Amid a declining stock market, rising interest rates, and spiking inflation, many people may feel that they have less to give this holiday season. And yet, economic turmoil also contributes to greater needs in our communities and the nonprofits that serve them.
The good news is that challenges often yield creative solutions. Donors—particularly those considering assets beyond cash—don’t need to make trade-offs in their desire to give generously this season. Below, we offer a few approaches to consider in your end-of-year giving.
Don’t Write Off Stocks and ETFs
Public markets in 2022 have taken a beating. But take a step back and look at a longer time horizon, and you may realize that things are not as gloomy as the headlines suggest. For example, the S&P 500 is down about 16 percent year to date. However, over the decade leading up to 2022, the S&P 500 averaged annual returns of approximately 14.5 percent.
If you’ve been invested in the markets for the last decade or more, there is still a strong chance you have appreciated publicly traded securities that are perfect for charitable giving. As we’ve discussed previously, there is a double tax benefit that comes with making a charitable gift of appreciated securities, as you can eliminate capital gains taxes and get a charitable deduction equal to the fair market value of the gift.
You can access our suite of fact sheets to learn more about the benefits of giving non-cash assets. The Trust gift planning team is always available to work with you and your trusted financial advisors in meeting your charitable goals.
Explore a Charitable Remainder Trust
A rising interest rate environment can be a great opportunity to consider a split-interest gift, specifically charitable reminder trusts. A charitable remainder trust (CRT) is a trust that makes annual distributions to you or someone else of your choosing for a period of time, and at the end of the trust term the remainder comes to The Chicago Community Trust. When the applicable federal rate, or AFR, goes up the value of the remainder coming to the Trust rises, which means the deduction that a donor gets when a CRT is funded increases.
CRTs represent the best of both worlds, as they can provide a stream of income to you or a loved one, as well as supporting the Trust and our work to make Chicago a thriving and equitable region for all.
In some instances, the Trust can serve as trustee for a CRT, making the management of the trust simple and efficient. To learn more about CRTs and how we can help, contact Don Gottesman at dgottesman@cct.org.
Think About Your Long-Term Impact
While donors may not be in a place to make outright gifts at the same level as they did in 2020 and 2021, they may be in a strong position to consider legacy giving through their estate plans. Here are some practical approaches to giving in the long term:
Now is a great time to review beneficiaries for your retirement accounts and consider naming The Chicago Community Trust as a beneficiary. Estate gifts are essential to our ability to serve the Chicago region in perpetuity and don’t require you, as the donor, to forgo any assets during life.
If you have a paid-up life insurance plan that is no longer needed, consider transferring ownership to the Trust. Individuals will often take out life insurance policies to provide financial support for their children and families during income earning years. If you opened such a policy and it is no longer needed, it can be a valuable charitable giving tool.
If you have a donor advised fund (DAF) with the Trust, now is a great time to review your succession plan with your philanthropic advisor. Some or all of your DAF can be used to create an endowment at the Trust that will make grants to organizations that you care about in perpetuity or for a specific period of time.
If you want to learn more about ways to maximize your charitable impact through your estate, contact your philanthropic advisor or Tim Bresnahan, Senior Director of Gift Planning, at tbresnahan@cct.org.
