Planning for the standard deduction, "quasi-endowments," and why giving makes you smile
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Hello from the Peninsula Community Foundation!
Thank you for the opportunity to work together! Already we are hearing from many donors and fund holders about your year-end giving plans. We couldn’t be happier that so many of you are planning ahead to be sure you have plenty of time to accomplish your charitable goals for 2024. Of course, we’re here to help put things together right up until the end of December, but it’s really nice to have plenty of time to ensure that charitable, tax, and estate planning objectives are all considered. This is especially important if you’re just getting started working with the community foundation or are considering doing so this year. We’re ready to talk when you are! In this issue, we’re covering three topics that have popped up several times recently in conversations. |
First, with potential tax law changes on the horizon, many people are taking a closer look at how the standard deduction might impact their charitable planning for the next few years. Learn how the community foundation can help you and your advisors work through various scenarios for organizing your giving, so you don’t leave dollars on the table either for yourself or your favorite charities.
Second, many people are involved with charities both as donors and as board members. If you’re one of these, you might have the opportunity to learn about different types of endowments–both the kind of endowment that a charity itself establishes as well as the kind of endowment that you as a private donor might establish for the charity. The community foundation can help with both.
Lastly, giving to charity makes people happy. That certainly does not come as a surprise to most people who incorporate philanthropy into their lives, but you might be interested to learn how the research on these positive emotions connects to the charitable giving tools available through the community foundation. Lots of reasons to smile!
As always, we look forward to hearing from you! Thank you for everything you do for the community we all love.
Thank you,
Michael Monteith
CEO, Peninsula Community Foundation
Second, many people are involved with charities both as donors and as board members. If you’re one of these, you might have the opportunity to learn about different types of endowments–both the kind of endowment that a charity itself establishes as well as the kind of endowment that you as a private donor might establish for the charity. The community foundation can help with both.
Lastly, giving to charity makes people happy. That certainly does not come as a surprise to most people who incorporate philanthropy into their lives, but you might be interested to learn how the research on these positive emotions connects to the charitable giving tools available through the community foundation. Lots of reasons to smile!
As always, we look forward to hearing from you! Thank you for everything you do for the community we all love.
Thank you,
Michael Monteith
CEO, Peninsula Community Foundation
Standard deduction planning: Avoid leaving dollars behindOne of many items on the legislative “watch list,” especially in light of the upcoming elections, is the standard deduction. Without intervening legislation, in 2026 the standard deduction for individual taxpayers is scheduled to drop from $14,600 to $8,300.
While this may spell higher taxes for some taxpayers, the news could be positive for charitable giving. You’ll recall that the Tax Cuts and Jobs Act of 2017 increased the standard deduction significantly. As a result, only 9% of taxpayers itemized deductions in 2020 compared with 31% in 2017. Tax savings are certainly not the only factor motivating charitable giving, but tax incentives do play a role in donors’ decision-making about whether, when, and how much to give. Indeed, statistics recently released by the National Bureau of Economic Research indicated that the increased standard deduction resulted in $20 billion fewer charitable donations in 2018 alone. |
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We are happy to work with you and your tax advisors to map out a charitable giving plan for the next few years to navigate anticipated changes in the law. For example, this year you could consider using a technique called “bunching” to make two years’ worth of gifts up front to your donor-advised fund to take advantage of the standard deduction while it is still high.
If you determine that bunching is right for you, cash is easy to give in a year of higher-than-expected income. So, for example, if you earn a large bonus this year, get a big increase in compensation, take a job buyout, or experience a significant liquidity event, your surplus income could make bunching ideal.
Most of the time, though, even when you deploy a bunching strategy, donating highly-appreciated marketable securities is a better choice than giving cash because it is extremely tax efficient. Stock given to a public charity, such as your donor-advised or other type of fund at the community foundation, typically is deductible at the asset’s fair market value. The community foundation, in turn, pays no capital gains tax on its sale of the asset, thereby generating more dollars to support your philanthropic interests than if you had sold the stock and given the proceeds to your fund.
You can think outside of the box, too, and explore other assets that make great gifts to your fund. As is the case with gifts of other long-term appreciated assets, a gift of real estate or closely-held stock avoids capital gains taxes and results in more money for your favorite causes than if you had sold the asset, taken the tax hit, and donated the proceeds.
The bottom line? Now is a perfect time to look ahead at your charitable giving plans so that you don’t leave dollars behind. Your own financial situation, as well as the charities you support, will benefit from your careful planning. The community foundation is here to help!
If you determine that bunching is right for you, cash is easy to give in a year of higher-than-expected income. So, for example, if you earn a large bonus this year, get a big increase in compensation, take a job buyout, or experience a significant liquidity event, your surplus income could make bunching ideal.
Most of the time, though, even when you deploy a bunching strategy, donating highly-appreciated marketable securities is a better choice than giving cash because it is extremely tax efficient. Stock given to a public charity, such as your donor-advised or other type of fund at the community foundation, typically is deductible at the asset’s fair market value. The community foundation, in turn, pays no capital gains tax on its sale of the asset, thereby generating more dollars to support your philanthropic interests than if you had sold the stock and given the proceeds to your fund.
You can think outside of the box, too, and explore other assets that make great gifts to your fund. As is the case with gifts of other long-term appreciated assets, a gift of real estate or closely-held stock avoids capital gains taxes and results in more money for your favorite causes than if you had sold the asset, taken the tax hit, and donated the proceeds.
The bottom line? Now is a perfect time to look ahead at your charitable giving plans so that you don’t leave dollars behind. Your own financial situation, as well as the charities you support, will benefit from your careful planning. The community foundation is here to help!
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On the other hand, in the case of a quasi-endowment, the organization’s board of directors may be able to elect to bypass restrictions and access the principal for certain stated purposes such as emergencies, and in some circumstances even vote to remove the restrictions altogether. The terms of quasi-endowments are typically set by the organization’s board of directors, and funds are added to the quasi-endowment by the organization itself at various points in time at the decision of the board of directors. This happens, for example, when the organization has a budget surplus or receives an unrestricted bequest or gift from a donor.
In either case, our team can help. If you’d like to establish a permanent endowment at the community foundation, whether during your lifetime or through a bequest, to support either the community foundation itself or a favorite charity, the board of directors and staff at the community foundation will ensure that the principal stays intact in perpetuity. On the other hand, if you prefer that your endowment gift includes more flexibility for the organization it supports, our team can work with you and the organization to help structure your gift in the form of a quasi-endowment.
The community foundation team is experienced at managing the accounting, investment, and distribution aspects of all types of endowment funds. When you work with the community foundation, it’s easy and rewarding to structure your endowment as a gift to improve the quality of life for future generations.
In either case, our team can help. If you’d like to establish a permanent endowment at the community foundation, whether during your lifetime or through a bequest, to support either the community foundation itself or a favorite charity, the board of directors and staff at the community foundation will ensure that the principal stays intact in perpetuity. On the other hand, if you prefer that your endowment gift includes more flexibility for the organization it supports, our team can work with you and the organization to help structure your gift in the form of a quasi-endowment.
The community foundation team is experienced at managing the accounting, investment, and distribution aspects of all types of endowment funds. When you work with the community foundation, it’s easy and rewarding to structure your endowment as a gift to improve the quality of life for future generations.
Giving to others gives you lots of reasons to smileCharitable giving is important not only locally and nationally, but also internationally. Indeed, the World Giving Index 2024 Global Trends in Generosity reports that 4.3 billion people worldwide helped someone they didn’t know, volunteered time, or donated money to a good cause in the preceding month.
It’s no surprise that research reported by the Harvard Business School, indicates that giving to others actually puts you in a good mood. We know this intuitively based on our own experiences. For instance, many of us enjoy picking out a birthday gift for a friend or family member and watching them open it. The same good feelings translate to charitable giving. Partnering with us to benefit the community activates three key factors: |
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- It Feels good in the moment. The community foundation makes it easy to give cash, stock, or other assets to a fund that is the best fit for you, whether that’s a donor-advised fund, designated fund, field-of-interest fund, or unrestricted endowment fund. When you initiate the stock transfer, for example, it’s fun because the community foundation makes it easy and you know immediately that you’ve taken meaningful action.
- It Offers choices. The community foundation’s tools are flexible to meet your charitable giving goals. We can help you set up an annual giving strategy, establish a bequest to your fund in your estate plan, and everything in between. Most of all, we want to help you support the causes that are most important to you, whether those are particular charities or broad areas of community need.
- It Shows results. The community foundation has its finger on the pulse of our region’s priorities and how charitable giving can improve quality of life for everyone. Every day, we work with you and other families, individuals, and businesses to help you not only make a difference, but also actually see the difference you are making. From research and hands-on site visits to networking with other donors and meeting with community leaders, our team will provide a wide range of opportunities for you to see first-hand the results of your philanthropy.
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.
For more information about establishing a fund, please [email protected]/757.327.0862
