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Communicating with Your Clients about Charitable Giving

We hope you and your loved ones are safe and well. Below are some tips and tools you might find helpful when communicating with your clients about charitable giving during COVID-19, and while interest rates are low. 

If you have any questions, please do not hesitate to reach out to Abby Axelrod-Wunderman, Director of Charitable Giving at aaxelrod-wunderman@cfpbmc.org or 561.340.4512.

Why now is an excellent time to set up a Charitable Lead Annuity Trust

Among the many factors swirling together in the pandemic marketplace are 1. historically low-interest rates and 2. historically high needs for increasing charitable giving to support organizations dealing with the health crisis. This makes the charitable lead annuity trust (CLAT) an attractive vehicle for individuals who want to help charities in the near term and still preserve assets for their families.

Here's how a CLAT works. 

An individual transfers cash or other property to an irrevocable trust. For a term of years, a charity designated by you (which could be a donor-advised fund) receives an income stream. The trust can be structured to maximize income tax benefits, or estate and gift tax benefits, in varying degrees. After the term of years, the remaining assets in the trust are distributed to your designated non-charitable beneficiaries.

Why is CLAT so advantageous right now? 

If over the term of the income period, the trust assets outperform the current IRS 7520 rate (which should be easy to do because rates are so low right now), the non-charitable remainder beneficiaries will receive assets with a value much higher than the taxable gift reported when the trust was created. This results in a tax-free transfer of wealth. 

What's more, if your client designates a donor-advised fund to receive the income during the term of years, the client can stay involved by recommending grants to the most appropriate charities. This is immediately helpful as the COVID-19 health crisis moves through different phases of need.

Lastly, while CLATs may be a good option for your clients and their families, gifts to donor-advised funds should still be considered during this time as well.  

The attractiveness of Donor-Advised Funds in the time of COVID-19

While gifts to donor-advised funds (DAFs) are not included in the CARES Act incentives, this time is still an attractive period for giving to or establishing a DAF. 

Consider donor-advised funds (DAFs) the "shock absorber" in philanthropy. The COVID-19 outbreak has quickly sent our economy into turmoil. It is harming some of our most vulnerable citizens — those living just one missed paycheck away from hunger or homelessness.

During times of fiscal stress, however, DAFs play a critical role as the philanthropic capital reserve in communities across the US. DAFs have a demonstrated track record of stepping up for nonprofits during difficult economic times. A 2019 study found that DAF donors are more generous with grant-making during recessions, especially compared to other forms of giving.

Share with your clients the advantage of enhanced Charitable Cash Contributions

For 2020 taxes, individuals can take a $300 above-the-line deduction ($600 for married couples) for cash contributions to charities if they do not itemize their deductions.

Also, enhanced charitable contribution limits are expanded for individuals and corporations in 2020. Individuals who itemize will be eligible for a deduction up to 100% of adjusted gross income (AGI) for qualifying cash contributions. Corporations now have the increased deduction of 25% for charitable contributions. These new charitable giving incentives apply to cash donations only. 

Take a look at the acceptable charitable cash contribution funds at the Community Foundation. Please call on us to assist you in helping your clients make gifts.

Share the benefits of Required Minimum Distributions and Qualified Charitable Distributions

The CARES Act was designed to provide relief to Americans who are struggling due to the economic, emotional, and physical toll COVID-19 is causing. The goal of suspending RMDs is to give people more control over their funds and to reduce having to sell investments and create a taxable event during a time of emergency. The CARES Act allows IRA account owners to skip both their 2019 and 2020 required minimum distribution (RMD), if it was their first year and had not yet made an RMD by April 1, 2020. How could RMDs in 2020 make a difference?

For one, an individual could provide support to charitable organizations if he/she is not concerned about keeping the RMDs. An individual can still do a qualified charitable distribution (QCD) from their IRA if they are age 70.5 or older and send money directly to a qualified charity. Even though RMDs are not owed in 2020, and their amount will not offset any future RMDs, except for the fact that their account balance is now lower, nonprofits in our community are in immediate need of the added support.

If you have a client who is in a position to take from their IRA account and give to a charity, please let them know how their charitable impact would be felt tenfold at a time like this.

Your accountant can answer your specific questions about the remaining provisions in the CARES Act. 

We Are Here to Help

As you talk with your clients about how to support their needs, consider calling the Community Foundation for Palm Beach and Martin Counties for further charitable insights. Whether your clients are looking to get more involved in supporting the build back of our community or you'd like our assistance guiding you and your clients through a decision-making process about how dollars can best be deployed, we are here to serve your needs. 

Some additional resources to help your clients in Charitable Giving:

  • Donor FAQ: You asked, and we answered! Here are responses to some of our most asked questions.
  • Why Choose the Community Foundation? Our top ten reasons why your clients should partner with us. 
  • Fund and Asset Types: Our development team can provide advice and assistance to help you and clients understand their options. Check out our list of fund types.

Some popular choices include:

  • Donor-Advised Fund: We can help your client meet their philanthropic goals through a charitable giving fund at the Community Foundation. Donors can recommend grants online and remain active in the grant-making process. 
  • Legacy Fund: Legacy funds are ideal for families and charitable individuals who want to designate how their assets will be distributed after their lifetimes and make a lasting impact in their community for generations. 
  • Family Foundation Fund: The Community Foundation offers a personal, local, and flexible approach to giving. We match donors with community causes they care deeply about and provide extensive knowledge about local charitable organizations and emerging community needs.

Reach out to Abby Axelrod-Wunderman, Director of Charitable Giving at aaxelrod-wunderman@cfpbmc.org or 561.340.4512, to learn more.