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Welcome to the LACGP Newsletter. This e-newsletter is sent to members on a monthly basis. The e-newsletter provides links to this page. Please see below for the items that appeared in the October 2020 issue.

Jane Peebles Induction Into the National Association of Charitable Gift Planners Hall of Fame

By Patience Boudreaux

I’ve always known we, in Southern California, are lucky to have a wealth of expertise present locally in our learning community. Earlier this month, I was reminded of just how lucky we are when I learned Jane Peebles of Karlin & Peebles, LLP, was being inducted into the National Association of Charitable Gift Planners Hall of Fame.

In 2018, Michele Bignardi and I, as co-chairs of the Western Regional Planned Giving Conference, were excited to honor Jane with LACGP’s Distinguished Service Award. Our motivation for recognizing Jane was rooted in our experience as her students in the Certified Specialist in Planned Giving program at the American Institute for Philanthropic Studies. Jane has taught International Gift Planning in the program since the mid-90s and made a complicated and unfamiliar topic approachable, understandable, and exciting to explore. When we asked for recollections from LACGP members about how Jane had contributed to their development as gift planners, we received so many examples of how she had provided guidance to nonprofits and donors alike, guidance that helped create opportunities for transformational giving.

I encourage all of you to watch both Kimberley Valentine’s video highlighting Jane’s meaningful contributions to the field of gift planning and Jane’s video reflecting on the honor of being inducted into the Hall of Fame. Each of us are lucky to be able to help clients and donors achieve incredible impact through charitable giving and lucky in the excellence of our colleagues within this professional community like Jane. I hope you all plan to join me in connecting with colleagues like Jane at our November General Membership Meeting on November 19!

The Mindset of the Investor During the Pandemic

By Juan C. Ros, CFP®, AEP®, CSPG, CEPA

We are living in a “new world” as we all face a pandemic together. Planned Giving officers and other development staff are unsure how their donors are feeling. We asked Juan Ros, financial advisor at Forum Financial Management, LP and an LACGP past president, how the volatile markets may be affecting the mindset of donors. Read on for his analysis.

When the new year arrived on January 1, no one could have predicted what would happen just a few months later and the impact on our lives. 

The coronavirus pandemic of 2020 has touched everyone around the world. It has led to monumental shifts in our society, from the practices of social distancing and wearing masks to working from home, from distance learning for school-age children and college students to the now-dreaded “Zoom fatigue.”

Yet during the ongoing pandemic, there is hope. As of this writing, four COVID-19 vaccine candidates have entered large-scale Phase 3 clinical trials in the United States.[1] Even as many businesses have been forced to shut down, close or reduce hours, millions of other businesses of all sizes have sprouted up to meet consumer needs and demands.[2]

For investors in the markets, it has been an unusually dramatic and volatile year. On December 31, 2019, the S&P 500 Index closed at 3,230. The S&P 500 reached an all-time high on February 19 of 3,386 before plunging 33.93% in less than five weeks to a low of 2,237 on March 23. Then, the S&P 500 recovered 17.57% in the next three trading sessions, to 2,630 on March 26. On September 2, the S&P 500 closed at a new record high of 3,580 — a rebound of 60% from the March 23 low!

When markets are as volatile as they were earlier this year, many investors can get nervous and perhaps panic. It is understandable, as emotions take over during times of extreme stress, in particular fear — fear of the unknown or fear of losing one’s savings permanently.

In my practice, I was on the phone with clients and answering emails from clients nonstop from mid-February until late March, reassuring clients and addressing their concerns over the market volatility.

When it comes to your money, extreme emotional stress and your investment portfolio do not mix well! Fear and anxiety can lead to poor financial decision-making that can cause irreparable damage to a portfolio — damage such as selling everything and going to cash at the worst possible time, and then not knowing when to get “back in” and missing out on a market rebound. 

At our firm, we like to say that a portfolio is like a bar of soap — the more you touch it, the less of it you have. Indeed, sometimes doing nothing is better than doing something, particularly in periods of extreme market volatility.

There are some principles of investing that are important to remember when markets are going crazy: 

  • Over time, markets have rewarded investors for the risk they take as market participants.
  • Market downturns are as impossible to predict in advance as market rebounds, which are usually swift and unexpected.
  • Over any given period, there will be good (positive) and bad (negative) market years. No one knows ahead of time which will be good, and which will be bad. But overall, going back to the 1920s, there have been far more good years than bad years. 

So, what is an investor to do? How can one be better prepared for the next market correction? By following several simple investing best practices, you can feel more confident that your long-term strategy will work for you:

  • Be well-diversified. Proper diversification is the cornerstone of prudent investing. And to be properly diversified means having exposure to a wide range of asset classes: U.S. stocks, international stocks, emerging market stocks. Within those categories, have exposure to large and small company stocks, as well as growth and value stocks. The adage still holds true: Do not put all your eggs in one basket.
  • Have the right asset allocation for yourself. Asset allocation refers to the percentage mix of stocks and bonds within your portfolio. The more stocks you own, the more aggressive your portfolio. The proper asset allocation depends on a variety of factors: your risk tolerance, your age, your time horizon, your other short- and long-term goals and objectives. A good financial advisor can help you arrive at the ideal asset allocation for you and monitor it over time.
  • Once you have chosen an asset allocation, stick with it no matter what the market is doing. Changing your asset allocation should be infrequent, a result of changes in your goals and objectives or other life events. Short-term market volatility is not an excuse to change your allocation!
  • Remember that market downturns are a buying opportunity. When markets correct, look at it like any sale! The share prices of stocks are suddenly available at a discount. Rebalancing your stock/bond allocation back to your target will provide opportunities to buy low and accumulate more shares at low prices, which helps build long-term wealth.
  • Keep emotions in check. Learn to recognize when fear is getting the better of you. Realize that financial decisions are best made at times other than when emotions are running high.
  • Be wary of “friendly” advice from others. When the stock market is in the news, family and friends tend to offer their advice of what works for them. While well-intentioned, that advice may not be appropriate for you. Everyone is in a different situation, and what is good for one may not be good for another.
  • Do not check your balances every day. Market investing is intended to be long term. Checking your account balance every day will only add to your stress. Avoid looking at your balance and instead find something positive on which to focus.

None of us know how much longer the pandemic will last, or when life will get back to normal (or a “new” normal). The markets can certainly retest the lows from March. But armed with some knowledge and self-awareness, you can be ready to withstand whatever comes next and maintain your long-term perspective to reach your goals.

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Juan Ros, CFP®, AEP®, CSPG, CEPA, is a financial advisor with Forum Financial Management, LP, where he works with multi-generational families and business owners. He is also the founder of Financially Zen, LLC, an online platform for personal financial education. He is a faculty member of the American Institute for Philanthropic studies, which awards the Certified Specialist in Planned Giving (CSPG) designation, editorial board member for Planned Giving Today, and former President of the Los Angeles Council of Charitable Gift Planners. He can be reached at [email protected].

[1] “Fourth Large-Scale COVID-19 Vaccine Trial Begins in the United States.” National Institutes of Health, September 23, 2020.

https://www.nih.gov/news-events/news-releases/fourth-large-scale-covid-19-vaccine-trial-begins-united-states

[2] Gwynn Guilford and Charity L. Scott, “Is It Insane to Start a Business During Coronavirus? Millions of Americans Don’t Think So.” Wall Street Journal, September 26, 2020. https://www.wsj.com/articles/is-it-insane-to-start-a-business-during-coronavirus-millions-of-americans-dont-think-so-11601092841

Year-end Charitable Planning under Recent Legislation—A Conversation Starter

By Janice H. Burrill, JD, CAP, LACGP Board Member, Legislative and National CGP Liaison

What a challenging year it has been for us all! Our legislative world is no exception. While our representatives in Washington D.C. have been preoccupied with many issues, the charitable community is continuing in its endeavors to promote philanthropy.

Planned giving can be a valuable tool for donors motivated to give during this unprecedented time, especially in light of recent tax law legislation. As we started this crazy year, the 2019 SECURE (Setting Every Community Up for Retirement Enhancement) Act had just been enacted which included many key changes to the IRA rules. One significant change was the elimination of the “stretch IRA”. Previously, IRA account holders could designate non-spousal beneficiaries and, upon death, the beneficiaries could “stretch” the required IRA withdrawals over their lifetime. This allowed younger family members to receive IRAs, take small (or no) distributions initially, and allow the accounts to grow over time. That opportunity is gone. Now the SECURE Act requires most beneficiaries to complete their withdrawals in just 10 years or pay a 50% tax penalty. Planned giving can provide a viable workaround to this IRA change. Specifically, the account holder can designate a life-income charitable vehicle as the beneficiary, usually through a testamentary charitable remainder trust or gift annuity. Upon the account holders’ death, these planned giving vehicles can be funded with the IRA proceeds and the account holder can designate an income beneficiary to receive life income, effectively quashing the 10 year payout rule. On the death of the life income beneficiaries, the remainder goes to one or more charities named by the account holder. A win-win solution for the donor, beneficiaries and charity!

In 2020, the CARES (Coronavirus Aid, Relief, and Economic Security) Act was passed to provide pandemic relief. It allows an above-the-line Charitable deduction of $300 for nonitemizers. Among other provisions, it increased the cash contribution limit from 60% to 100% of AGI in certain cases in 2020. While this deduction is generally not available for gifts to donor advised funds or supporting organizations, it does provide a considerable benefit for certain cash-rich donors.

The CARES Act also suspended the requirement in 2020 to take a required minimum distribution (RMD) from retirement plans. The SECURE Act had already increased the required age for RMDs from 70 1/2 to 72 years. Fortunately, the IRA Charitable Rollover is still available this year to donors over 70 1/2 to make qualified charitable distributions (QCDs) up to $100,000 from their retirement plans. While QCDs may not be top of mind with some donors because there is no required RMD this year, it is a convenient way to support charity especially by donors who have made similar gifts in the past.

Interest rates have hit new lows. This includes the Applicable Federal Rate (AFR) which is at a record low of 0.4% for October. This rate environment makes a charitable lead trust or gifting of a remainder interest in a personal residence extremely beneficial for donors.

Given all that’s happening in Washington, D.C., it is doubtful we will see any further legislation benefiting our charitable world before year-end. Unfortunately, the Universal Giving Pandemic Response Act, which would have lifted the cap for above-the-line charitable deductions from $300 to $4000 for individuals, did not pass. However, it did serve an important role in bringing the charitable deduction back into the debate with the possibility of inclusion in future legislation. So stay tuned and keep contacting your representatives.

As you work with donor prospects in the last months of 2020, hopefully some of these ideas may be helpful. We also can’t forget other tried and true planned giving options, including bequests, the “bread and butter” of gift planning. Many charities are seeing a large increase in bequest notifications in wills/living trusts and estate planning attorneys are busier than ever drafting and updating estate plans, including charitable planning. Donors are looking for ways to have impact. Clearly, we need to continue to be a visible resource (albeit via Zoom, social media, phone or email). Above all, patience and perseverance are necessary as we share new (plus tried and true) ideas with donors and, most importantly, let them know we value their interest and support.