As the Delta variant threatens pandemic recovery, and talk of tax reform bubbles up more and more frequently, it’s no wonder your clients are on edge. For attorneys, accountants, and financial advisors like you who counsel families on philanthropy planning, 2021 seems to have generated more questions than answers.
In this issue of our advisor newsletter, we’re covering three topics illustrating just how important it is to stay on top of trends in charitable planning: So-called "insider giving," donor privacy, and out-of-the-box legacies.
As always, you’re in good hands. Our goal at the community foundation is to serve as a steady, reliable partner and as a source of timely information and ideas that enable you to serve your clients without missing a beat, even in the face of uncertainty.
“Insider giving” and seats at the table: A team approach is essential to crafting an effective philanthropy plan
As corporate valuations soar, you may be getting more frequent questions from executives at publicly-traded companies about the tax benefits of transactions involving highly-appreciated stock. Proper planning is critical to optimize the tax aspects of a transaction, but no advisor should go it alone. A client’s attorney, accountant, and financial advisor should be at the table together to ensure that all parties are coordinated and unintended negative consequences are avoided.
For transactions involving charitable giving, consider inviting a knowledgeable professional from the community foundation to participate in the planning. Not only can the community foundation offer structures to streamline administration, create tax efficiencies, and maximize your client’s charitable wishes, but the community foundation also can serve as a source of up-to-the-minute developments in charitable tax planning policy and regulation.
An excellent example of this will be discussed in an upcoming issue of the Duke Law Journal on the topic of “insider giving.” A study conducted by University of Michigan professors found that charitable gifts of stock by shareholders who own 10% or more of a company’s shares tend to be “suspiciously well-timed.” Thus, charitable transactions involving securities may very well begin to receive more scrutiny from the SEC.
Our team is watching this and other developments closely to help you help your clients succeed. With the community foundation at the table during estate planning meetings involving philanthropic strategies, emerging pitfalls such as "insider giving" are more likely to be avoided.
Donor privacy: Ongoing concern for a common client priority
In an era of social media and intense polarization of rhetoric, it’s no wonder so many charitable individuals and families choose to give to their favorite causes anonymously. And, bolstered by the United States Supreme Court’s decision last month in favor of donor privacy (affirming a position advocated by parties across the political spectrum), this trend is likely to continue.
At the community foundation, we make it easy for you to help your clients who wish to give anonymously by establishing a charitable giving fund. For example:
Your client can select a name for the fund that is something less obvious than their own. For example, instead of the “Sam and Vera Barker Fund,” your client can name the fund the “SVB Fund,” “Desert Family Legacy Fund,” or whatever the client would like.
Sometimes your client will wish to recommend that certain grants (but not all grants) from a fund be issued anonymously. The community foundation offers your clients the ability to opt into anonymity on a grant-by-grant basis.
Your client can rest assured that no solicitations will flow directly to them; the community foundation handles all correspondence related to nonprofit grants from the fund.
The community foundation does not disclose information about your client or the fund to any third party, nor is detailed information available through a Form 990.
Outside the box: Legacy combinations you might overlook
As you’re developing estate plans for your charitable clients, remember that the community foundation is happy to help structure a hybrid gift in which a personal component is paired with a charitable component.
For instance, the charitable remainder trust ("CRT") is a popular tool because it allows your client to generate a lifetime (or term of years) income stream, with the remainder automatically flowing to a nonprofit organization. Because the trust is irrevocable, an immediate income tax deduction is available for the present value of the future gift to charity.
But the CRT is not necessarily the end of the story. Many charitably-minded families elect to name their fund at the community foundation as the remainder beneficiary of a charitable remainder trust, thus creating a lasting legacy. This is especially the case when the fund is established as an endowment to dynamically support the most pressing community needs at any given time, make ongoing annual grants from the fund’s income to specific organizations your client selects, or provide regular funding to causes your client wants to support in perpetuity.
Another example of a hybrid gift structure is a pet trust. A typical pet trust frequently does not qualify for a charitable deduction because funds are designated to support a client’s own pet. The community foundation, however, can work with a local animal shelter to create your client’s bequest such that both the pet and the nonprofit organization are supported and your client’s estate is eligible for a tax deduction for the portion of the gift that benefits the nonprofit organization as a whole.