Key Points Covered in this Podcast:
- Nonprofits are adapting to uncertain federal funding by focusing on resilient fundraising strategies and engaging younger donors through storytelling and digital content.
- Tax-efficient giving, such as donating appreciated stock instead of cash, allows donors to maximize their impact while minimizing their tax burden.
- New tax legislation introduces a non-itemized deduction for charitable contributions, allowing individuals to deduct up to $1,000 and married couples up to $2,000 in addition to the standard deduction.
- Individuals over 70.5 can utilize Qualified Charitable Distributions (QCDs) from their IRAs to satisfy Required Minimum Distributions (RMDs) tax-free, up to $111,000.
The more friction you can remove in that donor engagement experience, the better, and the more you know what to ask for and how to position certain things and show value to donors who already want to give to you, the better you are positioned as a nonprofit.
Transcript
The content shared on Your Life, Your Wealth Network reflects the views of the host and guests of the program only, and are not necessarily the views of Cordasco Financial Network or its advisors. This media production is educational in nature and should not be construed as financial, legal, or tax advice or a solicitation or presentation of sale of any financial products or solutions. Please consult a professional prior to making any financial, tax, or legal decisions.
Welcome to the Your Life Your Wealth Network, helping you find clarity and comfort for your life and wealth.
John Walker
Hey, welcome to the Your Life Your Wealth podcast. I’m John Walker, Regional Vice President at Mercer Advisors. Always a pleasure to be with you. And today we have a special guest, and we’re going to talk about not only giving and the charitable efforts that we help families and support families in their endeavors with, but also some of the changes to the foundation and giving landscape that have been created by the new tax bill that was signed into law last year. So the One Big Beautiful Bill has shifted the landscape when it comes to charitable giving, and to help us have that conversation and how it might impact you and your family if you’re either a part of an organization or if you are charitably inclined, there are some things you really should be aware of. It’s vital that you think through this because it may change your financial plan for the year. To help me have that conversation, my good friend and colleague, Mr. Jason O’Meara. Jay, welcome to the program.
Jason O’Meara
Thanks, John. Thanks for having me back.
John Walker
And to really add some color and insight into this, I’m privileged to introduce our head here of Mercer Advisors of Institutional Partnerships, Mr. Drew Ellis. Drew, thanks for joining us.
Drew Ellis
John, Jason, pleasure to be here with both of you guys.
John Walker
This is an important topic, right? There are some things that have really shifted. So, as I said, whether you’re a part of an organization, or if you are supporting one that’s important to you, you know, there’s some things you really need to be aware of, and I think before we dive into some of the specifics, Drew, maybe if we could help our listeners understand how the landscape itself has shifted over the last year or two. As a member of a board here of a local nonprofit in Philadelphia, we’ve certainly seen a lot of changes in how giving is represented and how families are approaching and how organizations are approaching donors.
Drew Ellis
Yeah, it’s 100% right, John, and you mentioned your board involvement. I’m a nonprofit board member myself, and maybe just taking one step back before we start talking about everything that has changed over the past couple of years. I can just talk a little bit about how we engage with nonprofits, how we kind of sit between the nonprofits that we work with and the families who ultimately give to those nonprofits. But maybe, like you mentioned, John, I represent institutional partnerships at Mercer Advisors. So for the listeners that might be less familiar with our institutional efforts, in addition to serving as a family office for tens of thousands of individual families, we as Mercer Advisors are also honored to work with almost 200 nonprofits across the country.
And help them build resilient investment portfolios for endowment accounts, for operating portfolios, for reserve accounts and the like, but also do a lot of advisory work with boards of those nonprofits that we’re honored to work with, helping them think through a wide variety of different governance topics, helping them through strategic fundraising opportunities, leveraging some of the in-house folks that we have like yourselves, like our estate and tax teams, that advise individual clients on their own philanthropic giving, making those same resources available to those nonprofit clients. And really what I wanted to focus in on is that the governance and the fundraising pieces of that partnership model with these nonprofits have really been in focus for us over the past couple of years.
You know, a lot of times, historically, we talk about investment performance of these portfolios, but now in over the past couple of years, more so than any time in history, nonprofit leaders have really been coming to us, talking about this changing landscape that exists in the nonprofit world. Federal funding is very much in focus right now. And federal funding to nonprofits, federal funding to all these different non-governmental organizations, federal funding to direct resources that exist in our communities has really never been more uncertain.
And really what that has caused a lot of nonprofits to do is take a step back and really think about how they’re running the nonprofit as a business, and think about opportunities to build resilience into how they’re running that business from a technology standpoint, from a hiring standpoint, from a talent standpoint, but importantly, from a fundraising standpoint.
A lot of these nonprofits rely pretty heavily on federal grants, on state grants, in addition to actually going out to donors and engaging with them on direct cash and appreciated security donations and all of these different types of things. But one conversation that we’ve been having over and over again is with a nonprofit that is heavily reliant on federal funding, really taking a step back and saying, hey, what happens to me as an organization, the good that I’m able to do in support of my mission if that big component of our revenue goes away and we’re forced to kind of take a step back and engage with donors on different types of giving programs and asking for donations from new cohorts of donors and all of these different types of things.
Jason O’Meara
What are some ways that you’re seeing that some of these nonprofits are kind of attracting new donors? Are there any programs, actions, activities you’ve been seeing?
Drew Ellis
So it’s a mixed bag, Jason, to be completely honest with you, and we always say there’s no one size fits all type of approach for attracting these types of things. One thing that I have seen always, but really over the past couple of years come into more focus has been on telling impactful stories to potential donors and doing it with a marketing sort of lens in place and getting those stories out in a variety of different ways.
So, we actually commissioned a big study a couple of months back on how different generations give, recognizing that there’s this mass wealth transfer that’s happening as the silent generation and baby boomers start to give to their kids as they get older. Obviously this is probably not going to be a surprise to anybody, but younger generations give differently than older generations.
Jason O’Meara
Right, right. Younger generations do everything differently than 100%.
Drew Ellis
So why would this be any different? Exactly. And you know, I think everyone always kind of thinks of as like, hey, charities, they do these big black tie galas. They might do a silent auction, but fundraising for a lot of these nonprofits for so long has been built on direct mail, sending annual reports out to their donors, doing one or two big galas where everyone comes up and dresses up really fancily and you hear about the great work that an organization is doing. But what we have found is that younger generations don’t necessarily want to attend a big fancy gala.
Jason O’Meara
Yeah, I don’t want to rent a tux. The money I’m spending on renting a tux I’m gonna just give you.
Drew Ellis
That’s exactly right. And you know that is very common with younger generations, Jay. So I think the nonprofits that we have been seeing as super successful in this younger generation donor engagement type of mindset have been uber focused on showing the actual good that their nonprofit is doing and telling that story in ways that people now consume content. So doing it in short form video, doing it by having it on social media and all these different types of things. So I think the people that are kind of in this mindset and futureproofing their fundraising strategy are going to be more focused on telling stories, doing it in a way that people consume content now, and focusing any sorts of events less on big, you know, black tie galas and more on experiential types of experiences, where people can feel like they are actively participating in that nonprofit’s mission. So smaller events, real impact, quantifiable impact and storytelling.
Jason O’Meara
You have the actual nonprofit, the mission, but then we have donors, right? The people who are donating to, and that’s what we’re trying to track. And one of the things that I’ve seen in the past is basically seminars for their donors to learn how to donate effectively, right? Cash isn’t always the best to donate with, right? If you have a stock portfolio and you bought Apple back in the 90s, and right now it’s appreciated, you know, how manyfold at this point. If you sell that Apple stock, it’s a taxable event for you, right? The individual is paying or covering the long-term capital gains on that.
Jason O’Meara
Whereas if you were to donate some of that stock to a nonprofit, right? One of 501c3 who does not pay tax, right? They can sell that stock without incurring any kind of tax. And we’ve, I know John, we’ve covered this before quite a few times, but there are ways that you can be as tax efficient as possible with your donations, right? And again, tax efficient means you don’t have that extra layer of impeding between you and the mission, right? You know, where you’re getting your donation watered down by taxes. If you can, we can look at ways to do it as efficiently as possible.
John Walker
Jason, we talk about in terms of investment portfolios, tax drag, right, the impact of taxes on what it does to your overall investment portfolio, and we’re pretty forthright when we meet new families that one of the ways we tried to add value here at Mercer Advisors is by being tax efficient, right? One of the ways that we support not only the families that we work with, but even the organizations we support is this education component on how tax efficient giving can actually enhance your ability to support an organization, right? And countless stories we could tell, Jason, of meeting families that say, well, I just did this, and you find out they donated cash, and to do so, they drew it out of their IRA.
Where they sold an appreciated stock to do it. And you know, the diminished return on that is significant. It impacts that family and the organization that you’re trying to support. So, you know, you’re right, it’s sort of two sides of the coin here. How do we help organizations educate their donors and navigate this challenging landscape.
And for you listening saying, well, I’m not on a board and I’m not a part of the leadership team of a foundation, what does this mean to me? Well, if you are trying to support a cause, it’s really important you understand what has shifted in this landscape because the context is, as Drew started with, a lot of the funding sources that organizations rely on have become inconsistent or untenable or they’ve had to adjust to a new reality where they can’t rely on that consistently like they used to. So they’re leaning more heavily on folks like you to help support their mission. And so, you know, I think we’d be remiss to not talk about what has changed, right, because the tax laws around this have changed, and they’re impacting both, and Drew can share how they’re impacting organizations, but Jason, they’re also impacting our families that we help. And for us listening, you should be aware of how this will affect your giving plan for the year.
Jason O’Meara
Yeah, I think there’s, in my opinion, there’s two big opportunities here with the new one big beautiful bill coming into effect in 2026. One is, you know, there’s a non-itemized deduction that has popped in here, which is, I think, incredibly helpful, right? Before, if you didn’t itemize your deductions, if you just took the standard deduction.
In 2020 and 2021, if you’re married, you got $600 right? Worth of donations that you were able to deduct in addition to the standard deduction, right? That’s increased now, you know, if you’re single, it’s $1,000. If you’re married filing jointly, it’s $2,000. So in addition to your standard deduction, which is already lofty, right? You get to take, if you donate $2,000 you get to take another $2,000 in deduction, right? That to me is probably one of the easiest ones for people to take that everyone can take advantage of. I know there’s a lot of people out there donating more, you know, donating at least $2,000, right?
So, myself included, I know I give to various charities throughout the year, well over $2,000 but I don’t have enough deductions to go above the standard deduction. So this is one that’s gonna absolutely impact me immediately. On top of that, if you have an IRA and you’re over 70.5.
You should be making any charitable contributions via qualified charitable distribution from your IRA, right? It should come straight out. That cuts out all that middleman, right? For those of you who haven’t heard of this before, if you donate directly from your IRA, your retirement asset, right, your IRA directly to a nonprofit.
Then that actually satisfies part of your required minimum distribution. Now I know required minimum distributions don’t start at 70.5 anymore, but QCDs still do. Um, but if you get to the point where you have RMDs.
This would satisfy a piece of it. If you are looking to make this donation from a QCD, you can do up to $111,000 charitable contributions out of a QCD satisfying a good chunk of your required minimum distribution without taking the money out, paying the taxes, and then doing the contribution. It’s an easy way to satisfy your charitable intent while still maximizing your tax alpha.
Drew Ellis
The only thing I’ll add to that is, again, putting on my serving nonprofit hat. I think nonprofit leaders who are the ones actually going out asking for these different types of donations from donors, explaining qualified charitable distributions, obviously not acting as financial advisors themselves, but making these donors aware of all the different opportunities that they have to maximize the impact of their gift to the organization. The smarter they can be about that, the more they can talk intelligently about tax efficient giving.
The more that they have again the infrastructure set up to take in QCDs, to take in appreciated security gifts, all of these different types of things, you just wanna make it easy to say yes, easy, right?
Jason O’Meara
You wanna make it as easy as possible, put as few roadblocks in the way. That’s exactly right, you know, cause unfortunately, you know how it is. I mean, if somebody hits one stumble, most likely they walk away from it, right? So as a nonprofit, you want to make sure it’s as easy as possible.
Drew Ellis
I don’t have anything super quantitative to back this up, but I know people of my generation, millennials and younger. They’ll be scrolling through Instagram, they’ll see a story about something that grabs at their heartstrings. My wife and I donated to a goat rescue at the end of last year that was doing a big fundraising push, and they had helped a goat that just went through an amputation, and they had a great Instagram story about that, and both of us, like we were just immediately drawn to that, we said, hey, this is awesome. This is local to us, my goats, take my money. Exactly. And to that nonprofit’s credit, they made it super easy. They had a link, we donated, great, we got our email five minutes later that we can use to file our taxes for 2025, all those different types of things. So again, the more friction you can remove in that donor engagement experience, the better, and the more you know what to ask for and how to position certain things and show value to donors who already want to give to you, the better you are positioned as a nonprofit.
John Walker
And Drew, that’s such a great point for us to end on, right? If you are supporting an organization, if you are a member of a board, if you’re thinking about how you can give more effectively this year, we’re always here to help reach out to us.
We’re here to answer questions, you know, we have great expertise both on the individual and on the organization side. Drew Ellis, Director of Institutional Partnerships here at Mercer Advisors, and Jason O’Meara, our market leader here for Philadelphia, thank you guys so much for joining me for this really important conversation. Thanks again for having me, guys. So if what we discussed is resonating with you, if you are serving a foundation or on the board of an organization, if you are really thinking about your charitable intentions this year and how you can effectively give. If you have questions about this, we’re always here to help. You can call us anytime at 215-558-3500. That’s 215-558-3500, or you can email me at jwalker@merceradvisors.com.
John Walker: That’s jwalker@merceradvisors.com. And as always, if you’d like to learn more about how Mercer Advisors thinks about the investment landscape that we’re in, we’d highly encourage you to listen to our other podcast, Market Perspectives with our Chief Investment Officer, Mr. Don Calcagni, which you can find at merceradvisors.com under the podcast tab. I’m John Walker, Regional Vice President of Mercer Advisors. Thanks for being with us.
If you’re interested in learning more about applying the principles we discussed to your personal financial circumstances, please visit Cordasco Financial Network at CFNplan.com.
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