Webmaster No Comments

Will 2021 Turn Out to be Another Record-Breaking Year for Philanthropy in the U.S.? What About 2022?

By Sarah Ruef-Lindquist,  JD, CTFA

We still have a few months to wait before GivingUSA releases its report on charitable giving for 2021. That usually happens in mid-June.  Anecdotally, many organizations are reporting that despite the significant continuing challenges of the pandemic for their operations and fundraising efforts, 2021 was actually a great year.

After record-breaking 2020 charitable giving statistics were reported in 2021, Fidelity reported as of last fall what they were learning and expected about giving trends in 2021.  They reported 9 out of 10 surveyed in the summer of 2021 indicated they planned to give as much or more than they had given to charity in 2020.

The report is based on a study conducted in July and August 2021 by Artemis Strategy Group, an independent research firm, on behalf of Fidelity Charitable. The study examined the effect of COVID-19 on giving behavior among 701 adults in the U.S. who donated at least $1,000 to charity in 2020.

You may recall, GivingUSA had reported a record $471 billion in 2020, representing a more than 5% increase over 2019 giving.

In November 2021, AFPGlobal.org reported that giving was on pace in the first half of 2021 compared to the same period in 2020. Through the work of the Fundraising Effectiveness Project, the report includes an increase in new donors as well as an increase in total gifts. “The estimated number of donors increased by 0.7% in the first half of 2021 compared to the same period in 2020, while the total amount of money given has risen by a projected 1.7%.”

A growth trend in giving would seem to be continuing in 2022.

In an article dated February 15, 2022, the Chronicle of Philanthropy reported a 9% increase in giving for 2022 over 2021. This would represent the largest increase in giving since 2012. The report was produced by Blackbaud Institute, a division of Blackbaud, and surveyed roughly 9000 charitable organizations.

Did your organization have a good fundraising year in 2021? We hope so. And we hope 2022 is full of success, too. And to the extent you are having success raising funds for the long-term, through current gifts to endowment or deferred giving, we’d like to know and offer our services tailored to non-profits to support your board’s fiduciary role stewarding those gifts. Learn more at AllenIF.com.

Sarah Ruef-Lindquist, JD, CTFA
Sarah Ruef-Lindquist, JD, CTFA
Webmaster No Comments

Sarah Ruef-Lindquist Discusses ‘Pandemics and Planned Giving’

Pandemics and Planned Giving was the topic of a presentation made by Sarah Ruef-Lindquist, JD, CTFA at the Northern New England chapter of the Association of Fundraising Professionals annual conference, held Nov. 3 and Nov. 4.

Ruef-Lindquist, a financial advisor at Allen Insurance and Financial in Camden, said the COVID-19 pandemic drove people to focus on estate planning, while the confluence of historic stock and real estate values, potential estate and income tax changes and compelling societal need has laid the groundwork for many fruitful conversations with organizations’ most loyal supporters.

Ruef-Lindquist explored these dynamics, which she said could impact gift planning for years to come. Attendees at the conference, held in Manchester, N.H., included approximately150 fundraising and non-profit professionals from across Maine, New Hampshire and Vermont.

Ruef-Lindquist has had a role in planned giving as an attorney, former trust officer and philanthropic advisor and consultant to non-profits across New England. She is outgoing  president of the Maine Planned Giving Council and she previously served as vice president for Southern Maine at the Maine Community Foundation and CEO of the Maine Women’s Fund.

The Certified Trust and Financial Advisor (CTFA) designation awarded by the Institute of Certified Bankers, American Bankers Association.

Sarah Ruef-Lindquist
Sarah Ruef-Lindquist, JD, CTFA
Webmaster No Comments

Last-Minute Charitable Giving Opportunities

December is the “giving season,” when many people consider using their wealth to help others. Because of the urgent need for generosity presented by the COVID-19 pandemic, you may be looking for ways to stretch your charitable donations. As always, the use of tax-efficient giving strategies can help them go further.

This year, it’s also important to be aware of the tax incentives for philanthropy included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The summary below explains how you can maximize these tax-efficient giving incentives during the final weeks of 2020. Two common vehicles for charitable planning—now and in the future—are also covered.

CARES Act Tax Incentives
These incentives, which are set to expire on December 31, 2020, apply only to cash gifts to public charities made by individuals or corporations. Regarding your 2020 tax return, here’s what you need to know:

Are you taking the standard deduction? If you’re not itemizing, you can take an “above-the-line” deduction of up to $300 for cash gifts to charities. The amount you claim will reduce your adjusted gross income (AGI). What about married couples filing jointly? As of this writing, your deduction also seems to be limited to $300, according to IRS draft instructions.

Are you itemizing deductions? Typically, annual charitable deductions are capped at a percentage of a taxpayer’s AGI. For individuals, this cap has been set at 60 percent since 2017. Under the CARES Act, however, you may deduct up to 100 percent of your AGI for gifts of cash to a public charity in 2020. This rule excludes gifts to a donor-advised fund (DAF). For corporations, the AGI cap for cash gifts, previously set at 10 percent, has been raised to 25 percent for the year.

  • For both individuals and corporations, any unused deduction under this cap may be carried forward for five years, which can lead to the planning opportunities discussed below. The cap for gifts of appreciated assets has not changed.

Planning Opportunities

If you wish to fund large charitable gifts this year, the 100 percent AGI cap offers huge advantages. Here are several ways this incentive could help you manage high-income events:

  • Stock options and lump-sum payouts. If you’ve exercised nonqualified stock options from your employer out of concern for market volatility or received a large lump-sum severance package as a result of a layoff, charitable gifts can help offset the tax burden.
  • Roth conversions. If you’d like to make a large Roth conversion this year, you could also make a large charitable gift to offset the tax liability of the conversion. This strategy is especially beneficial because traditional IRAs have become a less attractive way to leave money to heirs since the 2019 passage of the SECURE Act, which requires most IRA beneficiaries to empty their inherited IRA within 10 years.
  • Business sale. Let’s say you have an expected AGI of $1 million this year due to a business sale. You could make a charitable contribution that would completely offset the year’s income.
  • Combining gifts. Although the CARES Act incentive applies only to cash gifts, the IRS does permit taxpayers to combine different types of gifts. For instance, you could maximize your 30 percent AGI cap for gifts of appreciated assets. The 100 percent AGI cap would be reduced by that amount, but you would still be able to deduct another 70 percent of your AGI by making cash gifts.

Qualified Charitable Distributions (QCDs)

A QCD is a direct transfer of funds from an IRA, payable to a qualified charity. Although the CARES Act allows IRA owners to skip required minimum distributions (RMDs) in 2020, the rules for QCDs have not changed. If you own an IRA (including an inherited IRA) and are 70½ or older, you can make tax-free distributions of up to $100,000 payable to public charities (excluding DAFs).

Here are some ways a QCD could help control your income:

  • If you decide to take an RMD this year (or must do so in the future), a QCD could be used to satisfy the distribution. This strategy would remove the tax burden associated with taking the distribution as ordinary income.
  • A QCD is not reportable as part of your AGI, which limits its impact on the taxation of social security benefits.
  • In future years, a QCD could also limit the impact of income on Medicare premiums, which are based on your AGI from two years prior.

Charitable Remainder Trusts (CRTs)

A CRT can help you (or your beneficiary) spread the tax liability on the sale of appreciated assets over many years. This may result in paying a lower overall effective tax rate. Let’s look at how this works:

  • A CRT pays an income stream to a noncharitable beneficiary (or beneficiaries) for a term of years or for life. At the end of the income term, the remaining assets in the trust are distributed to a charity.
  • When you move assets into a CRT, you receive a charitable contribution deduction based on the present value of the remainder interest set to pass to the charity at the end of the income distribution term.
  • If you contribute appreciated assets (e.g., investment assets, closely held business interests, real estate, or collectibles), those assets can be sold without creating a tax liability to the trust itself.

As you can see, the primary benefit of a CRT is that the trust is exempt from taxes. But that does not mean taxes are entirely avoided for beneficiaries. In fact, the distributions to the income beneficiaries are taxable based on four buckets of income: ordinary income, capital gains, tax-free income, and return of principal. Each year, when the CRT makes its income distribution, it first pulls the funds available from accumulated ordinary income, such as interest and dividends, before distributing other types of income. The beneficiaries would be subject to the taxation rules in place for these types of income.

Need Additional Information?

If you’re interested in exploring these options, please contact me. We’ll talk through how these giving strategies can help you meet today’s urgent need for generosity—and further your visions for doing good.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Webmaster No Comments

Which Charitable Giving Strategy is the Best Fit for You?

For many, the holidays are a time for giving back—whether by donating to a favorite charity or helping out a family member. Before you make a donation or gift, however, it’s important to choose the right strategy, paying close attention to potential tax and legal implications.

Charitable Giving

If there’s a charitable organization you’d like to donate to, be sure to take the time to consider the charitable giving vehicle you’ll use to make your gift. Let’s look briefly at some of the options.

Outright gifts. Outright gifts of cash or property provide charities with immediate resources. Be sure to keep your receipts or bank records to validate any income tax deductions you wish to claim. Keep in mind that you may need a professional appraisal to qualify for a tax deduction on certain noncash contributions.

Donor-advised funds. A donor-advised fund is a charitable giving vehicle managed by a public charity for the purpose of distributing funds to other charities. When you contribute to a donor-advised fund, you can advise the charity on the grants it makes, as well as take advantage of possible tax deductions. Be aware, however, that there may be a minimum donation amount, and administrative fees may cut into the funds available for grants.

Charitable remainder trusts. With this type of trust, the donor receives income from the trust for his or her lifetime, the lifetime of another person, or a period of up to 20 years. At the end of the specified term, the remaining trust assets are distributed to a charitable beneficiary. The greatest benefit of a charitable remainder trust is that you can take advantage of immediate tax benefits while continuing to utilize the assets, as you may deduct the present value of the charitable remainder interest. On the downside, charitable trusts tend to be complex to set up and usually require legal and administrative support.

Charitable gift annuities. A charitable gift annuity is a split-interest gift made directly to a charity that provides you, your spouse, or a family member with fixed income payments for life. The charity typically ends up with about half of your donation, while you get an immediate tax deduction and some guaranteed income. Keep in mind that an annuity is a contract between you and the charity, and your return isn’t guaranteed by the government.

Private foundations. A private foundation is a charity established by an individual, family, or corporation. Although it offers donors a great deal of control over their gifts, a private foundation can be costly to administer, and it must adhere to a strict set of rules designed to ensure that it carries out its charitable purpose.

Bequests. If you wish to give to charity posthumously, you may make bequests by way of your will, trust provisions, or beneficiary designations. Although bequests offer simplicity and are easy to set up, they are not income tax deductible during your life.

Gifting to Family Members

Giving back doesn’t always mean giving to charity. Gifting to family members can be just as rewarding, and it can be an effective way to transfer wealth while reducing or avoiding taxes. Here are several common strategies for gifting to family members:

  • Making an outright cash gift. For tax year 2019, you may gift up to $15,000 to any individual without tax consequences. (This amount increases to $30,000 for married couples). This limit will remain the same for tax year 2020. If you’re sharing gifts with your spouse, or you’d like to gift more than this amount to one person, you’ll need to file a gift tax return using IRS Form 709.
  • Paying college tuition or medical bills directly. If you’d like to pay a family member’s expenses directly to a school or health care provider, the $15,000 limit does not apply. Plus, you’re still free to give the individual a separate tax-free gift of up to $15,000.
  • Contributing to a 529 plan. With this strategy, you can contribute to a relative’s qualified education expenses while paring down your own estate. Contributions to 529 plans grow tax deferred, and withdrawals for the beneficiary’s education are tax free at the federal level (and usually at the state level, too). Additionally, 529 plans are eligible for a special exemption that allows you to gift up to five years’ worth of annual exclusion contributions (i.e., up to five times $15,000, or $75,000, per person per year) without using any estate and gift tax exemption. You will need to file IRS Form 709 to document the transaction.

With all the options available, choosing the best way to give to charity or family members can seem overwhelming. Don’t hesitate to reach out to your financial advisor to discuss various strategies and select an option that makes sense for you, your family, and your financial situation.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.


Webmaster No Comments

What Will 2018 Charitable Giving Look Like?

By Sarah Ruef-Lindquist, JD, CTFA

Sarah Ruef-Lindquist, JD, CTFA

Sarah Ruef-Lindquist, JD, CTFA

In June 2018, the Chronicle of Philanthropy, in an article by Megan O’Neil, predicted a $16.3 billion drop in charitable giving due to the tax laws enacted in late 2017. That prediction was echoed throughout the news media, sending chills down the spines of executive and development directors in the non-profit sector.
Nine out of 10 wealthy households gave to charity in 2017, according to the 2018 Study of US High Net Worth Philanthropy conducted in partnership with the Indiana University Lilly Family School of Philanthropy by US Trust/Bank of America Private Wealth Management, released October 24, 2018. (link for reference, new window) The average amount given to charity by these households was slightly more than $29,000, an increase of 15% over 2015.
The biennial report is in its seventh edition since the series began in 2006.
There has been much concern expressed about the impact on philanthropy of the 2017 tax law changes, specifically a predicted negative impact on charitable donations because of the increase in the standard deduction to $12,000 per person and reduced reliance on itemized deductions.
However, as we’ve opined previously about the degree to which tax benefits drive charitable give, the fear among this demographic cohort is likely unfounded. The vast majority of wealthy households expect to maintain (84 percent) or increase (4 percent) the amount they give to charity in 2018 under the new federal tax law passed late in 2017.
Receiving tax benefits is generally not a prime motivation for giving. Just 17% of those surveyed said this was always a motivation, and 51% indicated it sometimes did…which means for 49% it doesn’t and for the 51 % who indicated it did sometimes, that would imply that for 51% it doesn’t always.
The important take-away here is that for high net worth individuals, those often making the largest charitable gifts, charitable intent motivates their giving more than any tax benefit, which is good news in an era of decreasing tax benefit.
What we’ve discussed above is charitable support to operating or annual budgets of organizations that would often appear on an itemized income tax return of the donor. These gifts are often given from income, as contrasted with gifts from wealth, which are often deemed “planned gifts” through estates.
Indeed, even the elimination of estate taxes would cause only 5% of HNW individuals to reduce their planned giving according to the US Trust Study of the Philanthropic Conversation, examining the perspective that advisors have compared to their HNW clients on charitable giving. (link for reference, PDF, new window)
This study, released earlier in 2018 done in conjunction with The Philanthropic Initiative, also found that just 42% of high net worth individuals would reduce their charitable giving if income tax benefit was removed.
The sampling for the study was of approximately 1,600 households with net income of over $200,000 and/or assets of $1M or more, not including principal residence.
So perhaps this is some “good news” that organizations from which to gain hope for our society, as philanthropy continues to address some of the critical issues of our time through the work of the non-profit sector.
As always, consult your financial and tax advisors before making any significant gifts or changes to your financial plans to be sure they fit within your overall, long-term financial and estate planning goals.

Webmaster No Comments

Record-Breaking U.S. Charitable Giving in 2017 Tops $400 Billion

By Sarah Ruef-Lindquist

Sarah Ruef-Lindquist, JD, CTFA

Sarah Ruef-Lindquist, JD, CTFA

According to Giving USA 2018, for the first time in history annual US charitable giving exceeded $400 billion, with $410.02 billion in charitable gifts in 2017. The report is available at www.givingusa.org.
Their report, published annually by Giving USA Foundation, The Giving Institute and the Indiana University Lilly Family School of Philanthropy, released June 12, 2018, heralded the unprecedented amount of charitable giving that represents an increase of almost $20 billion over 2016, which saw total giving of $390.05 billion.
Some of the factors cited in the report for the robust nature of philanthropy reflected in the 2017 data include:

  • Solid commitment to philanthropy;
  • People having more resources available, choosing to use them to make a difference; and
  • 2017 increases in the stock market, including 20% growth in the S&P 500.

Included in the report was mention of two gifts of at least $1 billion in 2017, quoting the dean of the Lilly Family School of Philanthropy, Amir Pasic, Ph.D., as saying “This tells us that some of our most fortunate citizens are using their wealth to make some significant contributions to the common good.”
Included in those figures were gifts by bequest of $35.7 billion, an increase of 2.3% over 2016.
As usual, gifts from living individuals made up the largest donor sector, representing 70% of the total. Foundations gave 16%, bequests 9% and corporations 5%. Giving to religion was the largest recipient area, at 31%, education next at 14%, followed by human services at 12%.
There is some speculation that with tax reform at year-end providing less of an incentive for itemization of deductions on tax returns starting in 2018, some may have accelerated giving into 2017, to take advantage of income tax treatment available. Likely we will have no way of seeing whether there has been any negative impact in 2018 of 2017 tax reform until a year from now when the 2018 figures are released.

Webmaster No Comments

Making Lemonade? Charitable Giving Strategies in 2018 and Beyond

Sarah Ruef-Lindquist, JD, CTFA

Sarah Ruef-Lindquist, JD, CTFA

By Sarah Ruef-Lindquist, JD, CTFA
The Tax Relief and Jobs Creation Act that was signed into law at the close of 2017 is touted as the most extensive tax reform legislation since the 1986 Tax Act, which I came to know early in my professional career as a lawyer and philanthropic advisor.
In the 1986 act, there was a lot we took for granted in the itemized deduction world, including the once sacred charitable income tax deduction for itemizers. Essentially losing that deduction because of the dramatic increase in the standard deduction has become cause for concern for the charitable sector. I’ve written before about why that might be misplaced, but I want to focus here on what strategies have not changed in that legislation that still are powerfully tax efficient giving strategies that support annual funds and planned giving alike.
For those age 70 ½ or older with IRAs they can give up to $100,000 total to charity or charities in any given year without having to recognize the income tax that would otherwise be payable on distributions. Why? Because a direct Qualified Charitable Distribution (QCD) can be excluded from income. That’s a significant amount of potential philanthropy. A donor could take advantage of the QCD method to make annual gifts, or a larger planned gift. I often advise clients who are eligible to do this kind of gifting even when itemizing the gifts for a deduction is an option, because it’s potentially more tax efficient.
When one receives a distribution from their IRA and then makes a gift from the proceeds on which they will be taxed, they may increase their Adjusted Gross Income in a way that exposes one to a higher level of income tax on Social Security Benefits. They may also bump themselves into a higher income and/or capital gains tax bracket. One of the best features of this strategy is that donors can use their Required Minimum Distribution (RMD) that they must otherwise withdraw from their IRA to make these gifts. The result? That income that was put aside without tax will become a charitable gift without deducting any tax, which many people find compelling.
If you are age 70 ½ or older, or work in development and have donors in this age demographic, consider the QCD option and what it could mean for you or your organization’s donors. As with all gifting strategies, be sure to obtain competent, independent legal and tax advice before making a significant charitable gift.

Webmaster No Comments

2017 Tax Reform and charitable giving: "Doom and Gloom" or perhaps just "Meh?"

By Sarah Ruef-Lindquist, JD, CTFA
There has been an income tax charitable deduction in the US since 1917. For 100 years, those who itemize deductions have been able to take a deduction for gifts to charities, with some limitations based mostly on a taxpayer’s adjusted gross income.
We have all been reading about the change in the individual income tax laws, the doubling of the standard deduction and the predictions about the impact on charitable giving.  A  November 16, 2017 Forbes article on line cited a potential impact of as much as $13 billion less in charitable giving as a result of the doubling of the standard deduction, with the amount of itemizers decreasing from 33% to 5%, according to the Tax Policy Center cited in the article. This assumes that what motivates charitable giving is a tax deduction.

Sarah Ruef-Lindquist, JD, CTFA

Sarah Ruef-Lindquist, JD, CTFA

According to the Giving in Maine 2017[1] report of the Maine Philanthropy Center, regarding 2015 “Declared charitable deductions represent approximately 80% of total dollars given by individuals” meaning there’s another 20% who don’t itemize, but still give. We are all familiar with the pattern of giving late in December, before the end of the year.  Charities do get the majority of their gifts from individuals during the last two months of the calendar year, suggesting a tax motivation for giving.
But do the 80% Mainers who itemize give because they get a tax deduction? I don’t think so.  How do you explain the other 20% that do give, and still don’t itemize? A deduction is a nice benefit, but if it were truly the motivator, only people who got a deduction would make gifts, and we know that is not the case.
I believe that people give to charities because they believe in the importance of work that the charity is doing, and want to support it. The fact that they can get a tax deduction is icing on the cake, but not the real reason they give.  I predict that rather than there being a drop of $13 billion in giving in 2018, without the incentive to deduct a charitable gift, there will be in an increase in charitable giving, because if people have more to give, they will give more.  I know that if I were sitting down to write my charitable gift checks today, and there was no tax incentive for me to do so, I would still write those checks. And if I knew my tax liability for the year was going to be smaller, because the standard deduction I can use is larger than my historic itemizations AND I had a lower tax rate, I might actually make my charitable gifts larger, because I could. That should be the case a year from now.
Giving USA[2] reported in 2017 that in 2016, total charitable giving in the US was $390.05 billion, 72% of that from living individuals. The figures for 2017 won’t be out until around June of 2018, and the figures for 2018 won’t be available until a year after that, so we won’t know for a while what impact – positive or negative – 2017 tax reform may have. Let’s all remember why we support charitable causes with our gifts, and that in years when we have even more to give, we might just plan to give more.
[1] https://www.mainephilanthropy.org/MEgivingreport
[2] Giving USA is Giving USA 2017: The Annual Report on Philanthropy for the Year 2016, a publication of Giving USA Foundation, 2017, researched and written by the Indiana University Lilly Family School of Philanthropy. Available online at www.givingusa.org.