July 2024 Professional Advisor News

You are well aware that donating highly-appreciated stock to a fund at GiveWell Community Foundation offers significant advantages for your clients over simply making cash gifts. Communicating this benefit, however, can be challenging when clients have emotional attachments to their shares. How can you overcome this hurdle and help optimize your clients’ charitable giving strategies? Start by exploring why a client might be reluctant to part with certain stocks in the first place:

• Legacy: “These shares have been in my family for generations.”
• Professional: “I worked at this company for decades; it’s part of who I am and my wealth.”
• Simple preference: “I just love this stock.”

Emotional ties like these can create psychological barriers to effective charitable planning. There is, however, a potential solution that can satisfy both your clients’ emotional needs and their philanthropic goals: The client donates shares of the highly-appreciated, emotionally-significant stock to their fund at the Community Foundation, and then the client purchases shares of the same stock in their personal investment portfolio. Here’s why this can be such an effective strategy:

• Maximize tax deductions: Publicly-traded securities are typically deductible at fair market value (and the tax savings could potentially help fund the repurchase).
• Reset cost basis: This transaction effectively resets the cost basis of the stock in the client’s personal portfolio to its current market price, potentially reducing future capital gains taxes.
• Emotional satisfaction: Clients can support charities while maintaining their shareholder status in the company they like.
• Community impact: The Community Foundation can sell the donated shares tax-free, thereby maximizing the proceeds flowing into the client’s charitable fund, and the fund in turn can be used to support the client’s favorite causes.

As you share this strategy with a client, be sure to acknowledge the emotional value of the stock and emphasize the client’s opportunity to maintain ownership in the company. Building on this, you can show the client how the tax benefits of giving stock allow the client to make an even bigger difference than if they’d given cash instead. As always, the Community Foundation stands ready as you assist your clients with selecting the best assets to give to charity, evaluate tax implications of various giving strategies, and structure gifts to achieve strong community benefit. We look forward to a conversation!

The annual Giving USA report has provided a comprehensive analysis of charitable giving in the United States for six decades. The report is helpful not only to charitable organizations as they design their fundraising strategies, but also to philanthropists – including many of your clients – who want to understand the overall economic landscape impacting the charities they support. Released in June 2024, the Giving USA report for 2023 provides key insights into charitable giving, including several that your clients (and you!) may find particularly interesting:

• Total charitable giving in the United States reached more than $557 billion in 2023. This is a new high in current dollars, up 1.9% from 2022. When adjusted for inflation, though, 2023 numbers represent a 2.1% decline.
• Individual giving is still the largest source of philanthropic dollars, totaling $374 billion in 2023 and representing 67% of all giving.
• Other major sources of giving include foundations ($104 billion), bequests ($43 billion), and corporations ($37 billion).
• Worth noting is that giving to human services charities grew by 1.7% (as adjusted for inflation) to $89 billion.

So, what does this mean? Here are four key takeaways for your philanthropic clients:

• Your clients’ favorite charities continue to rely heavily on individual giving to fund operating budgets and carry out their missions.
• Leaving a bequest to a fund at the Community Foundation is an excellent way for a client to plan a future gift to charity and help ensure that overall giving remains strong. This is especially relevant as demographics continue to shift; currently, nearly 77 million Americans are 60 or older.
• Clients who serve on charities’ boards of directors should encourage the organizations’ leadership to lean into donor relationship-building strategies and planned giving to keep individuals’ donations strong.
• Gifts of appreciated stock to a client’s fund at the Community Foundation continues to be an outstanding charitable giving and tax strategy. Indeed, the S&P 500’s growth in 2023 topped 24%, which certainly motivated a lot of the individual giving reported by Giving USA.

It’s so important for philanthropic individuals and families to inspire their favorite charities to focus on donor retention, personalized stewardship, and communicating the impact of donations to supporters. Please reach out to the team at the Community Foundation for ideas on how your clients can help the causes they care about.

Mid-year can be a great time to take a step back and review your practice through a big-picture lens. Indeed, summer’s natural slowdown provides an excellent opportunity to review your client lists and determine what each client should do before year-end. Are adjustments needed to a client’s retirement planning strategy due to market conditions or changes in the client’s personal situation? Could clients’ wills and trusts use fine tuning? How is the client’s tax situation shaping up for the year? Here are a few items of pending legislation to keep in mind:

• The expiration of certain Tax Cuts and Jobs Act (TCJA) provisions is a big one! In the absence of intervening legislation, key components of the TCJA are set to expire on December 31, 2025, and the impact on charitable giving strategies could be significant. For example, the standard deduction would decrease substantially, potentially increasing the number of itemizers who could benefit from charitable deductions. The charitable deduction limit for cash gifts would revert from 60% back to 50% of adjusted gross income. And, most notably, the estate tax exemption would decrease from approximately $27 million for couples to approximately $14 million (depending on inflation adjustments), making charitable gifts and bequests much more relevant for many of your clients.
• The Charitable Act was introduced over a year ago and is still pending. This is a bipartisan bill that would reinstate and expand what is known as the “universal charitable deduction,” meaning it would allow non-itemizing taxpayers to deduct charitable donations up to one-third of the standard deduction (approximately $4,600 for individuals and $9,200 for married couples).
• Other miscellaneous items to watch include proposed IRS regulations related to donor-advised funds (the regulations are still under review and not yet binding) and continued reinforcement from the IRS that donations of cryptocurrency valued at $5,000 or more require a qualified appraisal for tax deduction purposes.

Please reach out to the Community Foundation to learn more about these potential legal developments and the implications for your clients’ charitable giving strategies. We are happy to help!