A donor to Westview Boys’ Home in Hollis, Oklahoma, for 20 years, Ralph Pickle established the Ralph Pickle Family Fund at OCCF through his estate in 2017, and now his impact is stronger than ever before.

To achieve the best tax outcome and overall charitable result, it’s critical to undertake a careful process along the general lines of the following (depending of course on the specific situation):

1. You’ll need to determine that the real estate is a long-term capital asset (held for more than one year). That may sound obvious, but we’ve talked with advisors and their clients in the past about a potential gift of real estate and it turned out that the property was only recently purchased. The fair market value deduction (versus cost basis deduction) is available only for a long-term capital asset.
2. You’ll want to work with the team at the Community Foundation to structure a donor-advised or other type of fund to receive the asset, if your client does not already have a fund in place. The deductibility rules are different for real estate gifts to a public charity (such as a community foundation fund) versus a private foundation. Again, clients may not be aware of the pitfalls here.

Sometimes we meet with advisors whose clients are very close to transferring real estate to a private foundation, which could be devastating in terms of missed tax savings.

3. You’ll need to verify that the property is not subject to a mortgage or other debt. Transferring encumbered property triggers important considerations with potentially significant tax consequences. The lender might not even allow a transfer in the first place. If you’re dealing with commercial property, you’ll also need to check to be sure that the property is not subject to “recapture” if your client has previously taken depreciation deductions.

4. You will need to determine whether the property produces income and discuss this with the Community Foundation. Income-producing real estate can potentially trigger “UBIT” (unrelated business income tax) for the Community Foundation. Although there are exceptions and strategies to minimize UBIT’s impact, it’s important that this issue be dealt with up front.

5. You may need to work with the Community Foundation to determine whether an environmental audit is required for the property.

6. Verify that the client has not entered into any discussions about an imminent sale of the property. Even if the Community Foundation will sell the property shortly after receipt (so that the proceeds can flow into the donor-advised or other fund to support the client’s favorite causes), your client cannot have pre-arranged this sale. Doing so could trigger the IRS’s step transaction doctrine and wipe out the tax deduction.

7. Importantly, ensure that the client obtains a qualified appraisal to determine the fair market value of the property. This is critical to obtain a tax deduction, and the appraised value must be reported to the IRS on a Form8283 in strict compliance with the IRS’s rules.

8. Finally, transfer the property with the appropriate legal documents, including a deed.

OCCF donors Don and Carolyn Zachritz at the Oklahoma City Zoo.

Notably, two developments could have a big impact on your work with these clients:

• The estate tax exemption sunset set to occur at the end of next year continues to loom large. Without intervening legislation, a lot more of your clients will need to wrestle with the reality that their estates will likely be subject to a hefty tax, causing many clients to rethink both the timing and methods to transfer business interests. As a result, making gifts of closely-held business interests to a fund at the Community Foundation is likely to become more attractive to a broader cross-section of your client base.
• Valuation has always been a critical factor in any type of tax or estate planning. This is certainly still the case with substantiating the value of closely-held business interests that your clients transfer to a charity, such as a fund at the Community Foundation. And now, the additional wrinkle presented by the Supreme Court’s decision in Connelly v. United States makes things even more interesting. The Connelly decision impacts the way business interests are valued for estate tax purposes. In Connelly, the Supreme Court held that life insurance proceeds ought to be included in the valuation of a company without offsetting the redemption obligation. This could translate to higher taxable estates for your business-owner clients, creating further incentive to leave a portion of closely-held stock to charity. The decision is also a reminder that careful planning can potentially avoid pitfalls.

Please reach out to the Community Foundation to learn more about how our team can help as you work with your business-owner clients to navigate legal and tax developments that could significantly impact future plans for their privately-held companies.

The Rees family uses their fund at OCCF to support new and innovative efforts to end generational poverty.

These parents believe that the challenges and struggles along the way will ultimately enrich their children’s lives with intangible benefits that are far greater than the obvious benefits that come with gifts or an inheritance of significant financial resources.

As you work with clients who feel this way, please reach out to the Community Foundation. Every day, our team works with families in this exact situation. We’ll help you evaluate strategies such as:

• Establishing philanthropic components of an estate plan using charitable trusts as a ‘multipurpose estate planning tool’ to provide tax benefits, annual income and establish generational philanthropy.
• Use of a donor-advised fund at OCCF to help you to create a meaningful relationship between YOU, as an advisor, and your client’s family to increase charitable impact, succession planning for family wealth and family involvement. Many of our donors at OCCF create Legacy Funds with terms of the fund providing that the children step in as successor advisors following the clients’ deaths. As successor advisors to the donor-advised fund, the children can work with OCCF to recommend

Please reach out to the OCCF team anytime. We look forward to exploring strategies to help your clients meet their financial and tax goals as well as honor their wishes for children to live happy and productive lives.

Donor-advised, field-of-interest, designated, unrestricted and endowment funds at OCCF are flexible and effective charitable recipients of both lifetime and estate gifts. For some clients, you may wish to begin exploring a comprehensive, multi-generational wealth transfer plan, potentially using key tax-planning vehicles:

• Charitable Lead Trust (CLTs) may be particularly effective in the current environment. These trusts can provide income to your client’s fund at OCCF for a set period, with the remaining assets passing to family members. Right now, the higher exemption allows for potentially significant initial funding of such trusts because the value of the remainder interest counts toward the client’s estate and gift tax exemption.

• A Generation-Skipping Trust is an irrevocable trust that can benefit a client’s grandchildren and later generations. This trust utilizes a client’s Generation-Skipping Transfer (GST) tax exemption, which parallels the estate and gift tax exemption. This type of trust could allow a client to take advantage of the higher exemption before it potentially decreases in 2026. In some states, it is possible for these trusts to go on for many generations in a “dynasty” format, such that each generation benefits from the trust’s income (and potentially principal for health and education) without the trust’s assets being included in the beneficiaries’ estates for estate tax purposes.

• Multi-Generational Funds at OCCF In addition to charitable lead trusts or generation-skipping trusts, your clients can establish Donor-Advised Funds (DAFs) at the Community Foundation that can function much like a family foundation. With a DAF, successive generations can serve as advisors or the Community Foundation can step in after the first or second generation to recommend grants from the fund to carry on a tradition of supporting the causes most important to your clients.

The team at the Community Foundation looks forward to working with you to achieve your clients’ long-term charitable goals.

Outdoors at local coffee shop Not Your Average Joe.

Example:  A swimming pool company owner thinks it is a great idea to set up a charity to build swimming pools at community centers to give more kids access to water sports. The company could donate tax-deductible dollars to the charity, asking its suppliers and customers to do the same. The company’s executives would serve on the board of the charity, and the charity would purchase swimming pools from the company to carry out its mission.

Is this a good idea?

No. This strategy plays fast and loose with the rules. Beyond setting up an obvious conflict of interest, this practice would mean that a company effectively would be using charitable funds to benefit itself. This is not a “charitable purpose” in the eyes of the IRS and could result in the loss of the charity’s tax exemption. Plus, if the news got out about this structure, the company could suffer reputation damage.

The company, its executives and the community are all better off if the company pursues more transparent and ethical charitable strategies such as establishing a corporate fund at OCCF, setting up a volunteer program for employees, establishing a matching gifts program or aligning with wholly-independent charities on cause-related marketing partnerships.

Reach out to OCCF to learn more about effective corporate philanthropy strategies. We are here to help as you work with your clients to achieve their charitable goals both at home and in the workplace.

Castle Point Wealth Advisor’s Kendall King talks tax-wise giving.

There is, however, a potential solution that can satisfy both your clients’ emotional needs and their philanthropic goals: They can donate shares of the highly-appreciated, emotionally significant stock to their fund at the Community Foundation. Then, they can purchase shares of the same stock in their personal investment portfolio.

As you share this strategy with a client, be sure to acknowledge the emotional value of the stock and emphasize the client’s opportunity to maintain ownership in the company. Building on this, you can show your client how the tax benefits of giving stock allow them to make an even bigger difference than if they’d given cash instead.   As always, the Community Foundation can help you assist your clients with selecting the best assets to give to charity, evaluate tax implications of various giving strategies and structure gifts to achieve strong community benefit.

When your client is getting ready to make a contribution to a fund at the Community Foundation or other charity, remind them not to automatically reach for the checkbook! Here are other (and typically more tax-savvy) options to consider.

As is the case with a cash gift, OCCF will provide a receipt for tax purposes, and the gift of stock will be valued at the shares’ fair market value medium price of the high and low of the day on the date of transfer. When the Community Foundation sells the shares, the proceeds flow into the client’s fund without any reduction for capital gains taxes. This is because the Community Foundation is a 501(c)(3) charitable organization and therefore does not pay income tax. If, however, the client sold the stock then transferred the proceeds to a fund at the Community Foundation, then the client would owe capital gains tax on the sale. Especially in cases where the client has held the stock a long time and it’s gone up significantly in value, the capital gains hit can be big.

• Closely-held Business Interests – Our team is happy to work with you and your client to explore how your client might give shares of a closely-held business to a fund at the Community Foundation.

Not only will transfers be eligible for a charitable deduction during the year of transfer (and at fair market value if the shares are held for more than one year), but these gifts could also potentially reduce income tax burdens triggered upon a future sale of the business. Be sure to talk with our team well before any potential sale is in the works; otherwise, you could lose out on tax benefits. Gifts of closely-held business interests are powerful but can be tricky to administer.

• QCDs from IRAs – As always, keep in mind that the Qualified Charitable Distribution (QCD) is a very smart way to support charitable causes.

If your client is over the age of 70 ½, they can direct up to $105,000 from an IRA to certain charities, including a field-of-interest, designated, unrestricted or scholarship fund at the Community Foundation. If your client is subject to the rules for Required Minimum Distributions (RMDs), QCDs count toward those RMDs. That means your client avoids income tax on the funds distributed to charity. We can work with you and your client to go over the rules for QCDs and evaluate whether the QCD is a good fit.

• Real Estate – Your client’s fund at the Community Foundation can receive a tax-deductible gift of real estate, such as farmland or commercial property, in a variety of ways.

An outright gift is always an option; lifetime gifts of real estate held by the client for more than one year are deductible for income tax purposes at 100% of the property’s fair market value on the date of the gift, which also avoids capital gains tax and reduces the value of your client’s taxable estate. Other ways to give real estate include a bargain sale or a transfer to a charitable remainder trust, which produces lifetime income for the client and the client’s family.

• Life Insurance – Don’t overlook life insurance as an effective charitable giving tool.

Life insurance can be used charitably, whether by naming a client’s fund at the Community Foundation as the beneficiary or, in the case of whole life policies, naming the fund as beneficiary and transferring the policy itself. If your client transfers a policy, they may be able to make annual, tax-deductible contributions to the Community Foundation to cover the premiums.

• Other “Alternative” Assets – The Community Foundation is happy to work with you and your clients to explore options for giving other non-cash assets to funds at the Community Foundation, including:

*Oil and gas interests  *Negotiable instruments *Cryptocurrency *Artwork *Collectibles

A major advantage of field-of-interest funds, designated funds, scholarships and unrestricted funds is that they are eligible recipients of the popular and tax-savvy planning tool called the Qualified Charitable Distribution, or “QCD,” available to your clients who have reached age 70 ½.

• Scholarship Funds – Did you know OCCF is the largest independent scholarship provider in the state of Oklahoma? We have several donors funding their scholarships through QCDs now and increasing the scholarship’s impact with a testamentary IRA gift later.

• Field-of-Interest Funds – Did you know OCCF has funds that provide grant support for the following cause areas? Many of our donors love that they can provide support for their favorite cause areas and appreciate the accountability for the funded projects.

           *Health Care Access *Children *Beautification *Animal Welfare *Services for Older Adults *Education

• Designated Funds allow your client to provide support for specific organizations they love.