step-up basis Archives - IECF https://www.iegives.org/tag/step-up-basis/ Inland Empire Community Foundation Tue, 13 May 2025 19:54:27 +0000 en-US hourly 1 https://www.iegives.org/wp-content/uploads/2020/03/cropped-iecf-logo-icon-150x150.png step-up basis Archives - IECF https://www.iegives.org/tag/step-up-basis/ 32 32 Comparing two scenarios: Why the step-up in basis matters https://www.iegives.org/step-up-basis/ Tue, 13 May 2025 19:48:15 +0000 https://www.iegives.org/?p=23173 As you’ve watched the news about potential tax reform, a principle known as the “step-up in basis” might have caught your attention. Over the years, from time to time, draft legislation has proposed that this principle be changed or eliminated. Although tax law changes to eliminate the step-up in basis are not part of recently-introduced “death tax repeal” legislation, it’s still a good idea to be aware of the potential implications on the charitable giving strategies in your estate plan. The tax principle of “step-up in basis” means that the cost basis of inherited assets will be reset to their fair market value at the time of the owner’s death, effectively erasing any capital gains that accrued during lifetime. You and your advisors might have discussed this principle in deciding which assets to leave to a charity in your estate plan and which assets to leave to your heirs. The implications can be huge. Consider these scenarios: IRA to kids, stock to charity If you were to name your children as the beneficiaries of an IRA, and then provide for charitable gifts in your will or trust, your children will pay ordinary income tax on distributions from your IRA following […]

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]]> As you’ve watched the news about potential tax reform, a principle known as the “step-up in basis” might have caught your attention. Over the years, from time to time, draft legislation has proposed that this principle be changed or eliminated. Although tax law changes to eliminate the step-up in basis are not part of recently-introduced “death tax repeal” legislation, it’s still a good idea to be aware of the potential implications on the charitable giving strategies in your estate plan.

The tax principle of “step-up in basis” means that the cost basis of inherited assets will be reset to their fair market value at the time of the owner’s death, effectively erasing any capital gains that accrued during lifetime. You and your advisors might have discussed this principle in deciding which assets to leave to a charity in your estate plan and which assets to leave to your heirs. The implications can be huge. Consider these scenarios:

IRA to kids, stock to charity

If you were to name your children as the beneficiaries of an IRA, and then provide for charitable gifts in your will or trust, your children will pay ordinary income tax on distributions from your IRA following your death. Assets passing under your will or trust, such as appreciated stock, get a step-up in basis, but if a charity is the ultimate beneficiary, it doesn’t really matter because charities are not subject to tax. Tax result? Less than ideal.

IRA to charity, stock to kids

If, instead, you name your fund at the community foundation as the beneficiary of your IRA, the community foundation pays no income tax. Then, any stock that passes to your children through your will or trust will receive a step-up in basis, meaning your kids can sell the stock and avoid capital gains tax on the appreciation during your lifetime. Tax result? Very good!

Please reach out to the community foundation to learn more about leaving a legacy in your estate plan to support your favorite causes. We are happy to work with you and your advisors to maximize both the community impact and tax efficiency of your charitable gifts.

Please reach out to our Charitable Giving Team any time, and stay up to date on all the good work we’re doing through the power of philanthropy. Sign up for our eNewsletter, Philanthropy Matters, today.

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The team at IECF is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.

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]]> QCDs: Soon there may be more to love https://www.iegives.org/qcds/ Mon, 12 May 2025 17:35:23 +0000 https://www.iegives.org/?p=23142 If you are 70 ½ and older, by now you’ve likely heard about a charitable giving tool called a Qualified Charitable Distribution (“QCD”), allowing you to direct a distribution from your IRA to an eligible charity, such as a designated fund, unrestricted fund, or field-of-interest fund at IECF. With a 2025 limit of $108,000 per taxpayer, QCDs count toward required minimum distributions (RMDs) but are excluded from taxable income, which can help you avoid higher tax brackets and phaseouts of deductions. The IECF team is here to help you make the most of charitable giving tools, including QCDs. A frequently asked question about QCDs is whether they can be used to add money to a donor-advised fund. The answer is no–for now. While most public charities qualify as QCD recipients, donor-advised funds, private foundations, and supporting organizations do not under current law. Recently proposed legislation, however, aims to further expand QCD eligibility by allowing distributions to donor-advised funds. If enacted, this change would give you and other eligible donors even more flexibility in maximizing your philanthropy. Indeed, a donor-advised fund is often the “hub” of a family’s charitable giving because it makes it so easy to stay organized and track […]

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]]> If you are 70 ½ and older, by now you’ve likely heard about a charitable giving tool called a Qualified Charitable Distribution (“QCD”), allowing you to direct a distribution from your IRA to an eligible charity, such as a designated fund, unrestricted fund, or field-of-interest fund at IECF. With a 2025 limit of $108,000 per taxpayer, QCDs count toward required minimum distributions (RMDs) but are excluded from taxable income, which can help you avoid higher tax brackets and phaseouts of deductions.

The IECF team is here to help you make the most of charitable giving tools, including QCDs. A frequently asked question about QCDs is whether they can be used to add money to a donor-advised fund. The answer is no–for now. While most public charities qualify as QCD recipients, donor-advised funds, private foundations, and supporting organizations do not under current law. Recently proposed legislation, however, aims to further expand QCD eligibility by allowing distributions to donor-advised funds.

If enacted, this change would give you and other eligible donors even more flexibility in maximizing your philanthropy. Indeed, a donor-advised fund is often the “hub” of a family’s charitable giving because it makes it so easy to stay organized and track support to favorite charities over the years. It’s becoming common for a family to add to its charitable giving “portfolio” by establishing a designated or field-of-interest fund alongside the donor-advised fund, as well as giving to IECFs initiatives through the donor-advised fund. In many cases, family members also update their estate plans to include bequests to their funds at IECF.

A QCD is a wonderful tool, and we’ll keep our fingers crossed that it becomes even more wonderful. As always, IECF will keep you posted on this and other tax law changes that may impact your plans for supporting your favorite causes and the community we all love.

Please reach out to our Charitable Giving Team any time, and stay up to date on all the good work we’re doing through the power of philanthropy. Sign up for our eNewsletter, Philanthropy Matters, today.

  • This field is for validation purposes and should be left unchanged.

The team at IECF is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.

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