December is a busy, generous month. The giving spirit of the holiday season often moves people to support the causes they love. As year-end approaches, people also evaluate tax consequences and work to maximize their contributions.
At the end of 2023, the Seeley Lake Community Foundation received a very generous gift of $10,000 earmarked for our endowment. How did this happen? The donor simply called up the SLCF office to talk about what he was looking to do. Together we figured out the mechanics of this gift, and made it happen before his Dec. 31 tax deadline. I’m sharing what this looked like because I think there are a couple of interesting components to this story that will be of interest to other Seeley Lakers.
The gift was made from the donor’s IRA. When you turn 73, you must start taking required minimum distributions (RMDs) from your individual retirement accounts (IRAs). Depending on your tax bracket, you could owe beaucoup taxes if you take the distribution personally. One thing to consider: If you instead send this distribution to a charity as a gift (in lieu of donating the cash personally), all the money will go to your favorite cause, with no taxes taken out! This is called a qualified charitable contribution, or QCD. (Actually, a donor can direct a QCD from his IRA when he turns 70 1/2 , a couple of years before that donor would be required to take minimum distributions.) Of course, always consult your financial adviser to make sure this is a good fit for you.
This fellow, who is in his 70s, LOVES Seeley Lake. He asked to have his gift go to the SLCF endowment. An endowment is set up to hold money permanently and only distribute the income earned on it. In other words, when there is money in an endowment you can’t spend the ‘golden goose’ of the principal, but you can spend the ‘golden eggs’ of the earned income! The bigger the endowment, the bigger the payout each year.
Non-profit organizations usually must fundraise for yearly operating costs. Endowments are a way to build long-term funding, ensuring important work can get done in communities year after year. Many organizations have endowments. Healthy and vibrant places require investment in schools, housing, main streets, businesses, hospitals, and much, much more. These endowments can help ensure charitable organizations, schools, and communities have ongoing, reliable support.
The SLCF endowment pays out about 4% a year (a pretty standard endowment payout percentage). The SLCF endowment holds more than half a million dollars currently. That means our endowment payout is about $20,000/year. And will go on forever. This translates into stability – the SLCF will ALWAYS be here to support Seeley Lake. And now the SLCF endowment is $10,000 larger than it was a month ago. I think this story illustrates how powerful a gift can be – not only for the person making it but also for their organization and endowment of choice and for the place or cause they love. What a legacy!
To sum up, if you are looking for ways to give back to the causes and places you love, there are a lot of interesting options out there. Be sure to explore how you can leverage your gifts to get the most bang for your buck. This might include RMDs, QCDs, or other complicated-sounding acronyms. And even if these numbers feel out of reach or RMDs don’t pertain to you yet, the good news is you can learn about these strategies. They might one day help you get a good deal on giving back to the causes you care about.
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