January 2025 Nonprofit News: What to watch in the new yearEngaging minds and hearts is crucial to attract legacy gifts
Philanthropy professionals have long recognized the importance of emotional engagement in fundraising, particularly during annual campaigns or initiatives focused on immediate donations. Indeed, recent research underscores the critical role of emotional intelligence in successful fundraising.
When it comes to charitable gift planning, however, such as helping a donor structure a legacy gift, it’s tempting to approach the process as a primarily rational exercise. This is understandable given the complex tax and legal considerations involved in structuring various giving vehicles such as trusts, bequests, foundations, donor-advised funds, and beneficiary designations. Of course, it is crucial to address technical aspects to ensure donors’ charitable intentions are fulfilled with tax benefits and financial goals in mind.
At the same time, you’ll want to be sure that the emotional dimension of charitable gift planning isn’t overlooked. Legacy giving offers psychological benefits. Legacy gifts, in particular, can offer can extend the donor’s impact and perpetuate their values beyond their lifetime. No doubt you’ve watched this in action as you’ve helped donors structure legacy gifts, and perhaps you’ve even played a role in facilitating a donor’s unique emotional and reflective process when considering such a gift.
Encourage your donors to consider the benefits of a legacy gift:
–Create a lasting impact that aligns with their personal values
–Leave a meaningful legacy that extends beyond their lifetime
–Culminate a long history of support for your organization in a significant way
To maximize success in legacy fundraising, nonprofit organizations should strive to engage both the hearts and minds of donors. Consider sharing inspiring stories and testimonials that illustrate the long-term impact of legacy gifts. To further build an emotional connection, you might even offer the donor exclusive events or site visits to help donors visualize the future impact of their gifts. On the rational side of the equation, you’ll find that working with the community foundation team helps you provide clear information about the tax and legal aspects of various giving vehicles. Our team can also help you address concerns about administrative complexities and provide support throughout the giving process. Please reach out anytime to the team at the community foundation to help you implement a balanced approach to tap into donors’ emotional desires to make meaningful, lasting gifts while also ensuring that all technical aspects are properly addressed. We are here to help you develop more meaningful connections and ultimately achieve greater success in securing legacy gifts to keep your mission strong for generations to come.
What to watch: Potential tax law changes impacting your fundraising efforts
2025 is shaping up to be a very interesting year for tax policy, to say the least!
The Republican-led Congress and White House are aiming to use the budget reconciliation process to extend the Tax Cuts and Jobs Act (TCJA) of 2017. This process allows them to bypass typical filibuster rules and require only a simple majority of 51 votes in the Senate. So what does this mean to you and your colleagues and the way you should approach your planned giving efforts ?
The community foundation will help keep our nonprofit partners up-to-date on potential tax law changes in 2025 related to the scheduled expiration of provisions in the Tax Cuts and Jobs Act (TCJA) of 2017, and what might happen if the TCJA provisions wind up expiring instead of being extended.
Here are three things that are important to know:
Potential reduction in estate and gift tax exemption
The estate and gift tax exemption is slated to decrease significantly at midnight on December 31, 2025. Currently, the exemption is $13.99 million per person. After 2025, this could be reduced to approximately $7 million per individual and $14 million per couple. This change may impact charitable giving strategies, particularly for high net-worth donors who use estate planning as part of their philanthropic efforts.
Changes to charitable deduction limits
The TCJA temporarily increased the deduction limit for cash contributions to public charities from 50% to 60% of adjusted gross income (AGI). If this provision expires, the limit may revert to 50% of AGI. This reduction could affect the tax benefits for donors making large charitable contributions, potentially influencing their giving decisions.
Increase in standard deduction and impact on itemized deductions
The TCJA significantly increased the standard deduction, which led to a reduction in the number of taxpayers itemizing deductions. If these provisions expire, the standard deduction could revert to lower pre-TCJA levels. This change might increase the number of taxpayers who itemize, potentially making charitable deductions more attractive for a broader range of donors. However, it’s important to note that the overall impact on charitable giving could be complex, as it may be influenced by other factors such as changes in tax rates and the reinstatement of certain itemized deductions.
These potential changes underscore the importance for charity fundraisers to stay informed about tax law developments and to work closely with donors and their financial advisors to navigate the evolving landscape of charitable giving strategies.
For context, if you like to get in the weeds, we recommend taking a look at a recent study that breaks down the flow of capital into the nonprofit sector. Please reach out anytime to discuss strategies for growing your endowment even in the midst of tax policy discussions at the federal level. We will help you navigate uncertainty about what changes may be ushered in by lawmakers as the new administration steps in and Congress gets back in session. It’s critical to keep up the momentum of regular donor cultivation, and, as always, we are here to inspire and support you along the way!
Local Grant Opportunities
We are pleased to share three opportunities for local nonprofit partners.
The annual application to join Spur Local’s network of nonprofit partners is open through February 11, 2025. Spur Local, formerly the Catalogue for Philanthropy, as a DMV-based nonprofit focused on building a more equitable and just local community by raising the awareness of, and building capacity for, local nonprofits through connecting organizations with donors and providing trainings regarding nonprofit management, amongst other initiatives. You can learn more about eligibility requirements, upcoming application webinars, and how to apply on their website.
Spur Local is also running an identity-based ED cohort in 2025 for BIPOC (Black, Indigenous, People of Color) Executive Directors, offered in partnership with LeaderBridge, an initiative of the Crimsonbridge Foundation. This cohort offering is available to BIPOC Executive Directors of local nonprofits headquartered in the DMV and doing the majority of their work locally. If you know someone else who may be interested in this opportunity, please feel free to share it with them! Participating organizations do not need to be Spur Local partners to participate in this cohort. Learn more and sign up here.
The Dominion Guild, which has been supporting nonprofits in Northern Virginia since 1986 holds a popular annual “Merry Market” fundraiser. Apply here to be a beneficiary of the Market next year. Applications are due by February 1st.
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This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.