As the end of the year approaches, FJC CEO Sam Marks interviewed FJC Board Member, Neal Myerberg, Principal at Myerberg Philanthropic Advisors, who consults with charitable organizations, foundations and philanthropists. A transcript of the conversation, edited for length and clarity, is below.
Please note that FJC does not offer tax advice; any prospective donor should seek the advice of a qualified estate and/or tax professional to determine the consequence of his/her gift.
It’s a time of real uncertainty in the markets, with equity markets down for the year, plus rising inflation putting downward pressure on bond prices. At a time when many donors are seeing their portfolios decline, how should donors think about year-end giving?
There’s no question that investors may not be feeling as flush as they did in prior years. That said, long-term investors may still have capital gains from securities they bought many years ago. It’s worth asking the question to their tax attorneys or planning professionals.
It’s also good to remember that cash and appreciated stock aren’t the only assets that can be donated. FJC has accepted real estate, cryptocurrency, illiquid or lightly traded stock in advance of an IPO. These items can take a bit more lead time for be approved by FJC’s board committees, so I’d definitely encourage reaching out to Sam or Regina soon if people are looking to make these donations before the end of the year.
Are there any tried-and-true rules of thumb that philanthropically minded families should keep in mind, even in a down market?
Regardless of what the market is doing, it’s always a good time to plan. You might review your account documents and make sure that you have Successor Recommenders identified. And maybe it’s a good time to involve those successors—family members, the next generation—in your giving. Some donors engage in a family-wide “strategic plan” for their philanthropy. FJC encourages this and can even allow some or all of the costs of strategic consultants to be paid with funds in a donor’s DAF account.
For so many donors we work with, philanthropy is part of their legacy. Whether they are identifying beloved organizations for final distributions, or setting up a Board-designated fund to live on in perpetuity, FJC is really committed to meeting its donors where they are and creating a customized solution for them.
Could you offer one or two planning techniques that could be highly impactful for increasing our donors’ philanthropic capacity? Any little-known tactics that you wish more DAF account holders would consider?
FJC’s donors probably know that the Treasury Department has reinstated annual required minimum distributions for people who have inherited Individual Retirement Accounts. This is basically a reinterpretation of 2019’s Secure Act, which eliminated the “ten-year stretch”. In plain language, this means that under this change someone inheriting an IRA who does not fall into the category of exceptions has to take all Required Minimum Distributions (RMDs)–and pay taxes on them—within 10 years, instead of over their whole lifetime.
IRA owners that want their beneficiaries to receive benefits for life are interested in considering other alternatives. One solution may be to direct distribution of all or a portion of the IRA to a charitable remainder trust (CRT) after the lifetime of the IRA owner. The trust would be constructed to make fixed rate payments to one or more beneficiaries for life. Thus, the beneficiaries of the IRA owner would not be limited, as direct heirs of the IRA, to a ten-year payout. At the end of the term of the CRT when all beneficiaries have passed away, the remaining assets may be distributed to a family DAF for recommendations by the next family generation; e.g. the children or heirs of the lifetime beneficiaries of the CRT.
Anything you’d like to highlight about our ever-changing tax code?
While the estate and gift tax unified credit continues to increase year-by-year, the provisions governing annual increases will sunset at the end of 2025. Beginning in 2026, the unified credit will drop to approximately $6.2-6.5 million ($5 million base in 2010 indexed for inflation through 2025) or such amount as shall be enacted before then to govern estate and gift taxes from and after January 1, 2026. In addition, the maximum federal gift and/or estate tax rate may increase from 40% to 45%., Taking advantage of the current unified credit amounts ought to be considered in estate planning by the end of 2022 and over the following three years.