your community who are faced with challenges putting food on the table:
- Approximately 49 million people—about 1 in 6 Americans—received charitable food assistance sometime in 2022.
- During an average day in the 2021-2022 school year, 15.5 million children received a school breakfast and nearly 30 million children received a school lunch.
- Research has documented improved academic performance in math and English language arts by students participating in Universal Free Lunch programs.
By working with the community foundation, you and your family can learn about charitable organizations in our community that are striving to help people who are facing hunger. Whether you’d like to support a local organization, or perhaps an organization in the community where you were raised or have a particular interest such as the locale of a second home, our team can help you make a difference.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.
For more information about establishing a fund, please [email protected]/757.327.0862