Hello from the community foundation!
Not a week goes by without our team engaging with dozens of nonprofit partners like you who are making our region a better place to live every single day. It is our honor to help structure endowments and reserve funds to ensure that your missions stay strong for generations to come.
In this issue, we’re highlighting techniques and tips to help you cultivate donors’ gifts, including accepting gifts of hard-to-value assets, reminding donors about important tax rules for charitable deductions, and reviewing the importance of engaging younger generations in your mission.
Please reach out anytime to learn more about these opportunities and anything else that’s crossed your desk related to charitable giving strategies. We’re happy to serve as a sounding board alongside the services we provide to administer your endowment or reserve fund. We appreciate the opportunity to work together!
–Your community foundation team
THIS MONTH’S
TRENDING TOPICS
They’re paying attention: Why you shouldn’t ignore Gen Z donors
by Staff Name, Director of Charitable Giving
As you and your team review lists to identify potential endowment and legacy donors, it’s easy to slip into the habit of zeroing in on donors who are well-established in their careers and businesses, nearing retirement, or already retired. Of course, you’ll want to target these groups because they are likely to have the capacity to make large gifts, and they may be in a position to revise their estate plans or beneficiary designations to include your endowment fund.
But don’t stop there! Expand your endowment and legacy fundraising outreach to include not only Baby Boomers, Gen X, and Millennials, but also Gen Z. Gen Z’s philanthropic engagement defies stereotypes about short-term thinking, with 84% already supporting causes through donations, volunteering, or advocacy—demonstrating a readiness to commit to long-term impact despite their youth. Certainly their financial contributions may be smaller due to early-career stages, but their focus on social justice, climate action, and equity aligns with the legacy-building nature of planned giving.
Here are three strategies to keep in mind:
–As Gen Z donors get into the workforce, they’ll be enrolling in 401(k)s and other retirement programs through their employers. This presents an opportunity for you to educate donors early in their careers about the significant tax benefits of naming a charity as the beneficiary of their retirement plans.
–Regularly include messaging in your fundraising communications about the importance of your endowment to your mission’s sustainability for generations to come. The role your organization plays in the community’s future is an important message for Gen Z to hear repeatedly.
–Use messages that demonstrate trust and transparency because these concepts resonate particularly well with Gen Z’s values. This helps signal that your mission is worth supporting long-term, an important factor in light of Gen Z’s eagerness to plan ahead.
Proactively engaging Gen Z now will help your organization secure future revenue and build on young people’s sincere desire to make a difference. Please reach out to the community foundation team to discuss ways you can engage Gen Z to strengthen your endowment and legacy giving strategies.
Gifts of hard-to-value assets: Worth the effort
by Staff Name, Director of Charitable Giving
The team at the community foundation is always happy to help you evaluate potential gifts to your endowment fund. This is especially the case when a donor proposes giving something other than cash or marketable securities.
When a donor mentions the possibility of giving real estate or closely-held stock, for example, please reach out to our team. One of the benefits of housing your endowment or reserve fund at the community foundation is that we can serve as your back office for complex gifts as well as serving as a sounding board for giving strategies in general.
One of the most important factors to remember is that valuing and accepting complex gifts like real estate and closely-held stock is not easy! The community foundation will help you make sure that the donor and the donor’s advisors are aware of the IRS’s rigorous requirements for securing a qualified appraisal of a complex gift. Failure to follow these rules could wipe out the otherwise excellent tax benefits to the donor. These assets are called “complex” and “hard-to-value” for a reason!
Even though complex gifts can present inherent challenges, they’re still worth pursuing. Charities that cultivate hard-to-value assets such as real estate and closely-held stock can unlock significant advantages for both their missions and their donors. Remember that unlike gifts of nonmarketable assets to a private foundation, a donor’s gift of a nonmarketable asset to your endowment fund or other public charity can qualify for a full fair market value charitable deduction, up to 30% of AGI, and also avoid capital gains tax.
What’s more, beyond real estate and closely-held stock, the community foundation is happy to work with you and a donor to explore gifts of other complex assets, such as cryptocurrency, NFTs, and intellectual property, which expands philanthropic opportunities for donors who are business owners and investors in alternative assets.
Keeping an eye out for opportunities to attract hard-to-value assets will help you build a resilient endowment fund at the community foundation while also empowering your donors to optimize their financial and philanthropic legacies. The community foundation helps you bridge expertise gaps, handle asset liquidation, invest the proceeds, and meet regulatory requirements so that you and your team can focus on donor relationships and impact. Please reach out to talk with our team.
Tax time tips for your donors
by Staff Name, Director of Charitable Giving
April 15 is right around the corner! Now is a good time to review a few basic tax principles related to charitable giving so that you’re prepared for donor conversations. Tax planning is on their minds, and you don’t want to miss an opportunity to secure a gift to your endowment fund.
Your donors give for lots of reasons other than a tax deduction.
With taxes on the minds of so many donors this time of year, it’s important to remember that it’s not all about the tax deduction! Charitable giving is a priority for the vast majority of affluent families. Indeed, among people who own investments of $5 million or more, 91% of those surveyed reported that charitable giving is a component of their estate and financial plans. In another study, most affluent investors cited reasons for giving well beyond the possibility of a tax deduction and would not automatically reduce their giving if the charitable income tax deduction went away. During the fundraising process, be aware of donors’ non-tax motivations for giving, such as family traditions, personal experiences, and compassion for your mission.
Your donors may still default to giving cash, so you have to stay in front of them.
Many donors simply are not aware of the tax benefits of giving highly-appreciated assets to their favorite charities. Even if you feel like you say it a lot, keep saying it! Donors often forget or are in a hurry and end up writing checks and making donations with their credit cards. It’s really important to remind your donors about the benefits of donating non-cash assets such as highly-appreciated publicly-traded stock, or even complex assets (e.g., closely-held business interests and real estate). The community foundation can help you work with donors to give highly-appreciated assets in lieu of cash to your endowment fund. This in turn can help donors reduce–significantly–capital gains tax exposure, and they can calculate the deduction based on the full fair market value of the gifted assets.
Your donors may not remember the basic rules of deductibility.
It’s important to know that the deductibility rules are different for donors’ gifts to a public charity (such as your endowment fund at the community foundation) on one hand, and their gifts to a private foundation on the other hand. Donors’ gifts to your organization directly, or to your endowment fund, are deductible up to 60% of AGI for cash gifts and 30% of AGI for gifts of other assets. Gifts to private foundations are deductible up to 30% of AGI for cash gifts and 20% of AGI for gifts of other assets. In addition, gifts to public charities of non-marketable assets such as real estate and closely-held stock typically are deductible at fair market value, while the same assets given to a private foundation are deductible at the donor’s cost basis. This difference can be enormous in terms of dollars, so make sure you let your donors know about this if they are planning a major gift.
Make it a habit to repeat the tax basics in your donor communications. This will help you grow your endowment fund not only during tax time, but also throughout the year. As always, the community foundation is here to help! Reach out anytime!
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.