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This year has been difficult by any metric. Without question, advanced charitable techniques like planned giving are far from the minds of many. But it can be particularly valuable for donors motivated to give during this unusual time.
When there is a clear need, Americans consistently are compelled to give. Indeed, many charities (including community foundations and national donor advised funds) report significant upticks in grantmaking by their donors.
With that context in mind, it may be helpful to describe some of the trends in the first half of 2020. In terms of overall activity, the first two months of 2020 were much busier than normal. This may have been driven by advance planning in anticipation of November’s election.
With the onset of COVID-19 throughout the country in March, along with related lockdowns, that activity quickly stopped. There were initial difficulties as many advisors were no longer working from their offices, and donors were often limited in their ability to meet with those same advisors. Further, gifts that required filing with government offices – like real estate donations needing to be recorded with local counties – slowed considerably. Similarly, in the spring, donations of private appreciated stock ground to a halt. We expect this was related to a pause in mergers and acquisitions due to the lockdown.
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However, as the weather improved and the summer season began, gift planning activities resumed. There appears to be much more movement in capital markets, meaning an increase in charitable donations by business owners with significant stock appreciation and upcoming liquidity. Many contributions have some nexus with private equity.
One early 2020 development on the life income side was an examination of the new 2019 SECURE Act, which removed the stretch IRA technique. That technique allowed non-spousal IRA beneficiary distributions to (generally) take place over the beneficiary’s lifetime. The SECURE Act ended that allowance. We, along with other planned giving advisors, looked for ways to combine IRA beneficiary designations with life income gifts – specifically charitable remainder trusts and testamentary charitable gift annuities.
Throughout 2020, we have seen relatively sustained interest in real estate donations (and sales of donated real estate). High end commercial property donations tended to stall out, presumably because of expected difficulty finding buyers and the prospect of extended work-from-home planning by employers. That trend has quickly reversed and is gaining steam into the fall.
On the other hand, residential real estate donations have sustained a strong level of donor interest. Similarly, sales of donated residential properties have continued the pre-COVID trend of quick sales and strong buyer interest. This is likely tied to the historically low mortgage rates, which have made homebuying appealing for many. For charities, who do not typically hold real estate longer than necessary, this is good news.
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Though first half of 2020 was rocked by the pandemic and lockdowns—it has been encouraging to see continuing enthusiasm for charitable giving and sophisticated planned giving techniques. We have seen this in ongoing interest in real estate donations and in a quick revival in gift planning for business interests in late spring and early summer.
While we all are wishing for a quick return to normalcy, whatever that may mean going forward, the renewed donor focus on deploying assets for direct charitable purposes is promising. We continue to see the use of noncash assets as an effective way to get dollars in the hands of nonprofits who need them. Hopefully, this donor enthusiasm lasts while the pandemic becomes a distant memory.