The New Philanthropy

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April 29, 2016

Charitable donations have long been important to people with a passion for their community, a cause or an organization.


Now, many families are considering their philanthropic legacy more holistically, as part of their ongoing financial planning. Many families want to see the impact of their donations within their own lifetimes, and they expect charitable organizations to produce measurable results.


Mike Penfield, National Director of The Charitable Services Group, and Scott White, Trust Product Owner for U.S. Bank Wealth Management, discus show donors can benefit in a new philanthropic landscape.


What are the new trends in charitable contributions for 2016?


PENFIELD: The opportunities for effective philanthropy are dramatically expanding. One example is the tremendous growth of donor-advised funds. Private foundations also continue to evolve into more focused, cost-effective


                              Mike Penfield

and user-friendly organizations, and impact investing has become an important strategy for many.


WHITE: People are becoming more conscious of where their assets are going and the measurable benefit and impact they are having. Many donors desire to give during their lifetimes rather than through a bequest. There is also a desire to manage the grant process in a disciplined way rather than through lump-sum gifts at death.

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April 29, 2016

How does impact investing work?


WHITE: Impact investing provides opportunities for individuals to invest in companies, organizations and investment vehicles that strive to have positive social or environmental impact while at the same time seeking a positive return on investment. 


This could come in the form of micro-financing, an investment in a clean water supply or drilling of water wells. People can actually see the difference and impact they are making and also enjoy a return on their investment.


PENFIELD: Impact investing can also be done locally. One way is through a community

foundation that invests in unique projects that are community focused and provide a return on capital. For example, your local community foundation may be able to take the lead on a project that a commercial lender would not be able to fund. Another way to get involved is to buy investment vehicles that invest in projects with social impact.


Why should charitable individuals care about the “PATH” Act?


PENFIELD: The Protecting Americans from Tax Hikes (PATH) Act, passed in December 2015, now makes it possible for those who are 70 1⁄2 years or older to plan charitable contributions from their Individual Retirement Accounts (IRAs) to charities early in the year.

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April 29, 2016

In the past, it was renewed late in the year, and it was hard to take advantage of the benefit of the law. The excitement for all of us is that this law has now been made permanent.


WHITE: It’s a great program that allows a person to direct their required minimum distribution from their IRA to donate up to $100,000 of that distribution on an annual basis to IRS-qualified charities.


What are the tax benefits of lowering your adjusted gross income through an IRA charitable distribution?


WHITE: For clients who are in a high-income bracket, taking their required minimum distribution from an IRA can increase their tax liability.

By making a donation from that IRA account and donating to a charity, they can bring down their gross income, which could help reduce their tax burden while serving their purpose of philanthropy.


PENFIELD: This is also a good way to meet a yearly pledge to a university or religious organization, since you have to take the IRA distribution anyway. You’re just going to assign it directly to the charitable organization.


What charitable organizations qualify for tax-deductible contributions?


PENFIELD: If you’re making a charitable distribution through your IRA, the charity must be recognized by the IRS as a 501(c)(3) organization.

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April 29, 2016

You cannot give through this method to a private foundation, donor-advised fund or a charitable remainder trust.


What are donor-advised funds, and how can they benefit donors?


PENFIELD: Through donor-advised funds, the opportunities for philanthropy have expanded to fit everyone, from the very wealthy to those just getting started. With a donor-advised fund, you can open an account for as little as $5,000. You make a contribution to the fund, and then you recommend grants from that fund to nonprofit organizations. U.S. Bank is now a partner with Fidelity Charitable in donor-advised funds.


WHITE: It’s a great way for a person to donate assets, including highly appreciated assets and even illiquid assets while fulfilling charitable passions. Let’s say you’re selling a business or liquidating a highly appreciated holding, but you don’t know exactly what charity or charities

you want to support. You can donate the asset into a donor-advised fund, enjoy the tax benefits immediately and then recommend distributions out of the fund account over a period of years.


What are the tax benefits of setting up a charitable remainder trust?


WHITE: Charitable remainder trusts are a way to donate appreciated assets, avoid capital gains tax, plus get a current tax deduction and replace the income from the asset with income from the trust. The remainder beneficiary of the trust can be your own private foundation, a donor-advised fund or a 501(c)(3) charity. This is a great charitable vehicle to use to provide income, and it can build a family legacy and help with your estate planning.


It’s important to consult with your U.S. Bank relationship manager and your tax and legal advisors so you can structure your charitable contributions in the most appropriate way for your particular situation. You’ll also want to consider the effect on your state income taxes.

For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at or by calling 800-TAX-FORM (800-829-3676).

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