Greetings from the Community Foundation for Monterey County!

It is our honor to serve as your partner to help execute your clients’ charitable giving plans in the most tax-savvy, community-minded way possible. In this issue, we’re covering topics that are important to you and your clients as you kick off a new year.

• First, we’re offering suggestions for how to spot potential charitable planning opportunities for your clients.
• Second, attorneys, accountants and professional advisors are starting to hear questions that clients often ask about charitable giving as they are gathering information for their income tax returns. At the CFMC, we’re here to help answer questions on any charitable giving topic.
• Third, our team is constantly on the lookout for trends and developments in the newest tax laws that govern charitable giving. We’re sharing two of the latest topics that could impact the way you work with your philanthropic clients.
• Lastly, we cover the new Charitable Gift Annuity (CGA) rate increase and the new IRA QCD option for creating a CGA.

As always, the team at the CFMC is just a phone call or an email away to help you and your clients build charitable plans for 2024 to support the nonprofits that strengthen our communities.

Thank you for the opportunity to work together!

Christine

Christine Dawson

Senior Vice President Philanthropic Services (831) 375-9712 x126

If you’re not talking about charitable giving with your high net-worth clients, 2024 is the year to start! Below are three common scenarios and related opportunities for charitable giving solutions.

1.    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 CFMC, or maybe you helped a client structure a Qualified Charitable Distribution to a field-of-interest, scholarship fund, designated fund or Monterey County Gives!. As you speak with these clients, you may discover that they would like to update their estate plan to include a bequest to their fund at the CFMC, set up a charitable remainder trust with highly-appreciated stock or real estate, or proactively plan their charitable gifts for 2024 to get a jump on tax strategies.

2.    Clients whose stock portfolios have rallied: 2023 brought good news and record highs for the stock market. Giving appreciated, publicly-traded stock to charitable organizations is a highly effective tax strategy. These are typically eligible for an income tax deduction at the fair market value of the securities and your client does not pay capital gains tax. This is a win-win for your client and the nonprofit.

3.    Clients whose children have moved away: Remember that while the Foundation can help your clients maximize the impact and tax benefits of their local giving, the CFMC’s tools are also very geographically flexible. For example, 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.

The year is in full swing and many of your clients are already starting to gather tax documents and related paperwork for 2023 tax returns and 2024 planning. Now is a good time for advisors to review a few basic tax principles related to charitable giving. Here are two questions that are top of mind for many advisors, along with answers that can help you serve your clients.

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 the CFMC. It’s important 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, real estate and land). 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.

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 the CFMC) 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.

Here’s a recap of two key developments from last year that are worth keeping an eye on in 2024:

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.

Proposed Regulations

Proposed regulations issued by the IRS are not binding and often are revised–or even shelved or canceled entirely–before they go into effect. Still, the team at the CFMC is 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 ended mid-January and now the IRS will take time to review the comments. We won’t know anything definitive for quite some time, but for those who are interested, we like the detail provided in this podcast series on the topic. And of course, you’ll hear from us if/when the proposed regulations ever go into effect and what to do about it.

Donors over 65 years of age can receive a lifetime of payments in return for a contribution to Community Foundation for Monterey County. A charitable gift annuity (CGA) is a simple contract between the donor and the CFMC which offers fixed payments for life for donor and/or their loved one. The amount paid depends on the donor’s age at the time of the gift and is fixed for life. Some or all of the payment received each year is taxed as ordinary income. Upon the donor’s death, the remainder of the gift creates an endowed fund to benefit the CFMC or nonprofit(s) of the donor’s choice. Rates increased on January 1, 2024 and range from 5.7% at age 65 to 10.1% for those 90 and above.

New – IRA Qualified Charitable Distribution (QCD) can create CGA

Donors who are at least age 70½ at the time of the gift can make an IRA QCD to contribute to the CFMC to benefit the nonprofit of their choice. Donors pay no income tax on a QCD, which does count toward the Required Minimum Distributions (RMD) from their IRA without creating taxable income. Under a new law effective in 2023, some donors over 70 ½ can make a QCD in exchange for a CGA. There are some rules and limitations:

• Donors can exercise this option only once during their lifetime.
• There is an aggregate limit of $53,000 for 2024.
• The entire payment received from your charitable gift annuity will be subject to income tax.
• The donor’s spouse can be included as a recipient of the annuity payment.
• There is no income tax deduction for this contribution, although there is no tax on the QCD either.

We have many useful resources on our website for engaging with your clients on topics of charitable giving, including a planned giving center and memorandum of charitable intent (MOCI).

The team at CFMC is pleased to be a resource and sounding board. We understand the charitable side of the equation and are happy to help you find the best solutions to meet your clients’ needs. Please contact Cecilia Romero, Director of Gift Planning, at or (831) 754-5880 x124 if we can be of assistance.

This useful guide covers many ways donors can give during their lifetime or through their estate including:

• Donor Advised Funds (DAFs)
• Gifts of Real Estate or Appreciated Stock
• Charitable Remainder Trusts & Charitable Gift Annuities
• IRA Qualified Charitable Distribution (QCD)

View or download a copy or contact contact us for additional copies for your clients.

This newsletter is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.

To inspire philanthropy and be a catalyst for strengthening communities

throughout Monterey County