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A new resource for you
Welcome to our first installment of "Focus on Philanthropy," a resource from the Jewish Community Foundation that we hope will be a helpful tool to keep you up to date with the ever-evolving philanthropic landscape. It was so wonderful seeing many of you at the recent Estate Planning Symposium after such a long time apart. We hope you enjoy this newsletter, and we welcome your feedback. Most of all, we always love providing great service to you and your clients in support of their charitable goals. We can't wait to be in touch and here is a link to some of the services we offer.
Congratulations to Jonathan Klem on winning our drawing for a $100 JCF Charitable Gift Card at the Estate Planning Symposium.
Josh Stein
JCF Director of Philanthropy
(913) 327-8121 | Email
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QCDs: Good news and important reminders
Qualified Charitable Distributions, or “QCDs,” have been in the news a lot lately, especially in light of proposed SECURE Act 2.0 legislation that passed the House of Representatives in March and is now pending in the Senate.
Through a QCD, starting at age 70½, your client can instruct the administrator of an IRA to direct up to $100,000 per year to a qualified charity. This helps your client’s tax situation because the client does not need to report the amount of the QCD as taxable income.
Here are four important reminders about QCDs:
- Even though the SECURE Act changed the Required Minimum Distribution (RMD) age to 72 from 70 ½, the QCD age is still 70 ½.
- QCDs cannot be made to Donor Advised Funds, but your client can set up a restricted fund to receive a QCD.
- Under a version of the proposed SECURE Act 2.0 legislation, QCDs would be indexed for inflation. In addition, proposed legislation would allow a client to make a one-time QCD of up to $50,000 to a charitable remainder trust or other split-interest entity.
- Finally, be sure to help your clients coordinate their QCDs with their Required Minimum Distributions. Proper planning will help avoid troublesome tax pitfalls.
Please reach out to the JCF team to learn more about QCDs and how your client can establish a fund to support financial and tax goals, as well as charitable giving goals.
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Income timing: A NIMCRUT could hold the key
Clients who own closely-held businesses, real estate, or even cryptocurrency may be good candidates for a particular type of charitable remainder trust known as a NIMCRUT, which is short for “Net Income with Makeup Charitable Remainder Unitrust.”
The way it works is that your client transfers a highly-appreciated asset to a trust. The trust terms provide for the payment of a fixed percentage (at least 5%) of the trust’s value, revalued annually, to your client or another beneficiary.
Here’s the key with the NIMCRUT: The terms of this type of trust also provide that if the trust’s income is less than the designated fixed percentage, the trust will only distribute the actual income. Later, upon the liquidation of the highly-appreciated asset, for example, the income distributions will be made up.
In this way, not only does the NIMCRUT keep the highly-appreciated asset growing under favorable tax conditions inside the trust until it is sold, but it also allows your client to receive the higher income in later years, such as retirement, when the client’s tax bracket is likely to be lower. As with other types of charitable remainder trusts, when the term of the NIMCRUT expires, the remainder passes to charity.
Some NIMCRUTs deploy a “FlipCRUT” feature which removes the net income limitation upon a triggering event (such as the sale of an asset or a date). This creates even more flexibility in timing income for your client.
Note that it’s wise to consider naming a public charity, such as a Donor Advised Fund at the Jewish Community Foundation, versus a private foundation, as the charitable remainder beneficiary of a NIMCRUT or other charitable remainder trust. This optimizes the amount of your client’s up-front charitable deduction when the trust is funded.
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Social consciousness: Today's expectations of advisors
Especially over the last few years as social consciousness has increased, many of your clients have no doubt become more interested in how they can make a difference through their philanthropic activities, whether those activities include giving to favorite charities, volunteering, serving on boards of directors, purchasing products that support a cause, and respecting a sustainable environment.
As clients grow more in tune with social impact, they are expecting their advisors to be ready to help them structure and plan their charitable giving. What’s more, clients who receive charitable planning advice from their advisors tend to be more loyal and more willing to recommend their advisor to others, especially when that advisor is proactive in bringing up options for incorporating philanthropy into financial and estate plans.
With that in mind, the Jewish Community Foundation is here to help you stay up to date with philanthropy topics so you can, in turn, have the conversations and deliver the services your clients are seeking. To that end, for an insightful look into the inner workings and current state of the philanthropy industry, we suggest skimming the written testimony that the Council on Foundations recently provided to the Senate Finance Committee. The Council, a major voice and advocate for philanthropy in the United States, notes that the current economic and legislative environment has created a “pivotal moment for nonprofits and their philanthropic partners.”
JCF is also here to help you avoid treacherous situations as you create philanthropic plans for your clients. Sadly, as philanthropy and giving grow larger on the radar, periodic bad news is almost certain to bubble up. Legal disagreements with families, for example, shine a light on just how important it is to create a philanthropic plan and related legal documents that are rock solid on donor intent.
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The team at the Jewish Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.
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