DCCF Professional Advisor News

Q1 - 2024

Hello from DCCF,

Tax time is here, which means your clients may be taking a closer look at charitable giving options as they pull together information for 2023 filings. In this issue, we’re covering three topics that may capture the attention of philanthropic individuals and families this year while they’re talking with you about tax preparation.

• First, we’re offering suggestions for how to spot potential charitable planning opportunities within your client base. Clients who gave large year-end gifts, families whose grown children are spread out geographically, and clients whose portfolios jumped in value are examples of types of clients who may benefit from proactive charitable planning. As always, we are here to help!
• Attorneys, accountants, and financial advisors are starting to hear questions that clients often ask about charitable giving as they are gathering information for their income tax returns. At DCCF, we’re here to help answer questions on any charitable giving topic, ranging from tax deductibility to the advantages of non-cash gifts. 
• Local giving is frequently on your clients’ radar. DCCF is happy to talk with you and your clients anytime about the ways our team can help your clients maximize their gifts to local organizations to improve the quality of life right here at home, whether that’s by addressing the most pressing needs right now or in the future as they emerge.

As always, we appreciate the opportunity to work with you and your clients during tax time and every other time of year. We’re your partner in charitable giving, and it is our pleasure to help you serve your philanthropic clients as they support the causes they love.

Wishing you all the best as you wrap up tax season! 
—Chip Blaser, Executive Director

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 DCCF, or maybe you helped a client structure a Qualified Charitable Distribution to a field-of-interest or designated fund at DCCF. 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 at the community foundation, 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 at DCCF or other 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 DCCF can help your clients maximize the impact and tax benefits of their local giving, DCCF’s 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.
 

FAQs: A snapshot of clients’ tax-time charitable giving questions

Now is a good time for advisors to review a few basic tax principles related to charitable giving. Here are three questions that are top of mind for many advisors, along with answers that can help you serve your clients. 

How important is it to high net-worth clients to get a tax deduction for gifts to charity?

Among clients who own investments of $5 million or more, 91% of those surveyed reported that charitable giving is a component of their estate and financial plans. In another study, most affluent investors cited reasons for giving well beyond the possibility of a tax deduction and would not automatically reduce their giving if the charitable income tax deduction went away. What this means for your practice is that it’s important to be aware of your clients’ non-tax motivations for giving, such as family traditions, personal experiences, compassion for particular causes, and involvement with specific charitable organizations. This also means it’s critical to talk about charitable giving with all of your clients because it’s likely that most consider it to be important. 

Why do clients so often default to giving cash?

Many clients simply are not aware of the tax benefits of giving highly-appreciated assets to their donor-advised or other type of fund at DCCF or other public charity. Even if they are aware, they forget or are in a hurry and end up writing checks and making donations with their credit cards. It’s really important for advisors to remind clients about the benefits of donating non-cash assets such as highly-appreciated stock, or even complex assets (e.g., closely-held business interests and real estate). When clients give highly-appreciated assets in lieu of cash, they often can reduce–significantly–capital gains tax exposure, and they can calculate the deduction based on the full fair market value of the gifted assets. 

Encourage clients to explore not only highly-appreciated stock as a potential gift to charity, but also the various forms of “noncash” assets that can make great charitable gifts. After all, American households’ most valuable assets are retirement accounts and personal residences, not cash. Examples of assets that could be excellent charitable gifts depending on the client’s circumstances include gifts of real estate, closely-held stock, farm and ranch stock, and, for clients who are age 70 ½ and older, direct transfers from an IRA (known as a Qualified Charitable Distribution) to a field-of-interest or unrestricted fund at the community foundation. 

What are the basic deductibility rules for gifts to charities?

It’s important to know that the deductibility rules are different for your clients’ gifts to a public charity (such as a fund at DCCF) on one hand, and their gifts to a private foundation on the other hand. Clients’ gifts to public charities are deductible up to 50% of AGI, versus 30% for gifts to private foundations. In addition, gifts to public charities of non-marketable assets such as real estate and closely-held stock typically are deductible at fair market value, while the same assets given to a private foundation are deductible at the client’s cost basis. This difference can be enormous in terms of dollars, so make sure you let your clients know about this if they are planning major gifts to charities.

So what’s the first step? Reach out to DCCF! We really mean it. Make it a habit to mention charitable giving to your clients. We are happy to help you and your client evaluate the best assets to give to a donor-advised or other type of fund at DCCF to achieve the client’s charitable goals.

From that moment on, whatever the clients’ charitable priorities, consider our team to be your behind-the-scenes back office and support department to handle all of your clients’ charitable giving needs.