Talking With Financial Advisor Wil Peña:

‘Most People Want to Help Others’ 

Helping clients include charitable giving in their financial planning is part of financial advisor Wil Peña’s job that he enjoys. Through the planning process, Wil works with clients to figure out a charitable giving strategy and best approach that makes the most sense for his client’s unique situation. “Most people naturally want to help others,” says Wil. “It is not too hard to find people’s affinity for a cause they love and want to support.”

Helping people with their finances is purposeful work that is extremely gratifying to Wil. He enjoys helping individuals, families, and small businesses put together a long-term plan to protect and grow the fruits of their labor – money.

Wil has been involved in the financial services industry for more than 16 years. He transitioned from the telecom industry to financial services when he became a banker in Islamorada in 2004. After working extensively with clients on investments and retirement planning, he opened his own consulting practice. Earlier this year, he joined Fidelity Investments and works from his home in Key Largo.

Charitable giving is always part of the planning conversation, especially for those clients who have the means to make philanthropy part of the plan. They are not only able to take advantage of tax benefits, but also are pleased to use their money to support good causes. “These clients make an impact that can leave a mark on society and leave a legacy for their families and communities to enjoy after they are gone,” says Wil.

Being involved in the community is important to Wil and he recently joined the Community Foundation’s Upper Keys Advisory Council, where he will help build philanthropy in the Keys, especially the Upper Keys.  “I believe we are all born to serve one another,” he says.

He and his wife, Barbara, have enjoyed living in Key Largo for 31 years. “It’s a peaceful loving community where we enjoy a serene lifestyle near the ocean,” says Wil. Their two Jack Russell Terriers, Tobias and Hershel, keep them busy, too. “There’s never a boring moment living with Jack Russells,” he says. “It’s a blessing to have been able to fulfill a childhood dream of living on an island.”

Lack of information and knowledge about the types of strategies available is one reason some clients are unaware about the benefits of charitable giving. “Professionals can help identify the pros and cons of different ways to get started,” says Wil. “The process can seem more complex than it has to be. The Community Foundation is one way that can help an individual or a business get started with their philanthropic goals.”

Contact the Community Foundation for assistance at cffk@cffk.org or call Jennifer McComb at 305-292-1502.

Wil Peña is a financial planning advisor with Fidelity Investments Transition/Estate Services and works from his home in Key Largo.

How to Spot a Prime Opportunity for a Charitable Remainder Trust (CRT)

With high buyer demand, tight inventory, and low mortgage rates, the Florida Keys real estate market is soaring. And while it may seem attractive to sell property right now, some financial planners also suggest looking into a Charitable Remainder Trust (CRT) as one long-term planning option.

A CRT is a “split interest” charitable planning tool that allows your client to transfer an asset to an irrevocable trust, retain an income stream, and earmark what’s left (the “remainder”) to pass to a charity or charities of the client’s choice.

For example, your client could establish a fund at The Community Foundation of the Florida Keys to receive the CRT’s assets following the termination of the income stream, for example, on the client’s death. The client’s fund at the Community Foundation can provide for distribution of those assets to hospice, animal rescue, an arts organization, or whatever causes the client feels passionately about and wants to support.

Because the Charitable Remainder Trust qualifies as a charitable entity under the Internal Revenue Code, here’s what happens from a tax perspective:

• When the client transfers the property to the CRT at a fair market value of say $2 million (as an example) with a cost basis of $200,000, and then the CRT sells the property, the CRT itself does not pay tax on the $1.8 million capital gain.
• This leaves the full $2 million in the trust to be invested, subject to the client’s retained income stream.
• The client is eligible for a charitable tax deduction of the fair market value of the property given to the trust, minus the present value of the retained income stream.
• Payments to the client generally are subject to income tax during each year of the distributions, but under more favorable terms than if the client had conducted an outright sale.
• Because the CRT is an irrevocable trust, the property and its proceeds (other than what winds up in the client’s estate from the retained income stream) are excluded from the client’s estate for estate tax purposes.

Contrast this with an alternative scenario in which your client sells the property, realizes a $1.8 million capital gain, pays tax on that gain, and ends up with, say, $1.5 million (probably less!) with which to invest, give to charity, and draw from for income. And, in this situation, the proceeds would be included in the client’s estate for estate tax purposes.

When you spot a client who might benefit from a CRT, talk to your Community Foundation or other professional advisor about this giving option.

Planned Giving Starts Now: Tips and Talking Points for Lifetime Charitable Gifts

According to the recent Giving USA report, Americans’ bequests to charity totaled nearly $42 billion last year. That’s a tremendous amount of charitable giving flowing to community organizations from donors after they die. Still, it’s a fraction of the $324 billion Giving USA reports was given to charities in 2020 by living individuals.

As you work with your philanthropic clients, consider not only the benefits of building philanthropic components into clients’ estate plans for distribution after death, but also consider helping your clients make meaningful gifts during their lifetimes.

Here are three tips for encouraging your clients consider “giving while living” as part of their plans:

• Clients get to see the results of their gifts and have an opportunity to get involved, whether as a volunteer, board member, or simply an observer at a site visit to each charity they support.
• Clients can involve their children and grandchildren in making the gifts, especially when the clients are working with the community foundation through a family donor-advised fund or other collaborative vehicle.
• Clients are eligible for an income tax deduction for lifetime charitable gifts, and the gifted assets are no longer subject to future estate taxes.

The team at your Community Foundation can help you assist your clients with a philanthropy plan, starting with the basics. Here are three talking points to help you begin the conversation with your philanthropic clients:

• Give to what you know. Most Americans get the greatest joy from giving to causes with which they are personally familiar. This makes it easier to understand how the charity is using your dollars. So, for example, if you’ve had experience with helping foster children, you are likely to understand how the organization is using your donation to support training for foster parents. And do not be afraid to ask! Most organizations are happy to share the tangible impact of your donation—whether it is $10, $100, $1,000 or more.
• Give where you are. Look for opportunities to support Keys charities who are celebrating year-end giving by offering information about the overall need, the mission they serve to meet that need, and the positive impact of a year-end gift on the lives of others. When you give to local organizations, you are in a much better position to have confidence in your gift and are helping your Keys community.
• Above all, give to the charities you love. Gifts that are aligned with a passion and your own love of humanity carry the most energy and ultimately make the most difference. The bottom line is that giving should feel good. Certainly understanding how a charity is using the money is a part of that. But don’t let that get in the way of doing good and enjoying every minute of it.

Need more tips and talking points? We can help. Call Jennifer at 305-292-1502 or visit cffk.org.

Charities and Cryptocurrency: Gifts Are on the Rise

The Community Foundation of the Florida Keys now accepts cryptocurrency as an option for giving. As cryptocurrencies’ profiles rise in the marketplace, your clients are likely to begin asking questions about the possibility of using cryptocurrency holdings as part of their charitable giving plans.

Interest in this technique has spiked recently, especially after the University of Pennsylvania’s announcement of a landmark $5 million gift of bitcoin to support the Wharton School’s Stevens Center for Innovation in Finance.

In many ways, advising clients about charitable gifts of cryptocurrency parallels the strategies you routinely use to advise clients about a gift of any highly-appreciated asset. For example, cryptocurrency gifts require documentation similar to what’s necessary to substantiate gifts of real estate, closely-held stocks, and collectibles.

Furthermore:

• In the case of cryptocurrency held by your client as an investment for more than one year, the rules for gifts of long-term capital gains assets apply. In this situation, the client’s gift of cryptocurrency is valued at its fair market value at the time of the donation. (Typically, the charity works with Bitpay, Coinbase, or other third-party processor to receive the gift and convert the cryptocurrency to cash.)
• The receiving charity must sign your client’s IRS Form 8283 for your client to be eligible for the charitable deduction (unless the value of the gift is less than $500).
• A qualified appraisal is required for gifts with a value greater than $5,000.
• The recipient organization is required to file IRS Form 8282 if all or a portion of the cryptocurrency is sold or converted to cash within three years of the gift. As with gifts to charity of other appreciated assets, the charity does not pay tax on the gains.

The IRS has issued guidance for charitable gifts of cryptocurrency, including confirmation that the usual rules apply for a “contemporaneous written acknowledgment,” even though cryptocurrency is treated and reported by the charity as a non-cash gift.

The team at your Community Foundation is ready to assist you and your clients who may wish to donate cryptocurrency to a donor-advised fund or other type of fund.