Taking stock of the past year, we saw the stock market plummet during the onset of the COVID-19 pandemic and then “zoom” back as workers adjusted to working remotely, stimulus checks hit bank accounts, interest rates remained low, and the economy slowly reopened. Looking ahead, our investment management firm, SEI, recently published their view of the economy, stating, “We anticipate ongoing signs of a global economic recovery as COVID- 19 abates and activity normalizes. In the meantime, fiscal spending and accommodative central-bank policy should sustain gross domestic product (GDP) growth and eventually cause inflation to rise.”
While nobody can predict the future, in this column 11 months ago, we shared SEI’s analysis that within 12 months after each deep selloff over the past 35 years, every rebound saw a gain, averaging 23% increases. So far, as of this writing, this trend is on track for the year following last year’s drop, with the S&P 500 up approximately 70% from last March’s low and up about 15% from last February’s record high (at the time). Hopefully, this growth will continue for the foreseeable future.
Switching gears, let’s take stock of charitable giving tax strategies, with Tax Day arriving on April 15. As you meet with your trusted tax advisor, consider the following plan to share with them, as it may help your tax situation:
Step 1: Open a donor advised fund (DAF) with the Jewish Community Foundation, Inc. Going forward, this could be your charitable giving hub, via your own personalized online account. Selling appreciated stocks, ETFs, bonds, or other assets held for over one year? Consider donating them to your DAF, instead, to avoid capital gains taxes. Then, your fund is professionally invested and may grow. Ultimately, you can recommend grants from your fund at any time to any registered nonprofit. Your DAF becomes your best tool to support your philanthropy, and, by launching a DAF now, you will be well prepared to save on taxes next year.
Step 2: Create a legacy by leaving an after-lifetime legacy gift. This can be as simple as updating your beneficiary designations in your IRA, life insurance policy, or even checking account. You can do this at no cost and with no minimum dollar amount. You can also include a gift in your will that you are preparing or add a codicil (amendment) to an existing will. A legacy gift to the JCF will be added to your named endowment fund, which will provide annual income for many generations to any nonprofit program or service that you cherish, such as the Jewish Federation of Southern New Jersey. Your estate may even realize important tax benefits.
Step 3: If you are 70 1/2 years young or up, consider making an IRA qualified charitable distribution (“QCD,” also known as an IRA charitable rollover) as part of your charitable giving plans. This is a direct charitable contribution enabling you to avoid income taxes while having the QCD count toward your annual required minimum distribution (RMD), starting at age 72 1/2. (Note that your QCD should happen first, perhaps earlier in the year, before taking income, to satisfy the “first dollars out rule.”) Your QCD can be added to your endowment fund with the JCF, making it a wonderful way to witness your legacy benefiting others during your lifetime.
If you are considering any of these three steps, please contact the JCF. We are here to help you take stock of your charitable giving dreams and ensure that they are met.
Happy, healthy Pesach, from all of us at the JCF.