We are honored to partner with so many philanthropists in support of the charitable causes that mean the most to you and your family.
Here’s what’s trending when it comes to charitable giving:
– We’re glad to see that field-of-interest funds and designated funds are gaining popularity. A field-of-interest fund allows you to support a specific charitable cause over time and leverage the team’s expertise at Rancho Santa Fe Foundation (RSFF). Best of all, if you’re over the age of 70 ½, these funds are eligible recipients of Qualified Charitable Distributions (QCDs) from your IRA, up to $105,000 a year.
– Many Americans hold a significant portion of their net worth in one or more IRAs. Have you thoroughly considered all the ways your IRA can help meet your charitable giving goals, both during your lifetime and through a legacy? Giving to charity from an IRA is one of the most tax-savvy moves you can make.
–It’s that time of year! You may be reviewing your tax projections to determine an ideal level of charitable giving at the end of 2024. Before you start writing checks, stop to consider the many types of assets that frequently make even better gifts to your fund. Our team can help you and your advisors identify the best assets for year-end giving.
A Deeper Dive into each of the charitable giving options:
1. Field-of-interest and designated funds could be your year-end friends
As you’re looking ahead to year-end giving, you’re likely thinking about transferring cash, or ideally appreciated stock, to your donor advised fund so that you can maximize tax benefits and support the charities you love. And absolutely, a donor advised fund can be a fabulous component of your overall charitable giving portfolio. We encourage you to think beyond donor advised funds as the year comes to an end. RSFF offers a wide variety of funds to meet your charitable giving goals and help maximize your tax and financial planning efforts.
Two excellent fund types that are sometimes overlooked are designated funds and field-of-interest funds.
When you set up a field-of-interest fund, you’re setting aside charitable dollars for a specific charitable purpose. For example, you might decide to set up a field-of-interest to support research for rare diseases, to support organizations that assist families experiencing homelessness, or to enable art museums to acquire works that celebrate the region’s diversity. With a field-of-interest fund, you’re leaning on the knowledgeable RSFF team to distribute grants that achieve your wishes.
A designated fund is a viable choice if you would like to support a particular charity for multiple years. This is useful so that the distributions can be spread over time to help with the charity or charities’ cash flow planning, which allows you to potentially benefit from a larger charitable tax deduction in the year you establish the fund if, for example, your tax rates are higher than usual in that particular year. Your designated fund document allows you to specify the charities to receive distributions according to a spending policy you select.
Finally, if you are over the age of 70 ½, pay particular attention to designated funds and field-of-interest funds as year-end approaches because these two types of funds, unlike donor advised funds, can receive “Qualified Charitable Distributions” from IRAs.
2. Your IRA is a force for good
In many cases, IRAs–especially for people who have rolled over one or more employer retirement plans–represent a significant portion of a household’s net worth. When it comes to charitable planning, IRAs should never be ignored. Indeed, your IRA may offer some of the best opportunities to support the causes you care about.
Beneficiary Considerations
For starters, consider the benefits of changing the beneficiary designation on your IRA to name your fund at Rancho Santa Fe Foundation as the recipient of a portion or the full account. This is an easy, tax-effective way to leave a bequest to support the causes you care about. RSFF can help you structure the terms of your fund to match your intended charitable legacy. For example, you can plan for your children to serve as advisors on the fund to recommend grants to areas of interest, or the Foundation itself could deploy the money to support the community’s areas of greatest need or even to support the Foundation’s own mission-based operations.
The reason an IRA beneficiary designation is such an ideal form of charitable bequest is because of the tax advantages. Dollars flowing to a community foundation from an IRA upon your death are not subject to estate tax. In addition, as a public charity, RSFF does not pay income taxes on the IRA assets it receives. By contrast, if you were to name your children as beneficiaries of the IRA, those IRA distributions to the children are subject to income tax, which can be hefty given the tax treatment of inherited IRAs. Plus, the IRA assets would be included in your estate for estate tax purposes.
Finally, if you have reached the age of 70 ½, you can make a QCD from your IRA directly to certain charities without paying income tax on the distribution.
3. Variety is the spice of… giving
If you’ve been working with RSFF for a while, you certainly know that it’s easy to contribute to your fund. And by now, you likely know not to automatically reach for your checkbook! The team at Rancho Santa Fe Foundation is happy to work with you and your tax advisors to review the options for types of gifts. Here are things to consider:
Marketable securities
Gifts of long-term appreciated stock to a donor advised or other type of fund at Rancho Santa Fe Foundation is always one of the most tax-savvy ways to support favorite charitable causes because capital gains tax can be avoided. Gifts of publicly traded stock, for example, are easy to transfer to a fund. The RSFF team provides transfer instructions to make the process simple.
As is the case with a cash gift, RSFF will provide a receipt for tax purposes, and the gift of stock will be valued at the shares’ fair market value on the date of transfer. When the Foundation sells the shares, the proceeds flow into your fund without any reduction for capital gains taxes. This is because RSFF is a 501(c)(3) charitable organization and therefore does not pay income tax. That would not have been the case, however, if you had sold the stock first and then transferred the proceeds to your fund; you would owe capital gains tax on the sale.
Closely held business interests
Our team is happy to work with you and your advisors to explore how you might give shares of a closely held business to a fund at RSFF. Not only will transfers be eligible for a charitable deduction during the year of transfer, but also these gifts could potentially reduce income tax burdens triggered upon a future sale of the business. Be sure to talk with our team well before any potential sale is in the works; otherwise, you could lose out on tax benefits.
Real estate
You can give a tax-deductible gift of real estate, such as farmland or commercial property, to your fund in a variety of ways. An outright gift is always an option; lifetime gifts of real estate held for more than one year are deductible for income tax purposes at 100% of the fair market value of the property on the date of the gift, which also avoids capital gains tax and reduces the value of your taxable estate. Other ways to give real estate include a bargain sale or a transfer to a charitable remainder trust which produces lifetime income for you and your family.
Life insurance
Do not overlook life insurance as an effective charitable giving tool, whether by naming your fund at RSFF as the beneficiary or, in the case of whole life policies, naming the fund as beneficiary and transferring the policy itself. If you transfer a policy, you may be able to make annual, tax-deductible contributions to the community foundation to cover the premiums.
Other “alternative” assets
We are happy to discuss your options for giving other non-cash assets to your fund at the community foundation, including oil and gas interests, negotiable instruments, cryptocurrency, artwork, and collectibles.
We look forward to working with you to explore all the options! Contact us at info@rsffoundation.org
The team at Rancho Santa Fe 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.
