In a recent episode of our Wealth Matters radio show, Gaslowitz Frankel partners Craig Frankel and Robert Port met virtually with special guests Christy Butler Eckoff, Chief Foundation Officer and Managing Director of the Atlanta Jewish Foundation, and Randy Gorod, President and CEO of Pisgah Consulting, to discuss philanthropic trends they’ve seen in 2020 and predictions for best practices in 2021.
Here are some highlights from their conversation.
Philanthropic Trends, Predictions, and Best Practices in 2020.
1. People Will Continue to Give
In 2018, right after the Tax Act had been passed, Christy admits she thought there would be a $20 billion reduction in charitable giving, but that did not happen. Instead, the 2019 rate of charitable giving actually increased by 2.4%.
“We learned that, no matter what, people will continue to give because they care,” said Christy. “What we have seen, though, is that most of the charitable giving is now coming mostly from individuals with more wealth since they have the greatest tax advantage. However, we have seen a bit of a drop-off of donations from individuals with moderate-low income.”
2. An Increase in the Number of Donor-Advised Funds
Donors can use vehicles like donor-advised funds to gather together charitable deductions in one year that someone may be able to take on their taxes. These donors bunch their donations from one year into a donor-advised fund and then continue giving at their usual rate without worrying about tax consequences and deductability.
“The biggest transfer in philanthropy has been from individuals to their donor-advised funds to support small foundations, “ says Randy. “These are the people who want to be philanthropic — they are putting the money here to support other organizations; it’s not like a financial investment for their own portfolios.”
So, what is a donor-advised fund?
Essentially, it allows you to make charitable contributions into a specified fund called a “sponsoring organization fund,” and take an immediate tax deduction. That money is then invested and donated in the future.
“With us (the Atlanta Jewish Foundation), all you have to do is go onto an online portal,” says Christy. “When you want to make a donation, click on the charity you want to give to, determine the amount, press the button, and we send the money to the charity on your behalf.”
3. Giving Assets, Not Income
Nonprofits are also encouraging people to give assets rather than income. 80% of the average person’s wealth comes from their assets, like stocks and bonds or the ownership of a business. Smart nonprofits now seek asset-based donations rather than a percentage of an individual’s income.
For example, let’s say you have Coca-Cola stock that you bought 20 years ago for $100/share, which is now worth $10,000. If you sell that stock and then contribute the proceeds to a nonprofit, you have to pay capital gains tax and net investment income tax on it. Your donation will lose 30-35% of its valuein taxes. However, if you give the stock directly to the charity or donor-advised fund, you take a charitable deduction for the full $10,000 and contribute that entire amount.
“Unfortunately, not many charities and nonprofits have staff or board members who understand this concept,” says Randy. “They still believe that fundraising is all about throwing this big gala, which sure, it was about that before 2020, but certainly this year showed us that you should NOT rely on having events like that to bring money in.”
For more tips on maximizing your charitable donations at the end of 2020 and beyond, check out the full episode of “Wealth Matters” here.
Gaslowitz Frankel LLC is the Southeast’s premier fiduciary litigation law firm. Our legal team specializes in all aspects of fiduciary disputes representing individuals, executors, trustees, investors, shareholders, and corporate fiduciaries in complex fiduciary disputes involving wills, estates, trusts, guardianships, and businesses. Contact us today to book a consultation.
