Giving appreciated stock to charitable organizations is a highly-effective tax strategy. During years when highly-appreciated stock is in short supply, however, implementing this strategy may be easier said than done. 

This is when donor-advised funds come in especially handy. Now is the time to discuss charitable giving with those clients who regularly added to their donor-advised funds throughout the market’s long bull run. If these clients intend to ride out today’s market conditions in their personal portfolios, this year’s bear market doesn’t mean the clients’ year-end charitable giving has to take a hit. These clients can use their donor-advised funds to support their favorite organizations, sometimes even at levels consistent with prior years. 

For other clients, this may be a year to consider contributing cash to a donor-advised fund instead of donating highly-appreciated stock (which has been the go-to gift for so many of the last several years). Gifts of cash could reduce the burden on a client’s personal stock positions that may have fallen in value dramatically, giving these positions more time to recover value and, at some point in the future, be contributed to a donor-advised fund at a higher value (thereby resulting in a higher tax deduction for the client). 

Finally, consider encouraging your clients who’ve not yet established donor-advised funds at the Community Foundation to consider doing so now. Not only does a donor-advised fund help organize charitable giving, but over the long term it can also protect a client’s ability to support their favorite causes even when market conditions are rough.

The team at the Community Foundation is always happy to help your clients maximize both the philanthropic and financial elements of their charitable giving strategies. We look forward to hearing from you.

Meet professional advisors who partner with the Community Foundation to meet their client’s charitable goals – and who also have their own funds with us.

Eric Hutchinson, vice president of Goldman Sachs, is a local professional advisor we work with to serve his clients. Hutchinson served on the Community Foundation’s state board starting in 2013, which included nine years as Finance Committee chair. We are so grateful for his leadership and service to the Foundation. He and Donna, his wife of 51 years, established the Hutchinson Family Endowment with the Community Foundation of Faulkner County. We are excited to get to know Eric better through our Q&A series and shine a light on important contributors like him to the Foundation:

What is your favorite nonprofit in Arkansas and what drew you to their mission? How did you hear about them?

Without question, my favorite charity is Arkansas Community Foundation. I like that there are so many opportunities to give to causes that are important to our family, all through a single resource. Plus, the Community Foundation provides help to identify needs in the community and to vet the charities serving those needs. This allows us to give with confidence that our dollars will be productively employed. I first heard about the Foundation hearing then CEO Pat Lile speak at an event. Pat inspired me to learn more and when we learned what was possible, we established a family fund. Our family fund serves as a giving vehicle for our family and as a teaching vehicle for our grandchildren to learn about philanthropy.

What inspires your family to give?

We have been teaching our children and grandchildren to be sensitive to needs they see in the community. We honor their awareness by finding and giving to charities to support the causes they find important.

How did you get involved in charitable giving? 

Both my wife and I grew up with parents who were giving-oriented and taught us the importance of giving back to the community and sharing our blessings. We always wanted to give and the Foundation provided a more convenient way to accomplish our giving goals.

What do you enjoy doing in your spare time?

My wife and I love to travel and have been blessed to visit many wonderful places all over the world. We have shared this love of travel with our children and grandchildren through regular family trips designed around experiences that will enhance their world view.

What has been your most valuable lesson in life?

Probably the most important lesson I ever learned is that I am 100% responsible for my life. If something doesn’t about my life doesn’t suit me, it is up to me to make it right.

What question do you wish you got asked more?

I love travel and have learned much on those travels. I love to talk about those experiences and relive them as I tell about them. 

If you had a chance to have a meal or conversation with someone, living or dead, who would it be? Why?

Jesus Christ. No one human being has had more impact on the world than Jesus and it would be amazing to learn more about his human experience.  How he developed, how he learned and grew as a human being. I also wonder about how he felt about his ministry and his call to impact the world. Eric is from Searcy and currently resides in Conway, Arkansas. He and Donna have one living child, Amy Huett. Amy is a PhD Nurse and serves as the Director of Nursing Excellence at Arkansas Children’s Hospital in Little Rock. She has three children: Katie Huett is a junior at the University of Arkansas in Fayetteville studying nursing. Nicholas Huett is a freshman at the University of Arkansas in Fayetteville studying criminal justice. Eric Huett is a sophomore at Greenbrier High School and rising football star. 

You’ve no doubt noticed that donor-advised funds have been featured more prominently over the last few weeks in financial and wealth management publications. That’s in part because the Accelerating Charitable Efforts Act was reintroduced in the House of Representatives on February 3, 2022. The legislation contains the same proposed law changes as the bill introduced in the Senate in July 2021, which stalled. 

Portions of the bill are designed to address concerns that donor-advised funds are not required to make distributions to charities according to any timeframe or monetary level. The ACE Act proposes to create four new categories of donor-advised funds, each with different tax consequences to the donor.

Donor-advised funds are excellent charitable planning tools for many situations, including for individuals and families who want to organize a regular stream of giving to community organizations and unlock illiquid assets to do so. Indeed, the proposed legislation recognizes special categories of donor-advised funds established at community foundations, referred to as Qualified Community Foundation Donor Advised Funds, which are treated favorably for tax deduction purposes.

We’re tracking closely the various conversations surrounding this proposed legislation, including a proposal by some community foundations that calls for a five percent aggregate minimum payout and other measures to address concerns while also maintaining the characteristics of donor-advised funds that motivate more charitable giving overall, especially as Millennials catch on to this particular vehicle to fund their charitable priorities. 

As with any proposed legislation, no one can predict whether or when new laws impacting donor-advised funds will be enacted, and if they are, what parts of the proposed legislation will be included in the version that becomes law. What we can tell you, though, is that we are watching this legislation very carefully, on a daily basis, just as we do with any proposed legislation that could significantly impact your clients’ charitable giving strategies. You will hear from us if changes are enacted. In the meantime, please reach out with questions. 

Potential legislative changes aren’t the only choppy waters as 2022 gets into full swing. Charities are impacted by inflation, and your clients may wish to take that into account in their charitable giving plans for 2022. Certainly as your clients’ purchasing power dips, so does their ability to make charitable contributions. But, it’s possible that the charities your clients love to support are feeling the sting to an even greater degree. This might sway your clients toward maintaining–or even increasing–their historical charitable giving budgets and perhaps even adjusting those budgets for inflation. Be mindful, though, that even the possibility of inflation can have a significant psychological effect on your clients, impacting everything from their confidence as consumers to attitudes toward (and longing for??) Girl Scout Cookies.

The team at the Community Foundation has decades of experience working with advisors and donors through economic ups and downs. We’re happy to be a sounding board as your clients evaluate whether and how to adjust their charitable giving in 2022, especially in cases where establishing a fund at the Community Foundation can help achieve both a client’s and a charity’s objectives. 

We often hear from our  fundholders that one of the reasons they love working with the Community Foundation is because the foundation is truly the community’s foundation. Whether a family has established a multi-million dollar field-of-interest fund or a donor advised fund to organize a few thousands of dollars of annual charitable gifts, the family knows that they have full access to the Community Foundation’s charitable giving expertise and deep knowledge of the needs in our region.

This is part of the reason we find it so heartwarming to see a focus on altruism appear in the mainstream media. When people from all walks of life can share in the joy of philanthropy, everyone wins. 

Here are a handful of stories we’ve particularly enjoyed that are worth checking out if you happened to miss them.

–Yvon Chouinard, Patagonia’s founder, and his family have just given their ownership of the company to charity by establishing a group of trusts and nonprofits.

–Here in Arkansas, our very own Dr. Omar Atiq made news when he forgave thousands of dollars of medical debt.

–And business leaders aren’t the only people who are increasingly publicizing their charitable giving commitments. More celebrities are sharing their stories of charitable passion, too.

We look forward to hearing your thoughts on these and other stories as philanthropy pops up in your news feed. The community foundation is here to answer your questions and provide the tools you need to activate your charitable intentions in a concrete, meaningful, and tax-savvy way. 

Bear markets aren’t much fun for anyone. But that doesn’t mean your charitable giving commitments have to be put on hold. If you are like many donors, you are still looking for ways to support the organizations you care about that rely on your support to achieve their missions.

Remember, not every stock is down. It’s still incredibly tax-efficient to donate highly-appreciated stock to your fund at the Community Foundation. When you give appreciated stock held for more than one year (a long-term capital asset) to your donor-advised or other type of fund, instead of selling it outright, the capital gains tax is avoided. Plus, marketable securities are typically deductible at their fair market value, further helping your overall income tax situation.

Don’t forget about the Qualified Charitable Distribution (QCD), either. If you’ve reached the age of 70 ½, the QCD is an elegant and effective planning tool. You are still required to take Required Minimum Distributions (RMDs) from your IRA even in a down market, but the QCD can help offset this tax hit by allowing you to direct up to $100,000 to a qualified public charity, including a field-of-interest fund or unrestricted fund at the Community Foundation. 

This is also a good time to make sure your estate plan is in good shape, including bequests you may wish to leave to a fund at the Community Foundation so that the causes you care about can continue to be supported for generations to come. A bequest by way of a qualified retirement plan beneficiary designation is an especially effective tool to support your charitable intentions after you are gone. That’s because funds flowing directly to a fund at the Community Foundation from a retirement plan after your death will not be subject to either income tax or estate tax. 

Please reach out to our Development team at Arkansas Community Foundation.  We are here to help! 

The Fayetteville Area Affiliate of Arkansas Community Foundation recently held an event to recognize the organization’s history and growth. The organization is celebrating the awarding of $6.9 million in the last fiscal year to nonprofit organizations and also kicking off a campaign to endow its operating endowment.

“Our Board of Directors is pleased to share the growth of our local affiliate that encourages smart giving and promotes philanthropy throughout Washington County,” said board chairperson, Allison Dolan. “In less than 20 years, our affiliate has gone from awarding two grants totaling $50,000 to almost $7 million in our past fiscal year, and we wanted to share that milestone with our founders and supporters.”

“The growth of our affiliate is just another indicator showing that Washington County residents are community-minded individuals who want to make a difference through philanthropy,” said campaign chairperson, Danna Grear. “By establishing an operating endowment for the Fayetteville Area Affiliate, we will be able to continue the tradition of servicing donors to make grants into perpetuity.”

A quasi-endowed fund was designed for people and organizations that want to enjoy the excitement of giving larger grants now along with the benefit of investing for future growth. These funds are invested in the markets to keep them growing, but there’s no limit on the amount that can be granted from your fund to the organizations you choose. A quasi-endowment requires a $100,000 minimum to start and the balance must remain above $50,000 for the first three years.

Download this one-pager to learn more about about how a quasi-endowment works. 

A recent example of a quasi-endowment in action is held by Habitat for Humanity of Central Arkansas. Like many other nonprofits, Habitat relies heavily on annual giving and donations of all sizes year-round from their donors, but the use of a quasi-endowment allows them to access funds for emergency use and for special initiatives to boost their impact. The pandemic proved a prime example of this. It showed Habitat (and many nonprofits) the importance of growing and maintaining a strong reserve.

“Just like our homeowners must save for the closing costs of their new home, we must save for when a once-in-a lifetime opportunity presents itself to us as well,” said Kelly Fleming, executive director of Habitat for Humanity of Central Arkansas.

Because of a quasi-endowment, Habitat is able to have an impact now, and preserve funds for future use.

In addition to quasi-endowments, the Community Foundation helps donors manage three types of funds depending on the amount they want to donate, desired impact and time horizon. Learn more about the multiple ways to give here.

It doesn’t take long to start enjoying yourself when talking to Nicole and Darrin Williams. Darrin, a Little Rock native and Central High alumnus who serves as CEO for Southern Bancorp, and his wife, Nicole, are fundholders with Arkansas Community Foundation. They opened the Nicole and Darrin Williams Family Charitable Endowment in June 2020 to help ensure their legacy of giving and leadership.

The Williams are attorneys who met at Vanderbilt Law School. Currently living in Little Rock, they raised their children, DJ and Payton, in central Arkansas. DJ and Payton attended Central High and are now enrolled at Wake Forest University in Winston Salem, NC and Spelman College in Atlanta, GA respectively.  Darrin is a founding board member of the Little Rock Central High Tiger Foundation, and the whole family boasts Tiger pride: Nicole was PTSA president while her kids were enrolled there, and Darrin was student-body president in 1986.

Public service and the idea of “giving back” is a deeply rooted tradition for the couple. Darrin has a distinguished resume of public service and volunteerism. He served on the Little Rock Planning Commission, in the Arkansas General Assembly and currently serves on the boards of Arkansas Children’s Hospital and Hendrix College. Adopted by a minister and schoolteacher, his most formative years taught him that “giving back is just what you do.” Growing up “there was never a day that we ate alone as a family. My parents always welcomed people in need for meals and any other help they could provide. They modeled that for me,” he said.

Nicole has similar roots. Her father, a former IBM executive and entrepreneur, has served on the boards of more than 30 community organizations, and her mother has been a full-time volunteer for many service and civic organizations and her church’s Christian education department.

“It was important to Darrin and me that we raise our children to give back. When they were eight years old, we started a tradition to help foster that spirit of giving. Instead of birthday parties where everyone brought a gift for our kids, we would buy them one big thing, and then ask their party guests to donate to a local charity of our children’s choice. DJ first chose Heifer International and Payton selected the Humane Society when she turned eight. Each year they had fun choosing different local charities to support,” said Nicole. “We always had three jars for the kids: church jar, savings jar and spend jar. 10% to the church, 20% in savings and the rest you could spend. Now that the kids are in college, they are mostly continuing this principle, and now they truly see the value in financial management and planning their charity.”

Nicole is a board member with the Tiger Foundation, a sustaining member of the Junior League and a member of Alpha Kappa Alpha Sorority, an organization dedicated to sisterhood and service. Nicole is also actively involved with the local chapter of The Links, Inc. Links Inc. is a great way to give back to the community. The organization is approximately 75 years old. Founded and led by Black women, we award scholarships, promote cultural activities and events and expose children to art, STEM topics, healthcare information and more,” Nicole said.

“More than anything, though, our faith guides us,” said Darrin. “When Nicole and I first started dating while at Vanderbilt, we would attend church together on Sundays. Those were our first dates! Thankfully, our faith has shaped our marriage, guided our parenting and can hopefully be felt in any community leadership where we are involved. We attribute any accomplishments in life to our faith.”

When asked why they started their fund at Arkansas Community Foundation, Darrin and Nicole said at the same time, “We wish we’d done this sooner!” They are working on a legacy of faith and having fun, while giving back to the causes they care about.

“We are so grateful for the work of the Foundation. If I could offer any advice to someone exploring charitable giving or starting to build a legacy, I’d say ‘don’t wait.’ It is liberating and incredibly fulfilling to have opened a fund. The Foundation makes it easy and gratifying.”

During a routine check-in meeting, your client casually mentions that their employer, a local company, was just acquired. The client and dozens of fellow employee shareholders are now flush with cash. “I’d like to use some of the money to give to charity,” the client tells you. “Let’s talk about a family fund at the Community Foundation.”

You try not to flinch as you mentally calculate the capital gains taxes your client could have avoided if the client had given some of those shares to a fund at the Community Foundation years ago when the company was clearly growing fast, making it a natural target for acquisition or IPO, but well before an exit was in the works.  

All is not lost. You can still help the client establish a donor-advised, field-of-interest, unrestricted, or other type of fund at the Community Foundation to fulfill the client’s charitable intentions. The client’s gifts to the fund qualify for a charitable tax deduction in the current tax year, helping to offset the income from the sale of the shares.  

Still, this situation is all too common and a good reason to regularly remind clients about their options for making gifts to charity and the tax benefits of each.

Giving cash to a public charity, which is what your client in this situation will be doing (!), is always a viable option. The general rule is that your client can deduct cash gifts to up to 60% of their adjusted gross income (AGI) in any given year. While this may not completely offset large gains from the sale of the stock, it will help to reduce the client’s taxable income.

Giving appreciated stock, which is what you wish your client had done, is a very tax-effective method of supporting public charities. Clients who donate stock outright avoid all capital gains tax that would be levied on a sale of the stock if it were sold prior to making the donation. Even with the 30 percent of AGI limitation imposed on gifts of highly-appreciated, long-term capital gains property to a public charity, your client likely will still come out ahead because the client’s AGI is presumably a lot lower than it will be in the year of a future stock sale. 

For easy future reference: download and save our handy guide which details the AGI limitations on cash and stock gifts.

Despite cautionary tales most Americans do not have a will. Even those clients who do have estate plans in place may not truly understand the difference between a will and a trust (and the reason they still need a will even if they have a revocable living trust). A client also may not understand that a charitable bequest can be part of an estate plan whether the client’s main estate planning vehicle is a will or whether it is a trust. 

Of the $485 billion given to charity by Americans in 2021, according to Giving USA, 9.5% of that giving came from bequests–that’s $46 billion. Giving USA’s data visualization tool illustrates the ebbs and flows of bequest giving, which has long been a significant component of philanthropy. 

Research reveals fascinating psychological factors behind a person’s decision to leave a bequest, which helps to understand the motivation for leaving a gift to a charitable organization in a will or trust. Not surprisingly, altruism has long been one of those factors. Bequests to charity are not a new idea. Examples of high profile estate gifts date back centuries. Some of your clients may be familiar with the bequests of Benjamin Franklin, who established testamentary charitable trusts dedicated to supporting Boston and Philadelphia tradesmen, and George Washington, who left bequests in his will to colleges and trade schools.

Our team welcomes the opportunity to work with your clients to establish bequests to your clients’ funds at the Community Foundation through a will or trust or through a beneficiary designation on a qualified retirement plan or life insurance policy, including providing you with proper bequest language to ensure alignment with your client’s intentions. As we approach the fourth quarter, now is also a good time to remind your clients that bequests of qualified retirement plans can be extremely tax-efficient. Funds flowing directly to a client’s fund at the Community Foundation from a retirement plan after the client’s death will not be subject to income tax or estate tax. 

We look forward to working with you to establish your clients’ philanthropic legacies.