Greetings from the community foundation!
We hope this email finds you well. With so much turmoil and tragedy in our world today, we are especially grateful for the opportunity to partner with organizations in our community and people like you who are making the world a better place.
As always, we are here for you! Whether you'd like to discuss planned giving ideas, complex gifts, or creative ways to work with your donors, we'd love to talk. We are committed to helping you grow your major gifts, endowments, and reserve funds so that your mission can stay strong for generations to come.
Thank you for your partnership.
--Your Community Foundation
Study up on gift acceptance in a volatile market and beware of “garbage in”
It’s tough out there. Your donors are feeling the impact as they watch their stock portfolios ride a rollercoaster. Unlike the situation in early 2020 when the pandemic was an easily-identifiable primary cause of market turmoil, today’s reality is that the reasons for the market’s ups and downs are multi-faceted and therefore harder to navigate. Rising interest rates, an uptick in COVID cases in some parts of the world, a still-disrupted supply chain and high inflation, Russia’s invasion of Ukraine, and even the stock market itself, which some label as “overbought,” are all contributing to a wild economic ride.
Furthermore, for donors who’ve invested aggressively in trendy categories, the impact may be even more acute. Some once-hot SPACs, meme stocks, NFTs, cryptocurrency, and speculative technology companies are faring even less well than the mainstream market indexes.
Still, it’s no time to get bogged down in doom and gloom. Here are five bright spots to consider:
–Some real estate has not suffered the declines in valuation common today in other asset classes. This, in turn, creates an opportunity to encourage donors to give real estate assets to your endowment. Frequently, the donor is eligible for a charitable tax deduction of the fair market value of the property for a gift of real estate to a public charity. Then, when the charity sells the property, the full amount of the proceeds will remain intact for charitable purposes without reduction for income taxes.
–Furthermore, if a donor would like a gift of real estate to benefit your organization as well as one or more other nonprofits, the community foundation can help facilitate a transfer into a donor-advised fund, from which the donor can recommend grants to your charity and to the other charities after the property sale is complete.
–Now is a very good time to review your endowment policy, especially the policy’s guidelines for how your organization handles the acceptance of certain gifts, especially if they fall in the category of “Non-Standard Contributions” as defined by the IRS. Gifts of hard-to-value assets should not be undertaken lightly. We encourage you to reach out to the community foundation to assist in establishing a gift acceptance policy that will protect your organization and empower your fundraisers to engage in successful conversations with donors.
–What’s more, the community foundation offers nonprofit organizations the opportunity to establish endowments and reserve funds to benefit from the community foundation’s governance and oversight, especially related to accepting complex gifts, as well as relying on the community foundation for all of the policies and administration associated with an endowment or reserve.
–Finally, an easy way to avoid trouble with SPACs, meme stocks, NFTs, cryptocurrency, and speculative tech stocks is to be aware of potential pitfalls ahead of time so that you can be prepared to say no to a gift. The team at the community foundation is happy to talk with your team about the pros and cons of accepting certain types of property. You may very well wisely decide that speculative and unusual assets like this are more trouble than they are worth.
Even with legislation up in the air, the QCD is already a planning tool to celebrate
If it feels as though your donors are asking more questions these days about giving to your organization from their retirement plans, you’re likely not imagining it. We know you're getting these questions, and our team is here to help answer them.
Our team will continue to keep you informed of the status of legislation impacting the popular Qualified Charitable Distribution ("QCD") allowance. More and more donors are discovering this powerful tool for supporting their favorite charities.
Here's where things stand:
SECURE 2.0 passed the House of Representatives in March 2022, and companion legislation is now under discussion in the Senate. You might find it helpful to review a brief section-by-section discussion draft released by the Senate on May 26, 2022, especially the introductory paragraphs, to see a snapshot of the legislation.
We, like you, are watching this legislation with interest. Proposed provisions of SECURE 2.0 would enhance Qualified Charitable Distributions (“QCDs”) by indexing the $100,000 annual allowance for inflation and adding a provision for a one-time $50,000 distribution to a charitable remainder trust or other split-interest gift vehicle.
The legislation is bipartisan with broad support but still likely will not be signed into law until later this year. That is because the House and Senate versions need to be reconciled and then the bill would need to be signed by President Biden.
Here’s what’s important, though: A QCD under the current law is still an excellent planning tool. When you meet with a donor who is 70 ½ or older, encourage the donor to work with financial advisors and take a careful look at projected retirement income. If the donor does not need to rely on IRA income (which is subject to income tax), the donor may benefit significantly from distributing up to $100,000 annually from that IRA (and thereby avoiding the income tax) directly to a “qualifying” charity, whether that charity is your organization or a designated fund at the community foundation. Indeed, a designated fund gives your donor the freedom to support your charity and other specified charities, which may help you land the gift. Please reach out to our team. We would be pleased to assist.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.