Donor Connection – June 2023

Hello from the community foundation!

Many fund holders regularly tell us that they enjoy the summer months as an opportunity to reflect on their charitable giving goals. This allows them to be ready when September rolls around to implement charitable giving plans prior to year end. As you think about your 2023 charitable giving goals, we invite you to consider how the community foundation can help you reach them.

In this issue, we’re providing insights to help our current fund holders, as well as those who are considering establishing a fund, reflect on what they’d like to accomplish during the remainder of the year. Our article about anonymous giving might prompt you to think about what level of recognition you prefer for your charitable giving and why you might be feeling that way. Our piece about charitable remainder trusts and charitable gift annuities, on the other hand, is more about thinking; we want to provide a few quick pointers on why you might consider one or the other. Finally, as always, we’re including a couple of suggestions for further reading if you’d like to stay up-to-date on what’s going on in the philanthropy world.

Enjoy the month of June! Thank you for the opportunity to work together! We are grateful!

Angie Tatro, CEO
Central Kansas Community Foundation

Recognition or anonymity: Which one’s for you?

 

The community foundation is committed to working with you and your family to fulfill your charitable goals, whether those goals relate to making an impact, leaving a legacy, saving money on taxes, expressing gratitude, or a combination of objectives. If you have not yet established a fund at the community foundation (and even if you have!), it might interest you to know that a donor-advised fund or other type of fund not only offers flexibility to meet your giving goals, but also gives you options for recognition or anonymity, depending on your goals and preferences.

Many philanthropic individuals and families appreciate–and sometimes even seek–recognition for gifts to their favorite charities. In addition to feeling appreciated, donors give publicly for many other reasons, including knowing that their names can lend credibility to an organization and that their gifts can serve as an inspiration to other donors. The team at the community foundation also understands the perspectives of nonprofit organizations about anonymous giving. This means we can help you navigate your relationship with a favorite charity, which in turn allows us to help ensure that your intentions are achieved and the nonprofit’s mission is supported in the way you envision.

The community foundation carries out your wishes for recognition in a variety of ways. When you recommend grants to your favorite charities from your donor-advised fund, for example, the community foundation’s team typically will issue the grant checks to the charities noting that the gift is from your fund so that you receive the recognition. Sometimes, though, our fund holders have good reasons for wanting their support to be anonymous, whether because of modesty, religious convictions, avoidance of unwanted solicitations, or wanting to keep the focus on the charity.

Whatever the reasons you might prefer to give anonymously, whether from time to time or across the board, the community foundation respects your wishes and can help in a variety of ways.

–First and foremost, our team will listen intently to understand your charitable goals and interests and make sure that we are structuring your donor-advised fund, other type of fund, or series of funds to achieve your charitable giving and family philanthropy goals. Indeed, some individuals and families set up multiple funds to serve different needs, including the desire for anonymity for a portion of their giving but not all. Our team will be sure to ask clarifying questions to determine how best to structure your charitable funds to achieve your desired level of recognition. Do you prefer anonymity for every grant? Is there a threshold amount where smaller grants can be acknowledged? Does the restriction apply only to a public disclosure by the grantee, but the grantee organization is itself aware? We know these discussions can be delicate.

–You may wish to recommend that certain grants (but not all grants) from your fund be issued anonymously. The community foundation offers the ability to opt in to anonymity on a grant-by-grant basis. Also remember that no solicitations will flow directly to you; the community foundation handles all correspondence related to grants to nonprofits made from your fund.

–Remember that you can establish a donor-advised fund under a nondescript, less identifiable name, perhaps one that is generic sounding or honors ancestors who may have “seeded” the fund through a prior generation’s wealth transfer or inheritance. For example, you can select a name for your fund that is something less obvious than your own name. Instead of the “Sam and Vera Barker Fund,” for instance, you could name the fund the “SVB Fund,” “Desert Family Legacy Fund,” or something else. When the community foundation sends a grant check to a charity from your fund based on your wishes, the charitable recipient will see only the name of the fund, not your name.

–As always, with any fund (whether some or all of the grant making is anonymous) the community foundation’s code of ethics and operating principles mean that our team follows and enforces strict confidentiality. For example, we are careful about visibility and accessibility of donor information even internally, and we adhere closely to permissions and protections within the donor database.

–Finally, the community foundation does not disclose information about you or your fund to any third party, nor is detailed information available through a Form 990 filed with the IRS.

At the community foundation, we’re here to serve the greater good. We welcome all conversations about giving, and we gladly strive to honor the charitable giving preferences of our donors and fund holders to the fullest extent allowed by law.

More alphabet soup: QCDs, CRTs, and CGAs

If you or a family member has reached the age of 70 ½, you might have heard of a tax benefit known as the Qualified Charitable Distribution (QCD), which allows you to direct up to $100,000 annually from your IRA to a qualified charitable organization (which includes a designated or field-of-interest fund at the community foundation). You don’t pay income taxes on the distribution, and, if you are required to take minimum distributions (RMDs) because you have reached the age of 73, the QCD counts toward your RMD.

One of the many components of a new set of laws known as “SECURE 2.0,” which was passed at the end of 2022, is a provision that expands the QCD by adding the opportunity for taxpayers to make a one-time $50,000 QCD transfer to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA). This part of the new law is called the “Legacy IRA” provision.

Because of the new laws, many charitable-minded individuals and families are interested in learning more about CRTs and CGAs. CRTs and CGAs are similar because each provides an up-front tax deduction, a steady lifetime income stream, and a remainder gift to a charity, such as your fund at the community foundation, which will receive what’s left over at the end of the income term, such as your lifetime.

CGAs are often easier to establish than CRTs, especially if you plan to establish the vehicle with $50,000 or less. This makes the CGA an ideal tool to take advantage of the Legacy IRA provisions for QCDs noted above.

A CGA, like any other annuity, is a contract. You agree to make an irrevocable transfer of cash or assets to a charity, such as the community foundation. In return, the charity agrees to pay you (or a designated beneficiary such as a spouse) a fixed payment for life. You are eligible for an immediate income tax deduction for the “present value” of the future amount passing to charity.

The amount of income you can receive from a CGA is determined according to national standards, and it is based on “rate of return” assumptions that are revised from time to time based on what’s going on with interest rates.

By contrast, a CRT is actually a trust–a separate legal entity. To establish a CRT, you will work with your attorney to execute a trust agreement and also work with a person or entity (such as the community foundation) who will serve as the trustee. After you transfer stock or other property (ideally highly-appreciated assets) to the trust, you’ll receive an income stream from the trust based on a percentage specified in the trust document (and subject to IRS parameters).

The team at the community foundation looks forward to working with you and your advisors to determine whether a CGA or CRT might be a good fit for your charitable plans. For example, we will explore whether you already intend to leave gifts to charity following your death, discuss your income requirements while you are living, and review the types of assets you own and whether there is a particular highly-appreciated asset or assets (such as stock or real estate) that would make an ideal gift to a CGA or CRT to reduce your capital gains tax exposure.

As always, please reach out to the team at the community foundation whenever you or your advisors have questions about charitable planning techniques. We are happy to collaborate as you build your financial and estate plans to include support for your favorite charities and the community you love.

For further learning

Different generations do things differently. This is not a surprise to those who have watched their parents, children, or grandchildren in action! Catch up on how generational differences flow through to charitable giving. In particular, note that the donor-advised fund is popular across generations, not just with Gen X and Baby Boomers. Plus, given the hands-on preferences of Millennials and Gen Z, the community foundation is uniquely situated to cater to these new philanthropists as they seek to make their own mark of positive impact on the world.

Have you ever heard a philanthropist say how hard it is to give money away? There is truth to that, especially, as this article notes, where grants from private foundations are concerned. This is yet another reason why so many individuals and families are turning to the community foundation to help them structure charitable giving vehicles and navigate the best ways to support the causes they love, including forgoing the private foundation altogether in favor of the more straightforward and tax-friendly donor-advised fund.