For clients who may sell a business, the time to think charitably is right now

For clients who may sell a business, the time to think charitably is right now

Business owners who’ve enjoyed summertime’s more relaxed energy can deservedly daydream about the “extended vacation” that comes with selling the business!

While it all sounds good, business brokers will tell you that many business owners fail to optimize—and they sometimes even compromise—the value of their business’s proceeds by rushing the process, hastily determining an asking price, or not fully assessing the value of their business to a potential buyer. In their haste, owners often miss strategies that can deliver an improved post-sale result and a true reward for their years of work.

The Community Foundation can be a valuable resource as you guide a business owner client through a pre-sale preparation process. This is especially true for a business that has operated for many years and has accumulated significant unrealized capital gains in its valuation that are likely to be heavily taxed at the time of the sale.

Many closely-held business owners and their advisors may not be fully aware of the advantages of giving shares to a donor-advised fund at The Community Foundation well in advance of any external discussion about a potential sale of the business. With prudent planning, the gifted shares will be free of capital gains at sale time, allowing the proceeds to flow into the donor-advised fund, ready to be deployed to meet the business owner’s charitable goals. The business owner also benefits because they’ve reduced the value of their taxable estate. This can have huge repercussions given the anticipated reduction of the estate tax exemption slated for 2025.

Remember that it will be important to secure a proper valuation of the business at the time the business owner makes a gift of shares in order to comply with IRS requirements for documenting the value of the charitable deduction.

Critically important to successfully executing this strategy is to ensure that your client avoids even any preliminary discussions about sale, let alone negotiations, before consulting with advisors, including looping in The Community Foundation early on. Otherwise, your client might get caught in the IRS’s step-transaction trap, a risk with any pre-sale gift to charity of real estate, closely-held stock, or other alternative asset. Definitely, the devil is in the details!

By the way, if you routinely advise owners of closely-held businesses, and if you like to go deep into tax law, you might enjoy reviewing the issues related to the business itself supporting charitable causes, totally unrelated to its eventual sale.

Please reach out to The Community Foundation team if a business owner client would like to explore the idea of potentially giving a portion of the business to a donor-advised fund or other type of fund at The Community Foundation. We can work alongside you and the client to help optimize the exit and maximize the resulting proceeds.

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

Making it fun: Tips for teaching children about philanthropy

Making it fun: Tips for teaching children about philanthropy 

Over the years, you’ve probably taught your young children, grandchildren, nieces, and nephews lessons along the lines of “share and share alike” and “better to give than to receive.” But how do you transition these lessons into more concrete instruction about charitable giving, without risking the youngest members of your family becoming overwhelmed or bored? And how can you make those lessons effective as children grow older?

To inspire teenagers and young adults, consider tapping into an increasingly popular topic among younger generations, which is the notion of “purpose.” “Finding one’s purpose,” in the context of both personal lives and careers, is also a concept that can unite generations within a single family. The overarching purpose of giving can be framed as making the world a better place or strengthening the community. This translates nicely for youths who are seemingly always asking, ”Why?”

Teaching young children about philanthropy can be a little trickier. Indeed, many donors and fund holders at The Community Foundation have expressed an interest in learning how to do this. Here are a few principles that might help. And, as always, reach out to the team at The Community Foundation for ideas related to your own particular situation.

Positive reinforcement is a must.

As with any successful learning experience, positive reinforcement is a must in teaching the values of charitable giving. In particular, you may want to consider reinforcing that every charitable gift is good regardless of the profile of the giver, the size of the gift, or the nature of the recipient. Positive reinforcement in charitable giving is effective because it first engages the charitable giver’s own understanding of what it means to be philanthropic—from the giver’s own perspective–even if that giver is very young. So when your school-age children or grandchildren are raising money for a charity through a school fundraiser, throwing coins into a fountain to support a local children’s hospital, or donating gently-used toys and clothing, make sure you let the child know that these gifts really do make a difference.

Charitable giving can be defined expansively and inclusively.

When you’re talking with a 10-year-old, conversations about giving back are most productive when they go well beyond discussions about big checks written to highly-visible organizations. You may find it helpful in your conversations to cast a wide net around the definition of what it means to be charitable, often including things like adopting an older dog who needs a home, turning off lights to help the environment, cooking dinner for neighbors in need, helping to pay a family member’s medical bills, and recycling aluminum cans. Your enthusiasm during the conversation will be contagious as you convey the opportunities. The world is full of good deeds waiting to be done!

Tap into what the child cares about.

How do you know what charitable causes might inspire the young children in your life? Ask! You’re likely to hear things like animals, moms, friends, family, trees, school, reading and writing, having a home, finding missing people, helping to rescue victims of natural disasters, and having clean air and water. Any one of these elements gives you a fantastic opening for further dialogue, especially when you start that conversation based on the lens through which children see the world in their everyday lives and identify the needs within it. Charitable giving opportunities are abundant!

Understand that children have a power and direction all of their own.

Even 10-year-olds these days are assertive, aware of news and world affairs, and most importantly, digital natives. They like to figure things out on their own. With the tiniest bit of guidance and a lot of encouragement, their ideas go a long way. Let a child’s interests guide your lesson on giving. You do, however, have a strong power of suggestion as an adult. Kids do not necessarily know how to find the exact names of charitable entities, and they certainly do not know what “501(c)(3)” means, but they remember a place after they’re told it does lots of good for people.

Keep it short and keep it mutual.

The children in your life are brilliant, wonderful, and perceptive, but they do have short attention spans. Make the lessons informal, spontaneous, and flexible, and create plenty of opportunities for storytelling and game time. Children have a story for everything, and they love to share. Let them talk about how they feel. Let them tell you how, where, and why they want to give.

Take action! 

Finally, don’t just talk–take action! For children with a grasp of money, charitable values can be taught through allocations. For the youngest, that may be from a weekly allowance or earnings from performing household chores. For the more experienced, allotments can come from after-school or summer job earnings. Giving can be highly interactive or participatory. For example, parents can show children the causes they support or suggest potential grantees based on the child’s interests, and let them choose. Parents can also show them how a gift can be easily made from the family’s donor-advised fund at The Community Foundation, which offers many benefits and can often be named to include names of the child or children.

At The Community Foundation, we’re here to help your family–even its youngest members–convert ideas into reality for the causes they care about the most.

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

Recognition or anonymity: Which one’s for you?

Recognition or anonymity: Which one’s for you?

The Community Foundation is committed to working with you and your family to fulfill your charitable goals, whether those goals relate to making an impact, leaving a legacy, saving money on taxes, expressing gratitude, or a combination of objectives. If you have not yet established a fund at The Community Foundation (and even if you have!), it might interest you to know that a donor-advised fund or other type of fund not only offers flexibility to meet your giving goals, but also gives you options for recognition or anonymity, depending on your goals and preferences.

Many philanthropic individuals and families appreciate–and sometimes even seek–recognition for gifts to their favorite charities. In addition to feeling appreciated, donors give publicly for many other reasons, including knowing that their names can lend credibility to an organization and that their gifts can serve as an inspiration to other donors. The team at The Community Foundation also understands the perspectives of nonprofit organizations about anonymous giving. This means we can help you navigate your relationship with a favorite charity, which in turn allows us to help ensure that your intentions are achieved and the nonprofit’s mission is supported in the way you envision.

The Community Foundation carries out your wishes for recognition in a variety of ways. When you recommend grants to your favorite charities from your donor-advised fund, for example, The Community Foundation’s team typically will issue the grant checks to the charities noting that the gift is from your fund so that you receive the recognition. Sometimes, though, our fund holders have good reasons for wanting their support to be anonymous, whether because of modesty, religious convictions, avoidance of unwanted solicitations, or wanting to keep the focus on the charity.

Whatever the reasons you might prefer to give anonymously, whether from time to time or across the board, The Community Foundation respects your wishes and can help in a variety of ways.

–First and foremost, our team will listen intently to understand your charitable goals and interests and make sure that we are structuring your donor-advised fund, other type of fund, or series of funds to achieve your charitable giving and family philanthropy goals. Indeed, some individuals and families set up multiple funds to serve different needs, including the desire for anonymity for a portion of their giving but not all. Our team will be sure to ask clarifying questions to determine how best to structure your charitable funds to achieve your desired level of recognition. Do you prefer anonymity for every grant? Is there a threshold amount where smaller grants can be acknowledged? Does the restriction apply only to a public disclosure by the grantee, but the grantee organization is itself aware? We know these discussions can be delicate.

–You may wish to recommend that certain grants (but not all grants) from your fund be issued anonymously. The Community Foundation offers the ability to opt in to anonymity on a grant-by-grant basis. Also remember that no solicitations will flow directly to you; The Community Foundation handles all correspondence related to grants to nonprofits made from your fund.

–Remember that you can establish a donor-advised fund under a nondescript, less identifiable name, perhaps one that is generic sounding or honors ancestors who may have “seeded” the fund through a prior generation’s wealth transfer or inheritance. For example, you can select a name for your fund that is something less obvious than your own name. Instead of the “Sam and Vera Barker Fund,” for instance, you could name the fund the “SVB Fund,” “Desert Family Legacy Fund,” or something else. When The Community Foundation sends a grant check to a charity from your fund based on your wishes, the charitable recipient will see only the name of the fund, not your name.

–As always, with any fund (whether some or all of the grant making is anonymous) The Community Foundation’s code of ethics and operating principles mean that our team follows and enforces strict confidentiality. For example, we are careful about visibility and accessibility of donor information even internally, and we adhere closely to permissions and protections within the donor database.

–Finally, The Community Foundation does not disclose information about you or your fund to any third party, nor is detailed information available through a Form 990 filed with the IRS.

At The Community Foundation, we’re here to serve the greater good. We welcome all conversations about giving, and we gladly strive to honor the charitable giving preferences of our donors and fund holders to the fullest extent allowed by law.

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

Private foundations and donor-advised funds: Debunking three myths

Private foundations and donor-advised funds: Debunking three myths

If you’ve been involved with charitable giving for a few years, you’ve no doubt become familiar with both private foundations and donor-advised funds and their popularity as charitable giving tools. As is often the case with tax and estate planning-related topics, the differences between private foundations and donor-advised funds are sometimes the subject of confusion and misunderstanding.

As you work with your advisors and the team at The Community Foundation to establish your immediate and long-term charitable giving plans, take a few minutes to check out how to debunk these three common myths.

Myth #1: Donor-advised funds are all the same and only private foundations can be customized

Private foundations will always differ from donor-advised funds in important ways not only because of their status as separate legal entities and the deductibility rules for gifts to these entities, but also because of the opportunities to customize governance. But it is a mistake to think that a donor-advised fund is a cookie cutter vehicle. Indeed, “donor-advised fund” is simply a term used to specify the structure of a fund and its relationship with a sponsoring organization such as a community foundation. The donor-advised fund vehicle itself is extremely flexible.

  • Donor-advised funds are popular because they allow a donor to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. The donor can recommend gifts to favorite charities from the fund when the time is right.
  • A donor-advised fund at The Community Foundation is frequently a more effective choice than a donor-advised fund offered through a brokerage firm. That’s because, at a community foundation, you and your family are part of a community of giving and have opportunities to collaborate with other donors who share similar interests.
  • The Community Foundation can work with you and your family on a charitable giving plan that extends for multiple future generations. That is because the team at The Community Foundation supports your family in strategic grant making, family philanthropy, and opportunities to gain deep knowledge about local issues and nonprofits making a difference.

As you explore the many opportunities to deepen your work with The Community Foundation, consider the unique mix of flexibility and services available to you and your family when you establish a donor-advised fund.

Myth #2: Deciding whether to establish a donor-advised fund or a private foundation mostly depends on size

The size of a donor-advised fund, like the size of a private foundation, is unlimited. The United States’ largest private foundations are valued well into the billions of dollars. (Information about private foundations, ironically, is not so private. The Internal Revenue Service provides public access to private foundations’ Form 990 tax returns. That is not the case for individual donor-advised funds.)

Similarly, donor-advised funds are not subject to an upper limit. Although information on the asset size of individual donor-advised funds is not publicly available, anecdotal information indicates that some donor-advised funds’ assets may total in the billions of dollars.

Indeed, a donor-advised fund of any size can be an effective alternative to a private foundation, thanks to fewer expenses to establish and maintain, maximum tax benefits (higher deductibility limitations and fair market valuation for contributing hard-to-value assets), no excise taxes, and confidentiality (including the ability to grant anonymously to charities).

The net-net here is that the decision whether to establish a donor-advised fund or a private foundation–or both–is much less of a function of size than it is other factors that are more closely tied to the objectives a donor is trying to achieve.

Myth #3: Donor-advised funds and private foundations are mutually exclusive

Many philanthropists and their advisors are aware of the many benefits of using both a donor-advised fund and a private foundation to accomplish their charitable goals. For example:

  • Donor-advised funds can help meet the need for anonymity in certain grants, which is typically difficult using a private foundation on its own.
  • A donor-advised fund can receive a family’s gifts of highly-appreciated, nonmarketable assets such as closely-held stock and real estate, and benefit from favorable tax deduction rules not available for gifts to a private foundation.
  • An integrated donor-advised fund and private foundation approach can help a family balance and diversify its investment and distribution strategies to ensure that giving to important causes remains steady even in market downturns.

Some private foundations are even considering transferring their assets to a donor-advised fund to carry on the foundation’s mission. Terminating a private foundation and consolidating giving through a donor-advised fund is sometimes the best alternative for a family when the day-to-day management and administration of the private foundation has become more time-consuming than expected and is taking time and focus away from nonprofits, the community, and making grants. In addition, some families find that the tax rules related to investments, distributions, and “self-dealing” have become harder to navigate and are perhaps even preventing the family from maximizing tax benefits of charitable giving. Finally, the administrative load of managing a private foundation sometimes becomes overwhelming, especially if the family members who handled these functions initially have retired, passed away, or simply become busy with other projects.

 

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

Disaster giving: Perspectives for your clients

Disaster giving: Perspectives for your clients

Both the recent one-year anniversary of the start of the Ukraine conflict and the earthquake that has devastated Turkey and Syria are causing more and more people to explore ways they can help. In an era of abundant giving methods and (sadly) potential fraud, The Community Foundation is a source of reliability and expediency to help your clients act on their charitable instincts.

Disaster giving frequently takes the form of a wide-ranging response, given that disasters can occur suddenly or over time, domestically and internationally. The damage can be heart-wrenching, such as loss of life and property destruction, or health-related, like Covid that has swept the globe. The urge to help is often immediate.

There are many viable options for your clients to activate their generosity toward relief efforts, but there are also caveats. While global disaster giving is important, it is also important for clients to stay tuned to the most critical needs right here in our community. Although these critical needs do not always take the form of a time-bound disaster, the impact of ongoing crises such as low access to health care and poverty can be quite damaging over the long term.

 

What is disaster giving?

Although challenging to pinpoint holistically, what’s typically referred to as “disaster giving” is perhaps best thought of as a subset of what has been a robust philanthropic climate in recent years. In 2021, Americans’ charitable giving reported by Giving USA was up 4% over 2020 to nearly $485 billion. Certainly the strong percentage increases in the categories of Human Service, Public-Society Benefit (up 23%, the second-highest percentage gain) and Health all likely involved Covid-related concerns and sentiments.

An emerging area of challenge may be annual giving to international affairs, which declined approximately 5% from 2019 to 2021, finishing at $27.4 billion. Of course, these figures could change for 2022 when accounting for aid to Ukraine (and in future reports, to Turkey and Syria). As context, through February 2023, U.S. government aid to Ukraine has exceeded $75 billion, including 40% for humanitarian and financial purposes and the remainder for the military. Philanthropy also contributed to humanitarian needs; the 10 largest private donations, led by Microsoft, totaled more than $1.2 billion.

 

How The Community Foundation can help

The Community Foundation can help your clients fulfill their giving instincts by acting as a secure, knowledgeable, and trustworthy facilitator. Our team personally knows–and regularly vets–hundreds of charities every year, and we can help you and your clients navigate the options for both local and international giving.

Frequently, a donor-advised fund at The Community Foundation will be a suitable giving vehicle for your clients. Our team can help connect your clients to the causes they care about by identifying the most effective organizations addressing the critical needs both locally and globally in your clients’ areas of interest. Working with The Community Foundation also helps your clients secure robust tax planning benefits that can be missed when a client gives to charity on an impulse.

Finally, The Community Foundation can help your clients steer clear of scams perpetrated via familiar-looking but sham websites and QR codes, both of which proliferate during highly emotional or threatening times surrounding a disaster. While your clients may be tempted to make a gift online or by phone out of compassion in response to a verbal solicitation or a news story, remind them that The Community Foundation has much to offer—safely, securely and advantageously—when it’s time to make impactful humanitarian gifts both here and abroad.

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

Another Anonymous Donor Challenges Donations for COVID-19 Fund

The Community Foundation and The United Way of Harrisonburg and Rockingham County are pleased to announce a second anonymous gift of $20,000 from a generous community member. The donor states, “Now is the time to give to support members of our community who have lost their jobs and don’t have a savings account to fall back on”. The donor encourages others to give and is offering this gift as a challenge. The donor will provide a dollar for dollar match, up to $20,000 for new gifts given to the COVID-19 Harrisonburg Rockingham Community Response Fund which means this could be an additional $40,000 to this Fund. The Community Foundation received and met its first $20,000 challenge from another generous anonymous donor. With both of these gifts, an additional $80,000 can be raised for our community.

“We are very grateful to both anonymous gifts and for each contribution that has helped us exceed the first challenge. To date the funding has been granted to local nonprofit organizations that are focused on basic essentials, access to food and access to safe shelter.  It has provided funding for nutrition drinks for the elderly, food supplies for those in need, vehicle repairs and gas cards for working low income individuals, hygiene items, rent assistance, and financial assistance to shelters for hotel bills for clients who need to be quarantined.” – Revlan Hill, Executive Director of The Community Foundation.

The Community Foundation of Harrisonburg and Rockingham County and the United Way of Harrisonburg and Rockingham County announced a joint partnership to raise funds for the COVID-19 Harrisonburg Rockingham Community Response Fund. Gifts may be mailed to The Community Foundation at PO Box 1068, Harrisonburg, VA 22803, or given online at tcf-stage.stage3.estlandhosting.com/.

GreatCommunityGive 2020 postponed until June

The Community Foundation of Harrisonburg & Rockingham County has announced that the Great Community Give, slated for April 22nd has been rescheduled for June 24th, 2020.  The GCG2020 Planning Committee considered as much relevant information as possible to unanimously agree that delaying the event was necessary.

“We have to give consideration to minimizing health risks to the nonprofit staff and volunteers until COVID-19 cases begin to subside. GCG uses countless volunteers on the day of the event.  While the giving occurs online, it is also a social occasion on many levels.   For the purposes of planning, we have chosen June 24th as an optimistic date and hope it turns out to be the case. “– Revlan Hill, Executive Director of The Community Foundation.

“Although a difficult decision, postponing the event is best for everyone. We feel we can have more excitement and enthusiasm by gathering again as groups.  We believe the Great Community Give will be more successful for the nonprofits and less risky for health reasons later in June.  We owe it to the nonprofits to help them raise the most money we can” – Amanda Bomfim, Program Officer, The Community Foundation of Harrisonburg & Rockingham County.

The Great Community Give is in its third year as a community-wide day of online giving to 100 local nonprofits. The Planning Committee hopes that in moving the date, the goal of raising $600,000 for local nonprofits can be achieved. Planning for GCG2020 will continue through the new date of June 24.

 

In the meantime, The Community Foundation is actively encouraging donors to remember nonprofits in this time of social-distancing requirements and will continue its grant making to nonprofit organizations. Efforts to support nonprofit organizations during the COVID-19 crisis are ongoing. The Community Foundation and United Way of Harrisonburg and Rockingham County have jointly announced the establishment of the COVID-19 HR Community Response Fund. Grants from the fund will help support front line human services organizations that have deep roots in Harrisonburg and Rockingham County and strong experience working with those vulnerable in our community.

 

“We encourage everyone to write a check or go online and give to your favorite community based nonprofit organization today.   Our community is well known for its generosity of giving and we don’t have to wait for the Great Community Give on June 24th to make that contribution.   “– Revlan Hill, Executive Director of The Community Foundation.

 

Please contact Amanda  Bomfim at 540-432-3863 or amanda@tcfhr.org for information and interviews.  To learn about Great Community Give, visit www.greatcommunitygive.org