As attorneys, CPAs, and financial advisors, you are very aware of potentially significant upcoming changes to the tax laws that could impact your high net-worth clients. Whether or not a post-election Congress takes action to prevent the estate tax exemption sunset at the end of 2025 will potentially affect the way you design your clients’ wealth transfer strategies.

As you and other tax planning professionals watch and wait, it is important to keep charitable planning high on your list of strategies that could help blunt the impact of a lower estate tax exemption if the sunset were to occur.

Here’s why this is such a powerful technique, especially now:

Income tax savings. When your client designates a fund at the community foundation as the beneficiary of an IRA, the fund receives the assets without having to pay income taxes. This is because charities are tax-exempt entities, allowing them to receive funds from qualified retirement accounts tax-free after your client’s death. This is not the case with qualified retirement plans flowing to heirs; the income tax hit can be significant.

Estate tax deduction. Naming a charity as a beneficiary of a retirement plan results in an estate tax charitable deduction, which reduces any applicable federal estate taxes. This means that the full value of the IRA can flow into your client’s fund at the community foundation free from the estate tax burden.

Flexibility. Clients can revise IRA beneficiary designations anytime during their lifetimes. So, as the end of 2025 draws closer, a client can update an IRA beneficiary designation to name a fund at the community foundation, which would protect against a drop in the estate tax exemption. If the sunset does not occur, the client could of course revise the beneficiary designation to leave a greater portion of retirement plan assets to heirs. Remember, though, that the income tax hit will still apply to proceeds flowing to heirs. That’s why many of your charitable clients will choose to leave IRAs to their funds at the community foundation even if the estate tax exemption does not sunset. And, of course, many clients truly want to leave a legacy and would love to incorporate charitable giving into their estate plans regardless of what happens with the tax laws. As tax and estate planning advisor, it is your responsibility – and opportunity – to help clients achieve their philanthropic wishes.

Please reach out to the team at the community foundation to dive deeper into the ways you can help your clients fulfill their charitable goals, especially during this time when future tax laws are up in the air. We are here to help!

Attorneys, CPAs, and financial advisors certainly are not strangers to tough questions. Indeed, the mix of money, family, and mortality is a potent combination that almost always creates an emotionally-charged planning environment, whether the matter at hand is tax planning, updating wills and trusts, or structuring retirement portfolios.

Why, then, are so many advisors reluctant to bring up charitable giving during client meetings when the topic itself is so uplifting? In some cases, you may feel like you don’t know enough about the technical tax planning aspects of charitable giving to be able to offer sound advice. In other cases, you may be concerned about taking the planning process off course into areas where the client doesn’t want you involved. Or maybe you don’t feel you have a good enough grasp of the client’s big picture to truly recognize opportunities for charitable planning that are a win-win for the client’s favorite causes and the client’s tax and financial plan.

Guess what? There is no need to worry! The community foundation has you covered. Consider the following:

Clients are expecting you to bring up charitable giving; studies reveal a disconnect between what clients and advisors assume and perceive. So if you think to yourself, “Oh, I asked about that,” think again because the client may disagree. Did you approach the question with sincere interest, or were you just checking a box?

What’s important here is that the community foundation team is your technical back up! You absolutely do not need to know the ins and outs of the charitable deduction rules, the details of Qualified Charitable Distributions, or how a donor-advised fund or charitable remainder trust operates. If you’ve built an expertise around charitable giving in your practice, that’s terrific, but it is not necessary. Our team is just an email or a phone call away. Please reach out the moment a client expresses interest in charitable planning. We’re happy to support you and be part of the team to meet the client’s objectives.

And this does not need to be hard.

While plenty of resources offer excellent suggestions for how to bring up charitable giving in conversations, many advisors tell us that they have to keep it even more simple. We understand that you don’t have time to ask a briefcase full of questions. That does not mean, however, that you can’t have a meaningful conversation. Even just two minutes is plenty if you show genuine interest in the client’s intentions and connect the client to the community foundation.

For example, the charitable planning part of a client meeting could be as simple as this:

“Okay! Now that we’ve taken a look at your retirement projections, beneficiary designations, and portfolio allocation, let’s check in on charitable giving. Bring me up to speed on your involvement with community organizations.”

Then, let them talk. If they’re not involved in any community organizations, they’ll tell you. And if they are, they’ll tell you that, too.

If the client is indeed involved in community organizations, let them know that you are happy to connect them to the team at the community foundation, or, better yet, tell the client that you’d be happy to invite a professional from the community foundation to your next meeting. Your priority as their advisor is to bring professionals to the table to help achieve their charitable giving goals.

Of course, this sample dialogue is over-simplified for illustration purposes. But truly, it does not need to be much more complicated than that. Next time you meet with a client, give this simple approach a try. You might be surprised at how easy it is, and how much the client appreciates your interest in areas of their lives that go beyond dollars-and-cents transactions and legal documents. It is the community foundation’s honor to work with you and your charitable clients.

 

The West Virginia Community Advancement and Development Office recently announced that the Eastern West Virginia Community Foundation was allocated $48,500 in tax credits through the Neighborhood Investment Program (NIP). Qualifying gifts of at least $500 can be made to the Foundation to earn a 50% West Virginia income tax credit for the donor. Donors can receive a maximum of $2,500 in NIP tax credits for gifts of $5,000 or more.  Because these West Virginia NIP tax credits actually reduce a donor’s state tax liability, a $1,000 gift to the Community Foundation translates into an actual $500 out of pocket expense—and even less if donors itemize deductions on their federal tax return. Programs supported by NIP tax credits serve low-income residents in highly distressed neighborhoods and certain restrictions apply for contributions to be eligible.

The West Virginia Legislature sets aside $3 million annually in NIP tax credits to help nonprofit organizations that are serving distressed neighborhoods and at-risk populations. Donors can use the tax credits to reduce liability for West Virginia Personal Income Tax or Corporate Net Income Tax by up to 50% annually. Credits may be used over a five-year period.

“Tax credits can help donors make sizable gifts that will benefit our community this year, and forever,” says Susan Caperton, Executive Director/CEO of the Eastern West Virginia Community Foundation. “These NIP eligible gifts will support our Community Impact Funds in the five counties we serve – Berkeley, Jefferson, Morgan, Hampshire, and Hardy – as well as other endowed funds that address critical needs in our communities.”

The Eastern West Virginia Community Foundation was founded in 1995 to work with local donors to build permanent community endowment. Funds are invested and grants and scholarships are awarded from the annual gains. Individuals or businesses interested in donating can call (304) 264-0353 to reserve NIP credits and discuss how their gift will be used to benefit local charities. Credits will be awarded on a first come, first served basis.

The Community Foundation awards more than $1.2 million in annual grants and scholarships to local nonprofit organizations and college-bound students and provides financial stewardship for 383 funds with approximately $50 million in assets. The main office is located at the Caperton Station Suites at 229 E. Martin Street, Suite 4 in Martinsburg. To learn more, visit www.EWVCF.org or call 304-264-0353.

At first glance, you may think of charitable giving as mostly an individual act. Certainly, most of the time, the actual money or asset that constitutes the charitable donation comes from a single person, couple, or entity. Beyond that, though, it likely makes sense to think of charitable giving as a collaborative endeavor.

Here are three examples:

–Serving on the board of directors of a charitable organization is a rewarding activity for many people. And, many people complement their board service with financial support. Dialogue among board members, leveraging board members’ talents, and collective board oversight are important components of a well-run nonprofit organization. Charities are counting on board members’ objective voices in the boardroom, board members’ constructive questions, and the board’s dedication to ensuring that public trust in the charity is maintained.

–For many people, involving other family members in charitable giving is one of the most rewarding ways to instill philanthropic values and transfer these values across generations. Whether you’re teaching young children about the importance of helping people in need, or joining with siblings to develop a grant-making strategy for a family donor-advised fund at the community foundation, you’re experiencing the joy of working together to make a difference in the lives of others.

–Working with the community foundation is itself a collaborative activity. When you organize your giving through a donor-advised or other type of fund, you are working with multiple professionals on our team to help you plan your annual gifts, evaluate impact, structure tax-savvy contributions of appreciated stock, and so much more. Plus, the community foundation team often works alongside your attorney, accountant, and financial advisor to ensure that both your financial and community goals are top of mind.

Thank you for the opportunity to work together to make our region a better place for everyone, now and in the future. If you’re not yet working with the community foundation, we look forward to exploring the options! It would be an honor and pleasure to work alongside you and your family on your charitable giving journey.

The team at the community foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.