Year-End Planning – Doing More with Your Giving

In a year defined by new challenges and complexities, donors committed to doing more in 2020. As this tumultuous year draws to a close, the Trust can provide an approach to year-end giving and planning for 2021 that prioritizes simplicity and maximizes impact. 

Explore Your Options for Effective Giving

Now is a good time to reflect on how well your charitable giving vehicle is working for you in meeting your goals. In 2020, Trust donors increased their grant making by more than 60% over last year, and donor advised funds (“DAF”) proved to be a particularly effective vehicle for giving.

DAFs allow for simple and effective grant making, and because fund dollars are already earmarked for charity, they can be immediately mobilized in times of greatest need. Trust donors can open a DAF with a minimum gift of $10,000 and begin making grants to their favorite charities. The Trust, meanwhile, invests the assets, provides administrative support and ensures IRS compliance.

The ability to respond quickly to urgent needs differs across giving vehicles. Specifically, private foundations may lack the flexibility and responsiveness of DAFs, depending on whether it’s formed as a nonprofit corporation or a trust. Accordingly, a private foundation’s board must follow the articles of incorporation and bylaws or the trust document. The process for making decisions outlined in those documents may make it difficult for the foundation to quickly respond in times of need. Further, private foundation directors and trustees must ensure they are providing the right oversight and conducting appropriate due diligence so that they are not running afoul of laws and regulations. With a DAF, this is handled by the Trust’s grants management team.

Our expert team is always available to answer specific questions about giving vehicles and help you determine the best solution. Our Gift Planning team and Philanthropic Advisors can help you convert a private foundation to a donor advised fund at the Trust, identify organizations to support, brainstorm ways to engage the next generation in philanthropy and help you think about your legacy giving goals.

More information about our DAF program and our revamped DAF application, can be found on our website.

Contribute Appreciated, Long-Term Capital Gain Securities

While many individuals and families experienced significant economic challenges in 2020, stock markets proved resilient, and some even saw record highs. That means that many donors may still have long-term capital gain property in the form of publicly traded stocks, mutual funds and ETFs that they can leverage for charitable giving. It may be the perfect time to consider a transfer of appreciated stock to support the Trust’s mission or into a DAF or other type of fund at the Trust.

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.

The Gift Planning team at The Chicago Community Trust is here to answer any questions about contributing publicly traded stock, mutual funds and other appreciated assets to the Trust. Making a transfer of securities is often a simple process, and information about gifting publicly traded securities to the Trust can be found on our website.

Review Your Retirement Plans

Year-end is also a good time to review your retirement plans, particularly this year because of two major pieces of legislation that impact Individual Retirement Accounts (“IRAs”) and 401K plans:  the SECURE Act and the CARES Act.

The SECURE Act – The Setting Every Community Up for Retirement Enhancement Act – which became effective on January 1, 2020, did the following:

• it increased the age for required minimum distributions (“RMDs”) from 70 ½ to 72; and
• it reduced the amount of time for payment of the balance of a retirement account from lifetime to 10 years, unless the beneficiary is a surviving spouse, minor child, disabled individual or other “eligible designated beneficiary.”

The CARES Act – The Coronavirus Aid, Relief, and Economic Security Act – which was enacted on March 27, 2020, temporarily suspended RMDs from Individual Retirement Accounts (“IRAs”) for calendar year 2020.

Both Acts create incredible opportunities for charitable giving with input from your professional advisor.

• Make your 2020 gift from IRA assets – Although RMDs are not required in 2020, you will be able to reduce the balance of your IRA and may be better off from a tax perspective than using your cash. Also, IRA rollover gifts can still be made so long as you are 70 ½.
• Make your future gift from IRA and 401k assets – For those who wish to leave the balance of their retirement accounts to someone other than their spouse, you may wish to create a testamentary charitable remainder trust or charitable gift annuity to extend the payout (and tax liabilities) from 10 years to lifetime.

Even if we ignore the legislative changes of 2020, leaving the balance of your retirement assets to charity and leaving other assets to friends and family makes good tax sense. Unlike family and friends, charities who receive the balance of traditional IRAs and other retirement assets pay no income tax on those gifts. Also, if you have a taxable estate, a gift of the balance of your traditional IRA or 401k provides the estate with an estate tax deduction.

If you or your advisor has any questions about making gifts from retirement assets or would like to learn more about our trustee services, please contact the Gift Planning team at The Chicago Community Trust.

Take the Next Step

We hope these ideas and themes are helpful in planning for the end of the year and beyond. With 2020 nearly behind us, and the promise of 2021 just around the bend, The Chicago Community Trust is here to help you think about your charitable giving goals and help you make a plan that meets your needs.

To start the conversation, contact Tim Bresnahan, Senior Director of Gift Planning, at tbresnahan@cct.org or 312-565-2832, or contact Don Gottesman, Director of Gift Planning, at dgottesman@cct.org or at 312-616-6141.