Spotting Charitable Planning Opportunities

‍Big gifts, bullish portfolios, and kids who move away

If you’re not talking about charitable giving with your high- net-worth clients, 2024 is the year to start doing it! Recent studies show that 85.1% of affluent households give to charity. Certainly, many of your clients are among them. 

Take a few minutes this month to scan your client list for three common scenarios and related opportunities for charitable giving solutions.

Clients who made significant charitable gifts at year-end. 

You’re probably aware of at least a few clients who increased their charitable giving at the end of 2023. Perhaps you worked with a client to establish a donor-advised or other type of charitable fund at the Foundation, or maybe you helped a client structure a Qualified Charitable Distribution to a field-of-interest or designated fund with us. Now that the dust has settled on year-end planning activities, go back to these clients to find out more about their overall philanthropic plans. You may discover that a client would like to work with you to update their estate plan to include a bequest to their fund here, set up a charitable remainder trust with highly-appreciated stock, or proactively plan their charitable gifts for 2024 to get a jump on tax strategies. 

Clients whose stock portfolios have rallied.

2023 brought good news and record highs for the stock market  As always (and perhaps especially now!), giving appreciated, publicly-traded stock to charitable organizations is a highly effective tax strategy. This is because capital gains tax is avoided when your client transfers long-term, marketable securities to a fund with us or another public charity. The client is typically eligible for an income tax deduction at the fair market value of the securities, and when the charity sells the securities, the charity does not pay capital gains tax. This is a win-win for your client and the charity. Scan your client list for clients who are holding long-term stock positions that have appreciated substantially since they bought them, especially with the market’s latest rally.

 Clients whose children have moved away. 

Children of affluent parents tend to move away. This means many of your clients may be seeking ways to stay in close communication with their children. Remember that while we can help your clients maximize the impact and tax benefits of their local giving, our tools are also very geographically flexible. This means, for example, that your clients can use their donor-advised fund to support 501(c)(3) organizations across the country, including in communities where their grown children are living. When you demonstrate your interest in your clients’ charitable giving priorities, you not only are strengthening your client relationships, but you’re also helping clients strengthen relationships with their children. 

Trends and Legislation to Keep an Eye On

‍Tax law twists and turns: Five developments impacting charitable giving

2023 was a busy year! We understand that charitable giving topics may not always be at the top of your reading list. That’s why we're here! Our team is committed to keeping you up-to-date on what you need to know. Here’s a recap of five key developments last year that are most certainly worth keeping an eye on in 2024.

(1) Proposed Regulations

Proposed regulations issued by the IRS are not binding, and often they are revised–or even shelved or canceled entirely–before they go into effect. Still, we're always keeping an eye out for these and other forms of IRS rulemaking that could potentially affect your work with your charitable clients. A recent example of this type of IRS activity is a set of proposed regulations concerning donor-advised funds, issued in November 2023. The public comment period ends in mid-February 2024, and then the IRS will take time to review the comments, so we won’t know anything definitive for quite some time. For those who are interested, we like the detail provided in this podcast series on the topic. You can take a long winter walk and learn everything you want to know about what’s being proposed! And of course, you’ll hear from us when (and if) the proposed regulations ever go into effect and what to do about it. 

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(2) Charitable Act

Senate Bill 566, which is still pending, was introduced in early 2023 to address what is sometimes called the “universal charitable deduction,” meaning that even taxpayers who do not itemize their deductions would be able to claim a charitable deduction, potentially in an amount up to one-third of the taxpayer’s standard deduction. Keep an eye on this; the bill enjoys broad support and, if it becomes law, could be a real perk for both your clients and the charities they care about.  

(3) Exempt Purpose

It seems that at least once a year, the IRS issues guidance on what it means for an organization to be organized for an exempt purpose under Section 501(c)(3). In Private Letter Ruling 202349014, we are once again reminded that personal activities that have no direct public benefit simply will not be viewed by the IRS as exempt. While private letter rulings are of course not binding, they are nevertheless useful tools to provide to a client to show specific examples of what the IRS considers to be non-exempt. Estate planning attorneys and CPAs tell us that every few months, a client comes to them with an idea for starting a nonprofit, and it’s easier to tell a cautionary tale than it is to recite Internal Revenue Code sections!   

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(4) NIL Collectives

The IRS has had a lot to say lately about NIL collectives. In addition to offering insights for athlete recipients of NIL (name, image, and likeness) dollars, the IRS has also issued guidance pertaining to organizations that help develop NIL opportunities for athletes, suggesting that the activities of these entities, known as “collectives,” may not qualify as “charitable.” This development could be problematic for your clients who believe that their contributions to NIL collectives will qualify for a charitable tax deduction.  

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(5) Donations of Cryptocurrency 

It’s still a thing! At least a few of your clients are likely still invested in cryptocurrency, despite the whirlwind in that industry over the last year or so. You should know that in early 2023, the IRS published guidance confirming that a taxpayer cannot take a charitable deduction for a gift of cryptocurrency over $5,000 without submitting a qualified appraisal. Cryptocurrency, in the eyes of the IRS, is treated as property, not cash. And it is not a security, either. Note that the IRS also said that a price quotation from a cryptocurrency exchange (such as FTX!!) doesn’t count; a qualified appraisal is still required.