Recently I had the chance to speak with Jeff Stein the News and Program Director at News/Talk 1540 KXEL. We chatted about charitable donations to nonprofits in this age of COVID-19. Because there are so many financial challenges affecting both nonprofit organizations (and the beneficiary populations they serve) and current and prospective donors, this is a precarious, fragile time.
In preparation for the #GivingTuesdayNow global on Tuesday, give this interview a listen. It’s less than twenty minutes and will give you some solid insights into how to practice strategic charitable giving in a way that’s most useful to the nonprofit organizations you care most about during this trying time.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2020/05/Screen-Shot-2020-05-05-at-6.35.01-PM.png6901027Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2020-05-02 18:30:512020-05-18 11:28:31Listen to my Latest Radio Interview: Charitable Giving During COVID-19
Public charities and private foundations are both classified as 501(c)(3)s by the IRS. However, the different nonprofit operating structures come with different benefits, requirements, and challenges that can make navigating compliance difficult. I’ve written previously on aspects of private foundations including prohibited grants, payout requirements, and avoiding self-dealing. The best way to deal with many of the ins and outs of learning about private foundations is to deal with each individually; today let’s focus on jeopardizing investments.
Don’t Jeopardize the Foundation
Failing to exercise prudence and investing in ways that threaten the foundation’s ability to carry out its exempt purposes—called jeopardizing investment—and can result in a stiff penalty.
Many factors can contribute when determining whether or not an investment can be considered jeopardizing. At the least, a private foundation’s managers must exercise reasonable, ordinary business judgment and prudence in investing a foundation’s assets. Investments should also be made with the short and longterm financial needs of the entity in mind. This is part of baseline fiduciary duty board members must act with by closely overseeing the nonprofit’s finances.
In cases of jeopardizing investments, an excise tax of 10% is imposed on the foundation for the IRS-defined taxable period. Foundation managers can also be held personally liable and taxed up to a max of $10,000 (or 10% of the jeopardizing investment) if the “knowing, willfully, and without reasonable cause” participated in the making of the investment.
Furthermore, if the foundation does not take steps to remove an investment, an additional tax can be imposed on both the foundation and the responsible foundation managers.
High-Risk Activities: Proceed with Caution
While no category of investment is outright prohibited, a private foundation’s managers must pay close attention to high-risk activities, such as trading securities on margin, trading in commodities futures, and short selling, among others.
All of this said, this is general advice and each charitable organization is unique. I highly recommend seeking out an attorney well-versed in nonprofit law to assist with multiple aspects of the charitable organization life cycle from the formation through employee hiring through board development.
Questions? Want to make sure your private foundation is taking the right steps to avoid adverse consequences like audits and taxes on top of everything else there is to keep track of? Don’t hesitate to contact me.
One of the worst-case estate planning scenarios for any family is in-fighting which results from avoidance of estate planning conversations. Often this avoidance arises from not wanting to risk offending a relative.
I’ve known some couples who haven’t been able to agree on an important decision, such as who will take care of the children in the event of them both passing. Since they can’t reach an agreement they decide to bypass the conversation entirely and leave their children without a legal guardian. Which is, of course, the worst possible decision of all!
How you communicate your wishes to your family depends entirely on the family dynamic. One interesting concept I’ve heard of for family heirloom-decisions is to give your beneficiaries monopoly money and have them bid against each other for different items in an auction format. While that could make for a fun (albeit competitive) game night, it’s important that your loved one realize the importance and finality of an estate plan.
No matter how you determine decisions such as property dispersal, a professional estate planner can help you fully understand all the implications of your estate plan.
I’ve seen variations of this potentially tricky situation many times.
Three brothers grow up on a farm. Eventually, two of the brothers moved to the city while the third continued to run the farm’s operations. When their parents passed away, the third brother who had managed the farm, inherited the entire property while the brothers received none of the farm assets. As you can imagine, even if two of the brothers were not actively involved in the farm’s operations, if the parents died without discussing the estate arrangement with all of their children conflict could ensue between the siblings.
Then consider if the parents in this scenario divided out the farm assets between the brothers, whether or not they had a hand in helping manage the property. The brother who actually, actively manages the farm may feel slighted. Either way, such situations are made thorny when there’s no upfront, clear communication.
Bottom Line
Estate planning can be an extremely difficult decision-making process. It is something that should be discussed with your loved ones, family members, and beneficiaries, especially when your choices may take them by surprise. Help everyone — yourself included — achieve peace of mind by seeking professional help to draft a sturdy estate plan. And then your estate planner can help you communicate your decisions to your loved ones.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/Screen-Shot-2018-09-16-at-4.42.03-PM.png652994Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2020-04-15 22:50:392020-05-18 11:28:32The Importance of Discussing Your Estate with Your Family
Listen to my Latest Radio Interview: Charitable Giving During COVID-19
Charitable GivingRecently I had the chance to speak with Jeff Stein the News and Program Director at News/Talk 1540 KXEL. We chatted about charitable donations to nonprofits in this age of COVID-19. Because there are so many financial challenges affecting both nonprofit organizations (and the beneficiary populations they serve) and current and prospective donors, this is a precarious, fragile time.
In preparation for the #GivingTuesdayNow global on Tuesday, give this interview a listen. It’s less than twenty minutes and will give you some solid insights into how to practice strategic charitable giving in a way that’s most useful to the nonprofit organizations you care most about during this trying time.
Private Foundations: Avoid Jeopardizing Investments
NonprofitsPublic charities and private foundations are both classified as 501(c)(3)s by the IRS. However, the different nonprofit operating structures come with different benefits, requirements, and challenges that can make navigating compliance difficult. I’ve written previously on aspects of private foundations including prohibited grants, payout requirements, and avoiding self-dealing. The best way to deal with many of the ins and outs of learning about private foundations is to deal with each individually; today let’s focus on jeopardizing investments.
Don’t Jeopardize the Foundation
Failing to exercise prudence and investing in ways that threaten the foundation’s ability to carry out its exempt purposes—called jeopardizing investment—and can result in a stiff penalty.
Many factors can contribute when determining whether or not an investment can be considered jeopardizing. At the least, a private foundation’s managers must exercise reasonable, ordinary business judgment and prudence in investing a foundation’s assets. Investments should also be made with the short and longterm financial needs of the entity in mind. This is part of baseline fiduciary duty board members must act with by closely overseeing the nonprofit’s finances.
Penalty Payment
In cases of jeopardizing investments, an excise tax of 10% is imposed on the foundation for the IRS-defined taxable period. Foundation managers can also be held personally liable and taxed up to a max of $10,000 (or 10% of the jeopardizing investment) if the “knowing, willfully, and without reasonable cause” participated in the making of the investment.
Furthermore, if the foundation does not take steps to remove an investment, an additional tax can be imposed on both the foundation and the responsible foundation managers.
High-Risk Activities: Proceed with Caution
While no category of investment is outright prohibited, a private foundation’s managers must pay close attention to high-risk activities, such as trading securities on margin, trading in commodities futures, and short selling, among others.
Get the Right Advice
All of this said, this is general advice and each charitable organization is unique. I highly recommend seeking out an attorney well-versed in nonprofit law to assist with multiple aspects of the charitable organization life cycle from the formation through employee hiring through board development.
Questions? Want to make sure your private foundation is taking the right steps to avoid adverse consequences like audits and taxes on top of everything else there is to keep track of? Don’t hesitate to contact me.
The Importance of Discussing Your Estate with Your Family
Estates & Estate PlanningOne of the worst-case estate planning scenarios for any family is in-fighting which results from avoidance of estate planning conversations. Often this avoidance arises from not wanting to risk offending a relative.
I’ve known some couples who haven’t been able to agree on an important decision, such as who will take care of the children in the event of them both passing. Since they can’t reach an agreement they decide to bypass the conversation entirely and leave their children without a legal guardian. Which is, of course, the worst possible decision of all!
How you communicate your wishes to your family depends entirely on the family dynamic. One interesting concept I’ve heard of for family heirloom-decisions is to give your beneficiaries monopoly money and have them bid against each other for different items in an auction format. While that could make for a fun (albeit competitive) game night, it’s important that your loved one realize the importance and finality of an estate plan.
No matter how you determine decisions such as property dispersal, a professional estate planner can help you fully understand all the implications of your estate plan.
Tricky Family Situations
I’ve seen variations of this potentially tricky situation many times.
Three brothers grow up on a farm. Eventually, two of the brothers moved to the city while the third continued to run the farm’s operations. When their parents passed away, the third brother who had managed the farm, inherited the entire property while the brothers received none of the farm assets. As you can imagine, even if two of the brothers were not actively involved in the farm’s operations, if the parents died without discussing the estate arrangement with all of their children conflict could ensue between the siblings.
Then consider if the parents in this scenario divided out the farm assets between the brothers, whether or not they had a hand in helping manage the property. The brother who actually, actively manages the farm may feel slighted. Either way, such situations are made thorny when there’s no upfront, clear communication.
Bottom Line
Estate planning can be an extremely difficult decision-making process. It is something that should be discussed with your loved ones, family members, and beneficiaries, especially when your choices may take them by surprise. Help everyone — yourself included — achieve peace of mind by seeking professional help to draft a sturdy estate plan. And then your estate planner can help you communicate your decisions to your loved ones.
Have questions? Need more information?
A great place to get started with your estate plan is with my free (no obligation) Estate Plan Questionnaire or feel free to reach out at any time.