‍“If this, then that”: Scenarios to consider as tax time approaches

As attorneys, CPAs, and financial advisors, you’re well aware that you have clients’ attention when tax season rolls around. This makes it a great time to cover tax planning strategies for the current year and beyond. To help incorporate charitable giving topics into your tax season client conversations, we’ve put together tips to address three scenarios where the Community Foundation can assist your efforts.

Evaluate QCDs sooner rather than later.

If: Your client missed the 2024 deadline for a Qualified Charitable Distribution.

Then: Make sure the client took an RMD for 2024 (if required to do so). Start planning now for 2025 QCDs, paying very close attention to the required process. QCDs are an excellent tool for your clients who’ve reached the age of 70 ½ to give to a designated, field-of-interest, or unrestricted fund (donor-advised funds are not eligible), but if the client waits until the last minute at year-end, there might not be time for the transaction to be completed by December 31 as required. Plus, QCDs executed early in the year can help avoid negative effects of the "first-dollars-out rule” so that the QCD can count towards your client’s 2025 RMD.

Watch for charitable giving opportunities in business succession planning.

If: Your client is beginning to consider exit strategies for a closely-held business.

Then: Reach out to us right away. Gifts of closely-held stock to a charitable fund can be a very useful component of a business succession plan. That’s because a client can gift shares of the business, which in turn means that no capital gains tax will apply to the gifted portion when the business eventually sells. The proceeds of the gifted shares flow into the fund to be used for your client’s charitable priorities. Keep in mind that timing is crucial; if a deal is in the works at the time the shares are transferred to the charitable fund, the charitable deduction is in jeopardy.

Consider gifts of appreciated stock early in the year.

If: Your client’s stock portfolio made big gains last year.

Then: Evaluate whether it might be wise to make gifts of appreciated stock to a fund at the Community Foundation early in the year, rather than waiting until the end of the year. If certain stock positions are high right now, it’s worth considering whether a gift in the very near future could be a good move to maximize charitable dollars. As a reminder, gifts of stock to a public charity are eligible for a charitable deduction in the amount of the stock’s fair market value at the time of transfer. And, when the stock is sold so that its proceeds can be deployed to further your client’s charitable goals, no capital gains tax will apply.

We can be your go-to sounding board for any client situation where charitable giving is an option. Please reach out anytime you and a client are discussing philanthropy. In most cases, we can help. Even if our tools are not a fit, we will point you in the right direction!

For clients who love local causes, the Community Foundation is the place

Most of your philanthropic clients likely support a wide variety of charities year after year. The causes they support represent a range of motivations, including personal experience, a role as a volunteer or board member, family tradition, or alignment with values and community priorities.

Many of the charitable organizations your clients support are local. That’s important to note because it means that your clients are especially well-positioned to lean into the Community Foundation’s unique position as the hub for charitable giving and local knowledge. Here are three reasons that matters:

– Clients can tap into our team’s knowledge about specific organizations, including financial information, data about the impact of a charity’s programs, and observations of an organization’s areas of greatest need.

– Clients can choose from a variety of fund types depending on what they’d like to achieve. A designated fund, for example, allows your client to set aside tax-deductible dollars that are dedicated to supporting a specific organization. Through our services, funds are distributed over time to the charity while the assets remaining in the fund are protected from the charity’s creditors. Another example is an unrestricted fund, which leverages our extensive research about the needs of the community and the nonprofit programs that are addressing those needs.

– Clients can work with us to leave a bequest to an endowment fund to support community needs for generations to come. As a perpetual organization, the Community Foundation ensures that charitable giving stays strong in our region to address important needs as they evolve over time.

Of course, if your client establishes a donor-advised fund with us, the fund can support local causes and causes across the country. As the hub for your clients’ charitable giving, our tools and team are dedicated to helping your clients achieve their charitable goals near and far. Working with the local Community Foundation, no matter what a particular client’s charitable priorities may be, is itself a strong show of support for philanthropy right here in our community. 

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.