Category: Philanthropic Planning

SECURE Act 2.0: An Overview

Written by Erik Buatte on . Posted in blog, Charitable Planning, Education Planning, Estate Planning, Investment Planning, News, Philanthropic Planning, Retirement Planning, Tax Planning.

“Change is the only constant in life.” This phrase – attributed to Greek philosopher Heraclitus – is particularly relevant when it comes the recent changes to retirement savings in the United States. The Federal Government funding bill (which is over 4,000 pages long!) includes provisions from the prior proposed Setting Every Community Up for Retirement Enchantment (SECURE) Act 2.0 that will significantly change the way Americans save from retirement.

With that, let’s review some of those changes – specifically the “So What” that comes along with these changes. As we can expect in a law that is less than a week old, there are still a lot of unanswered questions on the HOW some of these changes will be implemented as well as the nuances as to WHEN each of these new laws are supposed to be put in effect (very few are scheduled to take effect right away in 2023).

To start, we will divide the changes based on who they are targeted at, based on life and career stage. Here is a quick summary of those main changes:

For those in retirement:

  • The Required Minimum Distribution (RMD) starting age will be increased to 73 starting in 2023 and 75 in 2033.
  • The penalty for missed RMDs will be decreased from 50% to 25% in 2023.
  • Employer sponsored retirement plans with a Roth account will no longer be subject to RMDs starting in 2024.
  • A one-time Qualified Charitable Distribution (QCD) will be allowed for Charitable Remainder Unitrusts (CRUTs) and Charitable Remainder Annuity Trusts (CRATs)starting in 2023.

For those nearing retirement:

  • The IRA catch-up contribution will be indexed to inflation starting in 2024.
  • A new “super catch-up” contribution will be available for those ages 60-63 in employer-sponsored retirement plans starting in 2025.
  • Catch-up contributions must be made to Roth accounts for those who made over $145,000 in the previous year starting in 2025.

For those in the early- to mid-career stages:

  • Automatic enrollment in new employer-sponsored plans will be mandatory starting in 2025.
  • Automatic rollovers between employer-sponsored plans will be allowed starting in 2025.
  • Employers will be able to offer Emergency Savings Accounts of up to $2,500 per year starting in 2024.
  • Employers will be able to make matching contributions to retirement plans to match student loan payments starting in 2024.

For education savers and beneficiaries:

  • A portion of overfunded 529 plans can be rolled over to Roth IRAs in the name of the 529 beneficiary starting in 2024.

—————

The details:

For those in retirement: More changes to Required Minimum Distributions

RMD Age Increased

Starting in 2023, Required Minimum Distributions (RMDs) are required in the year you turn 73 (previously 72 in 2022). In 2033, the starting age for RMDs will be increased to 75. This means that if you turn 72 on or after January 1, 2023 and 73 before January 1, 2033, your applicable age to start RMDs is 73. If you turn 75 on or after January 1, 2033, your applicable age to start is 75. This delay in RMDs allows for more years to control your income based on your needs and not mandated withdrawals, as well as increased years for proactive tax planning.

RMD Penalties Decreased

The new law also reduces the 50% penalty for missed RMDs to a less severe 25% penalty in the event that any portion of an RMD is missed in the year it is required to be distributed. It also reduces the penalty further to 10% in the event of prompt payment and acknowledgement of the missed RMD. This reduced penalty goes into effect in 2023.

RMDs for Employer Roth Accounts Waived

Starting in 2024, employer Roth accounts (such as 401(k)s, 402(b)s, and TSPs) will not be subject to RMDs – just like Roth IRAs. However, if you have funds in a Roth 401(k) and are 73 or over in 2023, you still have to meet your 2023 RMD in that account. This removes the urgency to roll over employer Roth 401K accounts into Roth IRAs as you near your RMD age and adds more flexibility in account ownership in retirement.

QCDs Expanded to CRUTs and CRATS

As of 2023, Qualified Charitable Distributions (QCDs) can be used to fund Charitable Remainder Unitrusts (CRUTs) and Charitable Remainder Annuity Trusts (CRATs) with a one-time gift of up to $50,000. Previously, QCDs to these trusts were not allowed. The new law does put two significant limitations to this opportunity however. First, stating that the QCD distribution must only be to a CRUT or CRAT that “is funded exclusively by qualified charitable distributions”. Secondly, all distributions to the trust beneficiaries will be classified as ordinary income, removing more tax preferred distributions of capital gains or qualified dividends like a “standard” CRAT or CRUT. Bottom line, there is an opportunity, but with a number of strings attached that may limit its usefulness to many.

For those nearing retirement: Opportunities to save more, but with complications.

IRA Catch-Up

In prior years, through 2023, the catch-up contribution for IRAs for those over 50 years old was held static at $1,000. A 55-year-old can contribute up to $7,000 ($6,000 base plus the $1,000 catch-up) in an IRA for tax year 2022. Starting in 2024 that catch-up limit will be indexed to inflation. This is an effort to increase that limit over time to better reflect its impact to savers getting ready for retirement. This won’t create a significant increase in the amount available year to year, but aligns it more so with other limitations that are indexed to inflation, allowing it to increase over time. For those looking to maximize this savings every year, you will need to verify the new annual value each year.  

“Super Catch-Up”

SECURE 2.0 introduces a new category of catch-up contributions, the “Super Catch-Up”, for those ages 60-63 in 401(k)s, 403(b)s, and the Thrift Savings Plan. Current law allows in 2023 a catch-up contribution in these accounts of $7,500 (on top of the standard limit of $22,500 for a total of $30,000). Starting in 2025 those in that narrow age range are eligible to contribute a catch-up of $10,000 or 150% of the standard catch-up. Starting in 2026 this Super Catch-Up is adjusted for prior year’s inflation rate.  In effect this creates three tiers of contribution limits in these employer sponsored plans based on ages:

  1. Under 50: Base Contribution ($22,500 in 2023);
  2. 50-59 and 64+: Base plus Standard Contribution ($22,500+$7,500 in 2023);
  3. 60-63: Base plus the Super Catch-Up.

Bottom-line, as you near retirement you can potentially add even more to your employer sponsored retirement plans, but have to be vigilant of your specific applicable limits each year.

Catch-Ups Forced to Roth

With this one the new law gives us another significant complication. Starting in 2024 all catch-up contributions, that’s anything above the base contributions for that account type, must be done into a Roth account. Funds in a Roth account are a powerful thing for your financial future, but with a Roth contribution you have to pay the tax now. This takes away the opportunity to take pre-tax deductions on catch-up contributions for those in higher tax brackets. This only applies to those individuals with wages over $145,000 in the prior year. To help paint that picture a bit, let’s say you are 55 years old in 2024 and made $185,000 in wages in the prior year, 2023. In 2024 you can fund your 401(k) up to $30,000 (assuming no changes from 2022 limits for illustration purposes). But that $7,500 of catch-up contributions would have to be made to the Roth 401(k) and you would be on the hook for those income taxes in 2024. This is one of the key “revenue generators” included within the bill, and has some of the biggest questions on the HOW this would be put into practice. This provision makes the importance of a holistic planning approach, ensuring to balance your past, current, and future tax situation, current assets, and lifestyle plan even more important in making the decision to contribute catch-up funds to your employer plans.

For those in the early- to mid-career stages: More changes to your employer sponsored plans (401(k), 403(b), Thrift Savings Plan).

Automatic Enrollment

Starting in 2025, new employer plans (yes, just for any new plans) are required to automatically enroll employees starting at a minimum of 3% contributions. Many employers already have automatic enrollment with a gradual increase over a timeframe, but up until 2025 it is optional for employers. Automatic enrollment has been found to be a great tool in helping individuals start to save for retirement. If you are already diligent to ensure you get your employer match this is a no-change change; however, if you change employers make sure you read the plan documents carefully to determine its specific contribution increase path to avoid any surprises down the road.

Automatic Rollovers

The new law allows for 401(k) providers to automatically move your old 401(k) from a prior company to your new employer’s plan starting in 2025. This is an attempt to combat the “lost 401(k)” issues some individuals experience as they move from one company to another and potentially leave behind retirement savings. This is another item with many unknowns around HOW this would be realistically completed. Considering the questions on how this would be put in practice, it is still recommended that you carefully track prior accounts in employer sponsored plans and rollover to either a Rollover IRA or your new employer plan as appropriate for you.

Establishment of an Emergency Savings Account

To help employees save for emergencies, and reduce the reliance on hardship withdrawals from retirement accounts or taking on debt, the new law introduces an option for employers to offer an Emergency Savings Account starting in 2024. This would be savings in an after-tax basis, so no pre-tax deduction for these contributions. This would be limited to contributions of $2,500 per year and 4 withdrawals per year. If you find yourself struggling to meet your emergency savings needs, this may be a good tool for you to automate that deduction to the account and avoiding the need to reach into your 401(k) or short-term debt to fund those surprises.

Student Loan Match

This targets those individuals that are not contributing to retirement savings through work due to needing the cash flow to pay off student loans. Starting in 2024 companies can match student loan payments in retirement plans, like they would if the individual was contributing directly to the retirement plan up to the companies match. This would allow those in this position to start building some retirement savings and take advantage of compounding over a longer timeframe.

PLEASE NOTE:

Many of these provisions are optional, not mandatory, to the employer to include. If there is a provision that you are particularly interested in and want included in your company’s plan be proactive and reach out to your Human Resources point-of-contact and let them know.

For education savers and beneficiaries: There is more flexibility with savings in 529 Accounts.


529 Rollover Option

This provision has the potential to affect you across the life stages. 529s can be a great tool to save for education related expenses. Recently the 529 options were expanded to allow for expenses for K-12 and trade schools, in addition to college. However, in the event of overfunding a 529 there were limited options to get money out of the 529 without penalties. The new law, starting in 2024, allows extra funds in a 529 account to be rolled into a Roth IRA owned by the 529’s beneficiary. There are, of course, limits in place: you can only make contributions up to the individual IRA contribution limit ($6,000 in 2022), there’s a lifetime cap of $35,000, and the 529 must have been open for at least 15 years.

To illustrate this, let’s assume a grandparent established a large 529 when their grandchild was born. That grandchild graduates in 2025 with a bachelor’s degree and is done with schooling, and there is $15,000 still in the 529. One option that has been used widely is reassigning that 529 to another individual, like another grandchild. With the new law the grandparent could instead use the 529 funds to make a Roth IRA contribution on behalf of the grandchild in 2025, 2026, etc. until those funds run out. This new provision could provide for some new and unique opportunities for families both in the event of excess funds and in the development of a gifting strategy prior to education. However, this is another of the provisions that has a lot of questions in terms of the HOW we will see this put into practice going forward.

In Conclusion (for now):

This is by no means a comprehensive list of changes within the bill, but hopefully, it provides insight into the potential impacts from some of the major provisions of the new law and how they may affect our financial lives.

With change comes opportunities. By leveraging a financial plan that encompasses all parts of your financial life, these new “tools” can be thoughtfully put to use to reach your unique goals.

Secure Act Bring Changes to Your Planning

Written by Andrew Gipner on . Posted in blog, News, Philanthropic Planning, Retirement Planning, Tax Planning.

Over the summer of 2019, the House of Representatives passed the bipartisan Setting Every Community Up for Retirement Enhancement (SECURE) Act. On December 19, 2019, the Senate passed the bill, and it was signed into law by the President on December 20, 2019.

The bill affects many Americans and may potentially result in the update of many financial plans here at Longview. The bill is long and covers many areas including the following:

  • Required Minimum Distributions from qualified accounts
  • Contributions to Traditional IRAs past the age of 70.5
  • Changes to the stretch provision in Beneficiary IRA accounts
  • Updates to exceptions of penalties for early distributions from accounts
  • The use of 529 accounts to pay off qualified education loans.

There is a lot to cover! In this post, we’ll cover updates to Required Minimum Distributions (RMDs) from qualified accounts, which include vehicles like Traditional and Rollover IRA as well as 401(K) and 403(B) accounts that are in your name.

Required Minimum Distributions

As many of you are well aware, the magic age of 70 and a half (70.5) signifies the start of Required Minimum Distributions – a time in which you have to distribute a portion of certain types of accounts. The amount distributed is based on the balance of the account at the end of the previous year and a divisor based on your age at the current year. Let’s break that down a little more using Steve as an example:

Steve is 74 as of January 1, 2020, and his birthday is December 2. On December 31, 2019, Steve had an IRA that totaled $1,085,000. With his birthday in December, that means that Steve will be age 75 as of December 31, 2020, which will make his RMD divisor 22.9. So, knowing those two numbers, this is how we determine Steve’s RMD.

$1,085,000/22.9 = $47,379.91

As you can see, Steve must take $47,379.91 by December 31, 2020, and report that distribution as income on his 2020 tax return. Failure to take the distribution means he would face a 50% penalty on the amount in which he failed to distribute. To get a better understanding of what your RMD may look like, check out the IRA Required Minimum Distribution Worksheet from the IRS.

So, what does this have to do with the SECURE Act? RMDs are still the same in that a portion will need to be distributed based on your age in the current year; however, the age in which an individual has to start RMDs is now age 72 but only for those turning 70.5 after December 31, 2019. So, for those born before or on June 30, 1949, sorry, you still have to take Required Minimum Distributions starting at age 70.5.

As for those born on or after July 1, 1949, you will not have to start taking RMDs until you reach age 72. Let’s use Sue as an example as to how the change in the law will work now:

Sue’s birthday is July 11, 1949. In her annual meeting in 2019, Sue’s advisor told her of her upcoming RMDs starting 2020, given the fact that she would not turn age 70.5 until January 11, 2020. With the SECURE Act now in place, her RMD does not have to start until at least 2021, which in turn may present opportunities to consider and implement from both a financial and tax planning perspective.

One thing to note about her first RMD that is very similar to the former distribution rules is that she will not officially have to start taking her RMD until April 1 following the year that she reaches her RMD age. Under the old RMD rules, while she would have turned 70.5 in 2020, her first RMD would technically not have to be taken until April 1, 2021. The only caveat is that she would have to take her 2020 and 2021 distribution both in 2021, which would raise the amount of tax she would have to potentially pay on her 2021 tax return.

With the new RMD rules, Sue doesn’t have to take her first RMD until April 1 in the year following her 72nd birthday, which would be April 1, 2022. Again though, like before, if she did move forward with that, she would need to take both her 2021 and 2022 RMD in 2022 and report both of them on her tax return. Sometimes, this may make sense, but before implementing that, we strongly encourage you to speak with your financial planner before to see if it makes sense from a taxation standpoint, because it could affect not only the taxes paid but also your Medicare premium in future years. 

Qualified Charitable Distributions

For many of our charitably inclined clients, we may make a recommendation for them to complete a Qualified Charitable Distribution (QCD). For those who are unaware of what this is, when an individual reaches age 70.5, they can take their RMD or a portion of it (up to $100,000) and have that money sent directly to a charitable organization. The amount that is contributed by way of QCD is not counted towards any income on the income tax return. This has become even more important over the past couple years with the recent Tax Cut and Jobs Act of 2017, which increased the Standard Deduction, thus for many Americans there isn’t a tax benefit from an itemization standpoint of donating to a charitable organization.

The QCD has created a new way of making charitable donations a de-facto tax benefit. Here’s an example: 

Let’s say that Joe is 75 and has to take an RMD of $50,000. Joe is also charitably inclined and would like to give $10,000 to his favorite charity, but will still take the Standard Deduction on his tax return. With a QCD, Joe can take $10,000 from his RMD, give that directly to the Charitable Organization and then only have to report $40,000 towards his income on the tax return.

The QCD has always coincided with age 70.5 and the RMD age. Going forward, under the SECURE Act, while the beginning RMD age has changed for some, the QCD age will remain at age 70.5, meaning that an individual may have a couple of years to give from their qualified accounts before their RMD start age of 72. This, in turn, not only contributes to the goals for those who would like to give to charity but may also lower future RMDs, thus potentially lowering future tax liability too. As with any distribution strategy from your accounts, please consult with your financial planner to determine the most appropriate action to take that is in line with your goals, as well as provides benefits for you both now and in the future.

2019 HudsonAlpha Tie the Ribbons Event

Written by Jeff Jones on . Posted in News, Philanthropic Planning.

Jessica, Lauren, and Debbie attended the 2019 Tie the Ribbons event held at the VBC North Hall. The annual event was informational and moving, as always.

HudsonAlpha Institute for Biotechnology‘s breast and ovarian cancer research team of scientists are “committed to the goal of using genomic science and HudsonAlpha’s state-of-the-art technology to find new breakthroughs in breast and ovarian cancers.”

To learn more about the event, visit https://hudsonalpha.org/foundation/tie-the-ribbons-event/

Guest Post: Planned Giving with Food Bank of North Alabama Development Director, Bobby Bozeman

Written by Andrew Gipner on . Posted in blog, Non-Profit Spotlight, Philanthropic Planning.

Considering where you’re reading this, I’m going to assume that you already have a pretty good idea of why planning gifts to non-profits, whether from your retirement plan or a bequeath from your will or life insurance policy, is good for you. There are, of course, the great tax reasons, and they are incredibly flexible, but it’s also many people’s only opportunity to leave their charities of choice with that major gift they’ve always wanted to give but haven’t been able to.

A planned gift also allows donors to create a legacy. It doesn’t just leave a lasting mark on the charity or non-profit you choose to give to, but it also creates a lasting impact on your community, leaving the world a little better than what you inherited. 

And on our end of things, planned giving is extremely important as well. Over the rest of 2019 and through 2020, the Food Bank of North Alabama will be putting forth a campaign to inform our supporters about planned giving options as well as creating a society to honor those who choose to consider the Food Bank in their planned gifts.

We’re wanting to make this push with our current supporters and with new potential ones because planned giving provides a sturdy foundation of long-term support. While it’s tempting for me as development director to focus on gifts that come in right away and make an immediate impact, I want to make sure we have long-term stability. Because there are so many agencies — over 260 soup kitchens, food pantries, churches, women’s shelters, halfway homes, child backpack programs, senior feeding programs and more — across North Alabama that depend on us for food, it’s so important that we are here for as long as people are hungry. Planned giving allows us to better navigate any unforeseen problems that might be awaiting us on the horizon.

The Food Bank of North Alabama was honored to be featured in this blog in 2016, but I wanted to share a few ways we’ve grown since then. Many of our programs have changed, most morphed into new programs with new names as new staff members take hold of them.

But the biggest change since 2016 is how much food we’ve been able to provide the people of the 11 counties in North Alabama that we serve. Then we supplied nearly seven million pounds of food to over 200 charitable feeding programs. This year, we are on track to supply 10 million pounds of food to over 260 charitable programs. It’s all because people who choose to support us. 

If you’d like more information about the Food Bank of North Alabama, please visit foodbanknorthal.org, and for more information about planned giving or to let us know you’ve made a planned gift to the Food Bank, email Bobby Bozeman at bbozeman@fbofna.org.

Sonny Hereford Cheese Distribution

Community Foundation of Greater Huntsville’s 2019 Summit on Philanthropy

Written by Jeff Jones on . Posted in blog, News, Philanthropic Planning.

Longview team members, JJ, Jessica, and Andrew recently attended the Community Foundation of Greater Huntsville’s Summit on Philanthropy. The Summit is “an annual celebration of our community’s generosity because we believe that together we can accomplish more than any one person, one company, or one organization can accomplish on their own.” The gala-style event, celebrating its 10th year, was held on Tuesday, September 10th at the Westin Huntsville in Bridge Street Town Centre.

Longview has long been a supporter of the Foundation’s work in our communities, and we are proud to continue our sponsorship of the Summit. Jessica Hovis Smith and Jeff Jones are both members of the Community Foundation’s Philanthropic Advisors Network. Please contact us if you are interested in learning more about The Community Foundation or would like to talk about your desires to become involved or create your own giving plan. You can also learn more by visiting the Community Foundation’s Web site at communityfoundationhsv.org.

Jeff Jones, Jessica Hovis Smith, & Andrew Gipner

Guest Post: A Look into Conservation Easements with Land Trust of North Alabama Executive Director, Marie Bostick

Written by Jeff Jones on . Posted in blog, Non-Profit Spotlight, Philanthropic Planning.

Today’s guest post is by Marie Bostick, Executive Director of Land Trust of North Alabama.

Many different strategies may be employed to conserve land including, donations, bargain sales, bequests and conservation easements.  Each has its own benefits and constraints based on the goals of the parties involved in the transaction. This article will focus on the use of conservation easements.

A conservation easement (CE) is a land conveyance from a private land owner to either a governmental entity or non-profit 501(c)3 Land Trust, which places restrictions on a property that has appropriate conservation values. The holder of the conservation easement (either the Land Trust or governmental entity) is responsible for monitoring the property in perpetuity to make sure the easement provisions are not violated.  The easement itself is negotiated between the parties to meet specific conservation goals and allow the land owner the continued to use of the property, so long as the uses don’t conflict with the conservation goals.  A key benefit to a conservation easement is the land owner’s ability to take a federal tax deduction for the value of the donation.  However, in order to take advantage of these tax benefits, the land owner must comply with the IRS Code requirements.

IRS Code 170 (a) and (h) provide the requirements that must be followed to execute a “qualified” conservation easement. One of these requirements is that a “qualified” entity – such as the Land Trust of North Alabama – must hold the easement. Another requirement, as mentioned above, is that the easement be held in perpetuity. For example, the restrictions that are placed on the property through the CE must be in the recorded document and the Land Trust must monitor and enforce those restrictions forever. In the event the fee interest in the land is sold to another party, the conservation easement will run with the land and the restrictions remain in effect. In order to assist the entity that is holding the easement to perform its enforcement obligation, a stewardship and defense donation is often included as a part of the overall transaction. Of course, a key requirement is that the property serves a valid conservation purpose, and the IRS Code list four conservation values that are used to make this determination.  Most land trusts also have criteria for conservation properties which must be met. While there is often overlap between these conservation values, the land owner and conservation easement holder must work together in determining if the conservation easement is appropriate for both parties. Lastly, the CE must be substantiated, which is typically done through a qualified appraisal and appraiser and documented by way of a Form 8283.

While completing a Conservation Easement to the standards of the IRS and the easement holder is a meticulous and detailed process, a landowner can realize substantial federal tax benefits.  Currently, a landowner can deduct the value of the conservation easement donation up to 50% of their annual income and carry forward any remaining donation value for period of up to 15 years.  Qualified ranchers and farmers are eligible for greater tax incentives, with the ability to deduct the value of their donation up to 100% of their annual income, with a carry forward period of 15 years.

Executing a conservation easement is a complicated process and the benefits vary with each person’s unique situation. Anyone considering a conservation easement should consult with their own tax professional to determine whether it is a viable option for them.

For information about Land Trust of North Alabama and working with them to protect your land, visit www.landtrustnal.org/preserve-land.

Five Keys to Determine the Effectiveness of a Nonprofit

Written by Jessica Smith on . Posted in blog, Philanthropic Planning.

We just celebrated one of my favorite days of year – Giving Tuesday. It is one of my favorite days because, perhaps even more so than on Christmas, it is a reminder to think outside of ourselves.

With companies, like Facebook, matching contributions, and #GivingTuesday challenges, there is increasing access to donations. This is great for nonprofits doing amazing work, but as a donor, how do you filter out all the buzz and peer pressure and ensure the nonprofits you support are effective?

Too often, efficiency gets confused with effectiveness. An efficient organization eliminates waste and maximizes productivity. An effective organization fulfills its mission. While an effective organization should consider efficiencies, efficiency alone is not the goal. All too often, donors are quick to zero in on the percentage of donations used for administrative expenses, like salaries, overhead, and general expenses to maintain the operation of the organization. While this is an important consideration, it is just one consideration when evaluating a nonprofit’s effectiveness.

5 Factors to Consider

  1. Mission: The most important determination of whether a nonprofit is effective is if it is achieving its mission. Make sure you know what you are supporting. Do a little research to determine the nonprofit’s mission. The first place to start is the nonprofit’s website, but there are other third-party resources like GuideStar (www.guidestar.org), Charity Navigator (charitynavigator.org), and your local Community Foundation that can help.
  2. Goals and Programs: Does the organization have very specific and measurable goals? Think SMART goals – Specific, Measurable, Achievable, Relevant, and Time bound. Are the nonprofit’s programs set up to achieve the specific goals and does the nonprofit report on the performance of those goals – positive and negative? Most nonprofits offer an annual report to donors. Ask for the previous year’s report in advance and pay particular attention to how achievements are discussed. The more transparent, the better!
  3. Financial Wellbeing: Pay attention to the financials of the organization, but as a whole, considering the nonprofit’s mission, goals, and programs. If the nonprofit is tackling big tasks, it needs a strategic, focused leader at the helm with other dedicated talented individuals supporting, just like a for-profit organization does. Be careful not to judge too quickly based on the amount paid in salaries alone. Also consider where the nonprofit is located and the marketing and overhead costs necessary to accomplish goals. Just like any other business, marketing and overhead are needed expenses to help facilitate higher performance. It may be helpful to compare financials of different nonprofits, but only do so if you are comparing apples to apples. The nonprofits should do very similar work, in a similar location with similar goals.
  4. Leadership: Check into the leadership of the nonprofit, both the internal leadership and the board leadership. Is the leadership engaged? Can they speak to the mission and goals of the organization? Do they implement a strategic plan? Are there checks and balances? Are there policies and procedures in place? Are there regular board meetings and term limits for board membership? Sometimes measuring the effectiveness of the leadership can be difficult. Before making large contributions to an organization, it may be helpful to sit down and interview both the Executive Director and the board (or at least a representative of the board) to ensure that they are on the same page and working well together.
  5. Collaboration: Think about the nonprofits with the best reputations. Many of them have dedicated volunteers and donors who are committed to the mission. This doesn’t mean that the nonprofit has to be one of the biggest, it just needs to be able to facilitate work through others. It needs an engaged group advocating for the mission. The leaders, volunteers, and donors need to be willing to break down fences to partner with others to create great impact, even if that means sharing resources and taking a smaller cut of the pie.

Above all, it is important that the resources you give align with your core values and passions. Before you make your next gift, I challenge you to take time to consider your top three key core values and three areas of interests and ask yourself how they relate. Are there any common threads? Write down your findings and keep them as a reference for the next time you are asked to give. If the request doesn’t align with your core values and passions, give yourself the freedom to say no. If the request does align with your core values and passions, say yes and follow through to ensure your gift is used wisely. You hold the power of impact in your hands. What will you do with it?

Bridging the Generation Gap: Using Philanthropy to Create Successful Families

Written by Jessica Smith on . Posted in blog, Philanthropic Planning.

Everywhere you turn, it seems like we are hearing about the differences in generations. It is almost certain that if I attend an educational conference, there will be at least one session about how to work with the next generation or how the next generation is different from all the other generations. These conversations are usually targeted toward the workplace, but I don’t hear many targeted toward the family. However, the differences apply across industries and families alike. Don’t we desire to better communicate at home and passing on education and skills in the home as much as in the workplace?

A few years ago, I came across Strangers In Paradise – How Families Adapt to Wealth Across Generations by Dr. James Grubman. Dr Grubman is a psychologist who works with individuals with wealth. Through his research, he has addressed the question of how families can share education and skills and better equip the next generation to inherit and sustain wealth. It is an interesting read that compares migrating to the “Land of Wealth” to migrating to a new country. He essentially divides the “Land of Wealth” into two groups: immigrants and natives.

Immigrants are those who create the wealth. They often come from humble beginnings and build their wealth by taking risks, like starting a business. Immigrants make up 80% of the inhabitants of the “Land of Wealth”. The remaining 20% are the natives. They are second and later generations who have grown up with more opportunities and experiences because of the family’s wealth. Many times, their parents have wanted them to have all the things they couldn’t have as a child. Natives are usually less experienced with risk and may not understand the amount of hard work that was necessary for the previous generation to generate the wealth.

As you may expect, each generation has its own struggles. The immigrants may struggle with trusting the next generation to carry on the wealth (or family business). They may also struggle with accepting and using the wealth, remembering the days before their success as hard and financially tight. This non-acceptance may lead to poor decisions and a tendency to give away wealth to others too easily. On the other hand, natives can struggle with a sense of entitlement due to a lack of understanding about the hard work necessary to create it. They may overspend or not consider the financial consequences of their decisions. Some may even feel pressured to carry on the previous generation’s values and desires because they do not think the wealth belongs to them.

Dr. Grubman argues that there are different skill sets that are necessary at each generation level in order for family wealth to continue. As you can see from the chart below, the skills needed grow with each new generation. This is why it is so hard to keep family wealth for the long term.

Adapted from Strangers in Paradise by James Grubman

Just like an immigrant to a new country, immigrants to wealth primarily transition into the “Land of Wealth” in one of three ways.

Avoidance

Some try to avoid the wealth and deny they are wealthy. They continue to live as they were before they earned their wealth, fearing the loss of relationships or judgements from their old circle of acquaintances. It is important to note that remaining frugal is not avoidance. Avoidance is an inability to accept the wealth or a strong desire to ensure others do not know about the wealth.

Assimilation

Some immigrants embrace wealth to its fullest. They may see it as a way to create happiness. While avoiders may not want to leave their old circles, assimilators may completely leave their old circles to create new circles with those who also have wealth. They tend to raise their own and their children’s standard of living drastically in an effort to fit into their new land and may do so at their own detriment. Some assimilators become more philanthropic, but may do so to appear wealthy, not necessarily because they feel a strong connection or desire to do good.

Integration

The last group of immigrants takes a more balanced approach and integrate their old and new relationships, communities, and values. They may look to their wealth to help them create new opportunities and experiences, but also remember the importance of saving and giving for purpose. They make a point to teach their children about their past while also giving them the opportunity to enjoy and learn from their new life of wealth. Integrators tend to be more adaptable.

Dr. Grubman further suggests that in order to allow for integration and to pass along and teach the skills needed at each generation, it is best to introduce the concept of family capital. He divides family capital into four subgroups. Human capital includes the values and personal attributes each individual brings to the family. Intellectual capital is the education and skills each member can provide. Social capital includes the family’s connections, community involvement, spiritual capital and philanthropy. Financial capital is the wealth and stewardship of the family.

By identifying the family’s capital, the family is better equipped to use the skills of each individual member for the betterment of the family unit and to recognize areas that may need improvement. Some examples of questions that can be asked to help facilitate a family discussion around capital includes:

  • Human Capital
    • What are the individual attributes of each family member, and how does the family use and share the skills of individuals within the family?
    • How can the family enhance members’ skills?
  • Intellectual Capital
    • What are the family’s core values and mission?
    • How is the family using each member’s education?
  • Social Capital
    • What/Who are the family’s connections?
    • What are the family’s philanthropic goals and how can each individual contribute to the goals?
  • Financial Capital
    • How can the financial capital be used to address the human, intellectual, and social capital?
    • How will stewardship be addressed?

Philanthropy is an excellent way to help address some of the questions above and to begin to build the skills that generation 2 and 3 need in order to inherit and pass on family wealth. For example, in order to begin to build human capital at an early age, parents could encourage their children to use their interests and abilities to volunteer or to look for volunteer opportunities that will enhance a child’s skills. Encouraging children to assist in determining the family’s giving goals, identifying which nonprofits the family should support, and what amount of support to give are ways to address the family’s capital while building leadership, financial, and relationship skills.

Regardless of your wealth level, improving your children’s and grandchildren’s financial and philanthropic literacy is important. We invite you to contact us if you are interested in learning more about ways to implement Dr. Grubman’s research with your own family.

In the meantime, here are some great, age-appropriate examples of using philanthropy to build your children’s skills that you can put into practice now:

The Women’s Endowment – For Women By Women

Written by Jessica Smith on . Posted in blog, Philanthropic Planning.

The Women’s Endowment – For Women By Women

The Community Foundation of Greater Huntsville recently launched a new initiative established for women by women. The Women’s Endowment “is Huntsville’s first permanent grantmaking endowment that seeks to make a positive difference in the lives of women and families across a broad spectrum of issues that impact the Quality of Life in our community.”

The endowment’s goal is to offer larger annual gifts or multi-year commitments that fund initiatives “that address systemic change and that create positive and measurable impact for women and families.”

Longview’s Jessica Hovis Smith is proud to serve on the Women’s Endowment Advisory Council. The Council is made up of women leaders from the community acting as volunteer stewards for the Endowment.

The Community Foundation celebrated the launch with the Legacy of Love event. Click here for photos from the event.

Click here to learn more information about the Women’s Endowment, including answers to frequently asked questions.

Contact us if you are interested in learning more or getting involved.

2017 Kids to Love’s Denim & Diamonds

Written by Jeff Jones on . Posted in blog, Non-Profit Spotlight, Philanthropic Planning.

Longview proudly served as the Presenting Sponsor for Kids to Love’s inaugural Denim & Diamonds event held on Saturday, April 29th, 2017. 

The Denim & Diamonds event was held as a fundraiser and open house for Davidson Farms, a 10,000 sq.ft. home on 10 acres in Madison County, Alabama. The home, a gift from Dr. Dorothy Davidson, will serve as “A Home for Girls” for tween and teen girls in foster care. Guests were treated to a tour of the newly-remodeled home, garden-to-table dinner on the grounds, and entertainment by The Michaels. With over 200 in attendance, the event raised over $30,000 through tickets, donations, and a live auction.

How To Give or Support Kids to Love

Kids to Love is a 501(c)3 organization that has several opportunities to volunteer and give financially. In addition to the education programs listed on their website, they also need funding and volunteers for the following:

  • Bibles For Kids – An opportunity to buy a foster child a bible for $5.
  • Christmas For Kids – An annual drive for Christmas gifts for foster children. You can sponsor an entire wish list, donate individual items and money or volunteer to wrap presents.
  • Camp Hope Alabama – S weekend camp that serves to reunite foster siblings that have been separated and offer them a home-like environment with fun activities.
  • More than a Backpack – Sn annual school supply drive. Kids to Love sends out over 5,000 backpacks full of school supplies every year to students in Alabama, Tennessee, Georgia and Mississippi. There are opportunities to donate or host a drive.
  • Scholarships – Kids to Love honors students each year with scholarships, giving out 448 scholarships since 2005.
  • Davidson Farms – In addition to monetary donations, they are looking for donations of household furnishings, appliances, decorations, etc. There are also potential naming opportunities should you be interesting in sponsoring a room.
  • Legacy gifts – Kids to Love also works with donors on legacy gifts. If you are interested in giving through your will or another future donation, they are happy to discuss options with you.

How to Contact Them and Learn More

If you are passionate about helping children and are interested in learning more about Kids to Love, their programs or ways to volunteer or give, you can visit their website or on Facebook. 

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