A: You’re right. Major weather-related disasters are becoming more common. Formerly once-in-a-century events now occur with alarming regularity. If you’re interested, you can find good data about these from the National Oceanic and Atmospheric Administration. 

To answer your question about insurance, it is important to first explain that standard homeowner’s insurance policies typically have limitations when it comes to natural disasters. These limitations can create a protection gap, leaving the homeowner vulnerable to catastrophic financial losses after a weather-related disaster. For example: 

Supplemental disaster insurance can narrow the protection gap. Without proper coverage, a single disaster could wipe out a homeowner’s home equity and savings. For many, knowing they are protected allows them to better focus on their family’s safety during emergencies. Some policies also include living expense coverage to help ease the stress of rebuilding in the event of a claim. 

Before purchasing disaster insurance, do your homework: 

Disaster insurance represents an additional expense. However, for many homeowners, especially in vulnerable areas, it has become less of a luxury and more of a necessity. The right coverage provides both financial protection and some peace of mind when facing natural disasters. As always, consult with your financial and insurance advisors to tailor protection to your needs.

A: We’ve been hearing a lot about this too, especially in the past few years. Tech companies and automakers have promised a transportation revolution that will make our roads safer and our commutes more productive.  

Despite the hype, fully autonomous vehicles that can drive anywhere, in any conditions, without human intervention, remain elusive.  

What we have today is a spectrum of automation. Many vehicles now come equipped with driver-assistance systems like automatic emergency braking, lane-keeping assistance, and adaptive cruise control.  

These technologies help human drivers but don’t replace them. 

Tesla, Waymo, and Cruise operate more advanced automated vehicles in specific locations. For instance, you might have heard about Waymo self-driving taxis in Phoenix, San Francisco, and Los Angeles. These systems can drive the vehicle autonomously under limited conditions, but a human must still be ready to take control. 

Several significant hurdles have slowed progress: 

Despite these challenges, self-driving technology offers promising benefits: 

When will they be ready? The timeline for widespread adoption continues to shift. Early predictions suggested they would dominate the roads by 2020, which didn’t turn out to be true. More likely, self-driving technology will continue its gradual rollout. Geofenced autonomous taxi services may expand in urban areas with favorable regulations and weather conditions. Long-haul trucking routes may see early adoption. And consumer vehicles will continue to get more autonomous features with each model year. 

Most realistic projections suggest that fully autonomous vehicles—those that can drive anywhere, anytime, without human oversight—won’t become common until the early 2030s at the soonest. The self-driving revolution is still coming, just more slowly and incrementally than the most optimistic predictions suggested. 

A: The answer depends on your personal financial picture. To make this decision, examine your financial needs, your risk tolerance, and the economic climate. Before proceeding, ask yourself:  

Also, make sure you understand how home equity loans work. Often called home equity lines of credit (HELOCs), these loans provide a credit line secured by your house. During a draw period of typically five to 10 years, you can withdraw funds and make interest-only payments. After that, a 10- to 20-year repayment period begins with both principal and interest payments. Most HELOCs have variable interest rates that will rise or fall with market conditions. 

HELOCs offer a few distinct advantages: 

However, today’s economic conditions require caution. Rising interest rates could raise your monthly payments; flexibility can lead to overborrowing; and falling home values could leave you owing more than your home is worth. 

Remember, your home secures the loan, so missed payments could lead to foreclosure. 

Another consideration: Preserving your home equity can be a strategic long-term move, offering financial resilience and future opportunities that might outweigh the immediate benefits of borrowing. 

Deciding whether to use a HELOC is a personal choice. Yes, your home equity can be a powerful financial tool, but it requires careful consideration and a clear understanding of the risks and rewards. Take your time, do your research, and consult your financial and tax advisors for their perspectives. 

The gift tax and estate tax share a lifetime exemption. Transfers made during life or through the estate are applied against this exception. If the exemption is exceeded, estate or gift tax is due. In 2024, this exemption was $13.99 million, and it is set to increase to $15 million for 2025, which will also be indexed for inflation.

Gift Tax

Within the federal gift tax system, certain transfers can be made gift-tax-free without impacting your lifetime gift exemption. This includes the following:

Gifts may still need to be reported on your tax return, even if no gift tax is due. Any gifts made outside the categories above must be reported on Form 709 and will reduce your lifetime exemption, unless you elect to pay the gift tax.

Estate Tax

To calculate potential estate tax, begin by determining your gross estate: the total value of everything you own. From the gross estate, subtract any amounts going to a U.S. citizen spouse or to charitable organizations, as these transfers are excluded from estate tax. The amount remaining after these exclusions becomes your taxable estate.

If your taxable estate is less than the lifetime exemption, no federal estate tax is due on the transfer of your assets. Assets exceeding the exemption are subject to federal estate tax.

Married individuals who do not use their full exemption can transfer the remaining amount to their spouse by electing portability on Form 706. This provides the surviving spouse with a larger exemption, in case the value of assets increases.

Note that even if assets are not subject to estate tax, they may still be taxable to beneficiaries.

State Gift and Estate Tax

Outside the federal system, about 18 states have a gift or estate tax for their residents. These state exemptions can differ significantly from the federal exemption, so it is important to know the rules in your state. Some states also may have an inheritance tax, which is levied on the recipient and varies based on their relationship to the decedent.

Federal Generation-Skipping Tax

The federal generation-skipping transfer tax applies to property transfers made either during your lifetime or at death to individuals who are at least two generations younger than you—typically grandchildren or other similarly related beneficiaries. This tax is assessed in addition to, not in place of, the federal gift and estate taxes.

Sources:

Estate and Gift Tax FAQs | Internal Revenue Service

Estate tax | Internal Revenue Service

Gift tax | Internal Revenue Service

Instructions for Form 706 (09/2025) | Internal Revenue Service

Instructions for Form 709 (2024) | Internal Revenue Service

Resource by the CAPTRUST wealth planning team

This material is not individual investment advice. If you have questions or concerns regarding your own individual needs, please contact a CAPTRUST representative for further assistance. This material does not constitute legal, accounting, or tax advice. This material has been prepared solely for informational purposes. Investment advisory services offered by CapFinancial Partners, LLC (“CAPTRUST” or “CAPTRUST Financial Advisors”), an investment advisor registered under The Investment Advisors Act of 1940. Data contained herein from third-party providers is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

Forfeiture Cases: A More Consistent Trend

401(k) plan fiduciaries have been challenged in approximately 75 class action suits alleging they improperly used participant forfeitures to offset employer contributions rather than to pay plan expenses that were eventually paid by plan participants.

Forfeitures occur when a plan participant leaves employment before the plan sponsor’s contributions to the participant’s account have vested. As reported last quarter, the U.S. Department of Labor (DOL) has provided in an amicus (“friend of the court”) brief its non-binding opinion that these cases are meritless. It has been a long-accepted practice for 401(k) plan sponsors to use forfeitures to offset employer contributions rather than to pay plan expenses when the plan allows either. This also has been the long-held understanding of Congress and the Treasury Department.

This quarter, a number of reported cases have followed what is becoming a relatively consistent pattern of these claims being dismissed, although one case was allowed to proceed. Here are examples:

American Airlines Loyalty Breach Remedy: No Payout, but Future Restrictions on Plan Fiduciaries

As previously reported, American Airlines and its 401(k) plan fiduciaries were found to be liable for breaching ERISA’s duty of loyalty to plan participants. The plan fiduciaries prioritized American Airlines’ business relationship with BlackRock, one of the plan’s investment managers, over prudently managing the plan’s investments for the benefit of plan participants. As the judge observed, BlackRock actively supported environmental, social, and governance (ESG) efforts and social change by making investment decisions and voting proxies on this basis, which the American Airlines fiduciaries did not challenge.

BlackRock was a significant investor in American Airlines, holding more than 5 percent of American Airlines’ stock and approximately $400 million of its corporate debt. The judge found that American Airlines’ “incestuous relationship with BlackRock and its own corporate goals disloyally influenced administration of the plans.” Spence v. American Airlines, Inc. (N.D. Tex. 2025). A decision on remedies was delayed.

The judge has now issued his decision on remedies, first finding that the plaintiff did not establish any financial losses to the plan from the breach. As a result, no monetary relief could be awarded. Spence v. American Airlines, Inc. (N.D. Tex. 9.30.25). The judge went on to observe that it was necessary for him to award equitable relief to ensure that the plan’s fiduciaries act “solely for the pecuniary benefit of the plan.” He ordered the following, with no end dates except as noted.

Cases Alleging Fee Overpayment and Investment Underperformance Continue

The flow of cases alleging that plan fiduciaries have overpaid for services and retained underperforming funds continues. In cases where details of the fiduciaries’ process was evaluated, good fiduciary process was imperative.

Any plan can be sued and be forced to defend itself—that is a cost of doing business. Winning is the result of having and executing a good process. The importance of this cannot be overstated. 

Here are some highlights of this quarter’s decisions.

These cases illustrate the wide range of suits being filed against plan fiduciaries and demonstrate the importance of having a sound and thorough process to prudently evaluate investments and recordkeeper fees.

Fiduciary Committee and Discretionary Investment Consultant Sued: Fiduciary Committee Wins, Discretionary Investment Consultant Must Proceed

Caesars Holdings hired Russell Investments to be the discretionary investment manager for their 401(k) plan. Soon after, Russell replaced many of the plan’s investments with Russell’s investments, including their target-date funds. The Russell target-date funds underperformed the funds they replaced, as well as Russell’s own internal benchmarks.

Disappointed participants sued both the Caesars fiduciaries and Russell. After conducting discovery, both Caesars and Russell moved for summary judgment. (Unlike a motion to dismiss, which contends at the outset that there is no basis for a claim, a motion for summary judgment contends that, based on the evidentiary record that has been developed through discovery, a trial is not needed, and the filer wins.)

Caesars undertook a careful process with the assistance of an independent third party to evaluate providers when they retained Russell. Then, the Caesars committee met quarterly and received reporting from Russell on investment performance. With little fanfare, based on this record of diligence, the court found no disputed facts on this front and granted Caesars’ motion for summary judgment.

The court then turned to Russell. It detailed several apparent conflicts of interest in Russell’s decision to use its own target-date funds. The court noted the complaint’s allegations that Russell’s self-serving swap of the target-date funds was a life preserver for its struggling funds, bringing in $1.4 billion, while other plan sponsors were leaving Russell’s funds. At the end of 2019, the Caesars plan held 74 percent of the reported assets in Russell’s target-date funds. An internal Russell report identified low assets under management as a reason other plans had left the Russell target-date funds. The judge viewed this as a material issue in dispute to be addressed at trial on whether Russell breached ERISA’s duty of loyalty.

Russell argued that its agreement with Caesars was a cost-plus arrangement, concluding that there was no reason for it to favor its own funds. The judge discounted this assertion, noting that it fails to address other incentives that motivated Russell to use its own funds.

With respect to breach of prudence allegations, the judge noted that, based on internal Russell documents, Caesars received advantageous pricing based on the assumption that Russell could use the Russell target-date funds. Also, Russell was unwilling to serve as a discretionary fiduciary on non-Russell target-date funds, because “the economics don’t support it.” These facts suggested that the decision to use the Russell target-date funds—and not consider competitors—demonstrate a lack of prudence by Russell in fund selection. This issue will also proceed to trial. Wanek v. Russell Investments Trust Company (D. Nev. 2025)

This case demonstrates the fiduciary committee risk mitigation that can flow from retaining a discretionary investment advisor—and the risk discretionary investment managers take on. It is also a reminder that discretionary investment advisors are subject to the full range of ERISA’s fiduciary responsibilities and must make prudent, evenhanded decisions, putting participants’ interests ahead of their own.

Key Takeaways

Global equity indices extended gains in the third quarter, with several major benchmarks setting fresh highs. A combination of macroeconomic strength, solid corporate profits, and heavy investment in technology has powered the climb. Even with lingering inflation, fast-changing policy, and unproven AI payoffs, financial markets continue to look ahead.

Third Quarter Recap: Markets Remain Focused on the Positives

A wide range of asset classes, led by global equity markets, enjoyed a strong third quarter.

Within the U.S., the S&P 500 Index delivered an 8.1 percent return as only one sector (consumer staples) posted a loss. Yet gains continue to be narrowly led, as just three growth-oriented sectors, technology, communication services, and consumer discretionary, delivered the lion’s share of returns.

Small-cap stocks performed even better, as rate-cut expectations suggested relief was on the way for more interest-rate-sensitive companies. Risk appetites rose as less-profitable, lower-quality stocks outperformed their more profitable peers.

Outside the U.S., equity returns were uneven. Emerging market stocks returned close to 11 percent over the period, with semiconductor leaders in China, Korea, and Taiwan benefiting from global demand. Progress on U.S. trade talks provided further support. Developed market international stocks also advanced, led by European banks, a growing global services sector, and ongoing market-friendly reforms in Japan.

U.S. bonds benefitted from falling yields, particularly within shorter-dated maturities, on expectations of Fed rate cuts. Investment grade corporate bonds continue to reflect credit spreads at multidecade lows, signaling continued investor confidence in company fundamentals.

Commodities rebounded, led by an acceleration of gold’s spectacular rally, as investors sought hedges for a variety of risks: economic, policy, and geopolitical. 

Figure 1: Q3 2025 Market Rewind

Asset class returns are represented by the following indexes: Bloomberg U.S. Aggregate Bond Index (U.S. bonds), Dow Jones U.S. Real Estate Index (real estate), Bloomberg Commodity Index (commodities), Russell 2000® (U.S. small-cap stocks), S&P 500 Index (U.S. large-cap stocks), MSCI EAFE Index (international developed market stocks), and MSCI Emerging Market Index (emerging market stocks).

Echoes of Innovation

Entirely new economic eras can be triggered by a single innovation. The steam engine, the Wright brothers’ Flyer, Sputnik 1, and the launch of the first web browser each marked inflection points with massive economic implications.

The launch of ChatGPT 3.5 in November 2022 can be viewed as such an event. In the three years since, over $1 trillion has been invested in advanced chips and stadium-sized data centers to provide the computing horsepower required for cutting-edge AI models.

The parallels to the dot-com bubble of the late 1990s are striking. As telecom companies raced to wire the world with high-speed internet, Cisco Systems, a leading maker of network routers and switches, saw its share price rocket 3,800 percent in about five years. At its peak, investors were willing to pay nearly 95 times Cisco’s future earnings per share, driven by the belief that the sky was the limit for internet innovation.

Today’s AI frenzy has accelerated even faster than the dot-com bubble. The internet reached 100 million users in seven years, while ChatGPT achieved this threshold in just two months. Following that trajectory, the market capitalization of NVIDIA, a key supplier of advanced AI chips, has grown from $400 billion to $4.5 trillion since the launch of ChatGPT. This is equivalent to nearly 15 percent of the entire U.S. economy, as measured by Gross Domestic Product (GDP).

We know how the dot-com era ended: Economic realities caught up with unbridled optimism. Experimental business models failed to deliver profits, and the speculative buildout of internet infrastructure led to investment in over 300,000 miles of fiber optic cable, much of which remained unused for a decade or more before real-world demand caught up.

However, the current environment also has some important differences from the dot-com era, including:

Figure 2: Cisco Systems and NVIDIA Market Cap Expansion (% of U.S. GDP)

Sources: Bloomberg, World Bank, Wall Street Journal, CAPTRUST research. Data as of September 19, 2025.

This year has also delivered evidence of what can happen when doubts creep into the narrative. In late January, China‑based DeepSeek rattled markets by delivering competitive AI performance at a fraction of the cost of existing flagship models. This announcement triggered a massive tech selloff. NVIDIA alone shed nearly $600 billion in market cap in a single day—the largest single-day market cap loss in stock market history—as investors questioned whether its advanced chips justified the premium valuation of its stock.

Investor hopes for AI’s impact are elevated. Although the dot-com era is an imperfect analog, it does remind us that breakthroughs don’t always pay off on schedule. Even if the technology ultimately overdelivers, the economic benefits may arrive on a timeline at odds with current market expectations.

Higher Margins Drive Investment and Growth

This year, U.S. corporations have performed better than expected, growing revenue and earnings despite tariff-related cost pressures. Nearly 80 percent of S&P 500 Index companies outpaced earnings targets in the most recent reporting period. Higher profitability has been driven by selective price increases and product mix adjustments, tighter operating discipline, supply chain optimization, and productivity gains. As shown in Figure 3, profit margin expansion has amplified earnings growth, providing continuing support for equity prices even at above-average valuations.[2]

Figure 3: S&P 500 Operating Margins Continue to Trend Higher

Sources: FactSet, CAPTRUST research. Data as of September 30, 2025.

Strong cash generation has translated into aggressive investment plans. In addition to the AI infrastructure build-out, utilities firms are investing heavily to harden and expand the power grid, manufacturers are committing to flagship projects, and tax policy tailwinds are pulling orders forward. When strong fundamentals provide companies with the means and confidence to invest in the future, the economy and markets can often power through headwinds.

Rate Cut Hopes, Real Risks

In September, the Federal Reserve began easing monetary policy with a quarter-point risk management reduction in its federal funds target rate. What made this move so notable is the relative strength of the economic backdrop: Inflation is still above the Fed’s 2 percent target, the unemployment rate remains near multidecade lows, equity indices are hovering near record highs, and financial conditions are loose.

Federal Reserve Chair Jerome Powell framed the move as a policy recalibration rather than a pivot to easy monetary policy. He described current labor market conditions as “unusual,” noting a slowdown in both the supply and demand for workers, as well as payroll gains slipping below the breakeven pace required to hold unemployment steady (Figure 4). Nevertheless, financial markets are currently pricing in two more rate cuts this year, and an additional three cuts in 2026. Expectations for aggressive easing could create downside risks for markets if they fail to materialize.

Figure 4: Labor Market: Cooling Demand, Stalled Supply

Sources: U.S. Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, CAPTRUST research.

The current environment represents a tightrope walk for the Federal Reserve amid growing political pressure for lower rates. Inflation has stalled at around 2.7 percent, with tariff-sensitive goods prices rising as services prices fall. Cutting rates too quickly risks exacerbating inflation, while a delay could serve to lock in labor market fragility. As Powell noted, “Two-sided risks mean there’s no risk-free path.”

Consumers: Feeling Low but Spending Freely

The state of the U.S. consumer is both resilient and restless. Although household budgets remain challenged by high interest rates, stubborn inflation, and a cooling labor market, spending remains firm. Consumer spending rose 2.7 percent in August, providing ongoing support for strong U.S. economic growth.

Although spending keeps chugging along, sentiment rests near crisis‑era lows. In addition, the distribution of consumer activity is highly skewed. Top‑decile earners now account for nearly half of all spending, while the bottom 40 percent contribute less than 10 percent of spending. Affluent households may be able to sustain economic momentum in the near term, but broader participation is necessary to provide a stronger foundation for growth.[3]

A future source of consumer spending strength could have an unlikely origin: tax season. As a result of the recently passed One Big Beautiful Bill Act (OBBBA), tax withholding table adjustments should lift paychecks early next year, followed by a tax season that is expected to deliver an incremental $150 billion in refunds. While this household budget boost will create meaningful economic support, the OBBBA is also expected to exacerbate the U.S. budget deficit. Tax breaks for corporations and consumers will contribute an additional $3.4 trillion to the budget shortfall over the next decade.[4]

Priced on Promise

When expectations get stretched, even small disappointments can earn outsized reactions. Companies and investors are placing their faith, and vast sums of money, in the promise of AI to deliver higher productivity, economic efficiency, and new profit engines. Although these gains may take years to unfold, the AI push is delivering current economic benefits in the form of capital investments that support the real economy.

Investor hopes are also pinned to the ability of the U.S. economy to operate within a narrow growth channel that allows the Fed to continue easing monetary policy. This will require a balance between softening labor market conditions and persistent inflation pressures, against a backdrop of political pressures and fast-moving policy changes.

The path of progress is rarely linear, and investors should be prepared to recalibrate their expectations in the event of bouts of volatility and changes in market leadership. Three years of outsized gains, led by mega-cap technology giants, have increased market concentration risk. If investors haven’t been disciplined in rebalancing portfolios to their strategic targets, risk profiles could be out of tolerance.

Investors should celebrate recent gains while also bracing for the possibility that blips in the path of progress could manifest as market pullbacks. When expectations live in the clouds, it pays to remain grounded.

Index Definitions

Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.

S&P 500® Index: Measures the performance of 500 leading publicly traded U.S. companies from a broad range of industries. It is a float-adjusted market-capitalization weighted index.

Russell 2000® Index: Measures the performance of the 2,000 smallest companies in the Russell 3000® Index. It is a market-capitalization weighted index.

MSCI EAFE Index: Measures the performance of the large- and mid-cap equity market across 21 developed markets around the world, excluding the U.S. and Canada. It is a free float-adjusted market-capitalization weighted index.

Bloomberg U.S. Intermediate Govt/Credit Bond Index: Measures the performance of the non-securitized component of the US Aggregate Index. It includes investment-grade, US Dollar-Denominated, fixed-rate Treasuries, government-related corporate securities. It is a market-value weighted index.

Bloomberg Commodity Index (BCOM): Measures the performance of 24 exchange-traded futures on physical commodities which are weighted to account for economic significance and market liquidity.  BCOM provides broad-based exposure to commodities without a single commodity or commodity sector dominating the index. 

MSCI Emerging Markets Index: Measures the performance of large and mid-cap stocks across 24 Emerging Markets countries.  It aims to capture the performance of equity markets in emerging economies worldwide and covers approximately 85% of the free float-adjusted market capitalization in each country.

Sources

[1] “Generative AI at Work.” The Quarterly Journal of Economics.

[2] FactSet Insight

[3] Moody’s Analytics, The Wall Street Journal

[4] Strategas, Bipartisan Policy Center

As nonprofit governance practices and policies have evolved, the adoption of board member term limits has varied widely among different organizations, sectors, and regions. However, in general, the percentage of nonprofits that utilize term limits has increased over time, according to BoardSource data. Although term limits can create challenges around succession planning and annual turnover, they can also be a helpful tool for improving board performance, increasing board diversity, and attracting new board members.

CAPTRUST’s 2025 Endowment & Foundation Survey showed that 66 percent of surveyed nonprofits have formal board member term limits in place. Almost half (40 percent) of the larger nonprofits with more assets ($100 million dollars or more) reported term limits of four years or longer and a high percentage of investment committee members that stick around.

According to a Leading with Intent study, the most common nonprofit term limit structure is two three-year terms. Many boards allow former members to rejoin after a one-year sabbatical.

Here, it’s worth noting that nonprofit governance practices, including board member term limits, are subject to the laws and regulations of the jurisdiction in which the nonprofit operates. Some states have regulations or guidelines regarding term limits for nonprofit boards, while others leave term limit policies to the discretion of the organization.

Limits Foster Strength

How do board members feel about term limits? “In one word, I’d say they feel relieved,” says Eric Bailey, endowment and foundation practice leader at CAPTRUST. “Of course, we all want to give our time and talents to make a positive difference in the world, but I don’t know of anyone who wants to be a permanent volunteer on a nonprofit board.”

By creating a sense of urgency and accountability, term limits often improve board performance and can reduce organizational anxieties about leadership turnover. “Almost everyone works better when they’re working under a deadline,” says CAPTRUST Principal and Financial Advisor Bill Altavilla. “When board members know their tenure will be limited, they may be more motivated to optimize their time, instead of letting responsibilities linger.”

This is something Altavilla has experienced firsthand, both as a financial advisor to endowments and foundations and as a board member of multiple nonprofit organizations. Altavilla says boards are sometimes concerned that term limits will disrupt established relationships and group dynamics. “And that’s true, of course, but usually term limits disrupt things in a good way,” he says.

“What I’ve seen is that when term limits do hit, the board is usually reinvigorated and refreshed,” says Altavilla. “People get excited, and they remember that change is good because it brings new perspectives and approaches.”

While continuity has its benefits, boards grow stronger not despite turnover but because of it, as new members infuse fresh energy, ideas, and perspectives. Term limits also offer a healthy way for the organization to rid itself of existing board members who are inactive, ineffectual, or misaligned.

For instance, Altavilla says, “I’ve seen a few cases in which the organization has given a board seat to a major donor but later realized the person was inhibiting their progress or was detrimental to the culture of the group. If there are no term limits in place and this person is donating a large amount of money, the board can feel indebted and therefore obligated to keep them involved. But when you have a normalized process in place with defined term limits, you can rely on the natural course of action to create predictable turnover.”

Term limits can also be used to increase board diversity. In fact, one study published in the Alabama Law Review showed a strongly negative correlation between incumbency and board diversity, suggesting that—even without a board member matrix or developed pipeline of diverse board members—term limits stimulate board diversity by opening the door to new talent. This can help prevent stagnation and ensure that the board is better able to represent the communities the nonprofit serves.

Turnover and Recruitment

Of course, term limits also pose challenges, especially when it comes to recruitment. Firm limits mean current board members must commit continued time and attention to recruitment efforts and succession planning. “Recruiting nonprofit board members is difficult, even in the best of times,” says Bailey.

Yet there is evidence that term limits can make it easier to attract new board members, since people are more likely to consider serving when they know the commitment will be limited. “There’s only so much energy you can give to an organization before you know you’re ready to move on,” says Bailey. “Typically, what board members want is to get involved, add some value, then rotate off at predictable intervals, leaving them with the time and energy to explore new endeavors.” In other words, for most board members, term limits are both appreciated and embraced.

Best practices suggest that boards should turn over no more than one-third of their board seats each year. Bailey and Altavilla say things are typically more complicated. “Term limits are wonderful when everything is operating normally,” Bailey says. “But if a quarter of your board is due to roll off because of term limits and then another quarter of the board members quit, either because of leadership or their jobs or just sheer coincidence, that’s a serious challenge. We saw this frequently during the pandemic.”

Altavilla agrees. He says one of the boards he serves on is now facing a similar dilemma. “Four of us came on the board all in one year,” he says. “And that’s the majority of our board. Now, we’re all supposed to roll off at the same time.” But this could create a tremendous lack of continuity and a gap in leadership for the organization.

To solve the problem, the organization passed a resolution offering these four board members the option to remain on the board for two additional years. Two members accepted the offer. “This at least buys us a little time to find and integrate qualified replacements,” says Altavilla. It’s not an ideal solution, he says, but recruiting candidates for unpaid board roles feels exceptionally difficult right now.

And finding volunteers who are interested in leadership is an even bigger challenge. “Lots of people want to participate on a board but don’t want to be in a leadership position,” Altavilla says. “So many boards end up playing musical chairs within their executive committees. Year after year, the same three or four people take turns being secretary, treasurer, vice chair, and chair.”

This leadership succession problem shows the challenge and complexity of selecting the right term length and limits. “If board terms are too short, new members won’t have enough time to grow into leadership positions,” says Bailey. “You want to make sure you can vet people appropriately and give them the chance to vet the organization. Otherwise, you basically need to tap someone immediately after they join the board and get them in the pipeline to become the board chair.”

Implementing or Revising Policies?

For endowment and foundation board members who are implementing term limits or revising their term limit policies, there are several considerations to keep in mind. First, it’s important to establish a clear and transparent process for implementation. Usually, this means amending the organization’s bylaws or governance policies to outline board term limits, name the specific criteria for reappointment, and define the process for succession planning. Next, be sure to clearly communicate the rationale for all term limit decisions.

Finally, it’s important to regularly evaluate how effective the organization’s term limit policies have been and adjust as necessary. As a best practice, boards should reevaluate their bylaws and term limits at least every five to seven years, or each time they address their strategic plans. “This helps ensure that board governance policies are working in alignment with the nonprofit’s strategic goals,” Altavilla says. It’s also a good idea to monitor the impact of term limits on board performance, diversity, and overall governance.

By implementing term limits thoughtfully and strategically, nonprofit leaders can harness the potential benefits of term limits while mitigating the potential downsides, leading to improved board performance and organizational effectiveness. In this way, board term limits can be a good governance tool to help the organization achieve its mission and demonstrate its values.

Proactive tax-planning tactics can have a cumulative effect and could generate significant savings in the long term, increase or preserve wealth, and improve your financial plan. Your tax and financial advisors can help evaluate your unique tax situation.

The impact of the items on your list may vary based on your situation, but everyone can benefit from considering at least a few of the following suggestions.

Income Deferral and Acceleration Strategies

One foundational aspect of end-of-year tax planning involves strategically managing when to recognize your income as earned and when to defer it. This can make a substantial difference for high earners, especially those who are subject to the highest marginal tax rates. The decision to defer or accelerate income depends on anticipated changes in personal tax rates, potential legislative tax changes, and investment income projections.

“The questions we typically ask clients focus on where their income is coming from and how that compares to last year,” says Lindsay Allen, senior team leader of wealth planning at CAPTRUST. “We also want to know if they’ll be itemizing deductions or taking the standard deduction.” The answers to these questions will help determine if a client should decrease or increase their income that year and which tax strategies they could potentially use.

If you anticipate being in a lower tax bracket next year, or foresee tax legislation that can reduce rates, deferring income can reduce your current-year liability. These strategies can include:

Charitable Giving

While fulfilling their philanthropic goals, high-net-worth individuals who are itemizing deductions can also use charitable contributions as a strategic tool to impact taxable income. There are several tax-efficient ways to structure charitable giving.

A donor-advised fund (DAF) allows you to make a charitable contribution, receive an immediate tax deduction, and then direct the DAF to make grants to your chosen charities over time. DAFs can be particularly advantageous in years with significant income events, such as the sale of a business or large capital gain, as you can prefund future giving and secure a large deduction in the current year.

Donating appreciated securities instead of cash allows you to avoid capital gains tax on the appreciation while still receiving a charitable deduction based on the current fair market value. This is often a highly tax-efficient strategy for individuals with substantial stock portfolios.

“For IRA investors who are over the age of 70 1/2, they may want to consider gifting a required minimum distribution to charity directly from their IRA. This is limited to $108,000 per person per year,” says Allen.

Increasing Taxable Income

Conversely, accelerating income may be beneficial if you expect to be in a higher bracket next year or face legislative changes that could increase tax rates, such as when the Tax Cuts and Jobs Act is slated to end in 2025. You can recognize gains this year to lock in lower rates, particularly if you’re planning to retire and expect a drop in income, if you expect higher taxes in the future, or if you’re in the final year of a significant bonus cycle and want to avoid future surcharges.

Long-term capital gains are taxed at preferential rates (0 percent, 15 percent, or 20 percent, depending on your income and filing status). High earners are subject to the 3.8 percent net investment income tax on top of the capital gains tax.

If you’re in a lower tax bracket this year than you expect to be in the future, consider harvesting some capital gains to take advantage of lower tax rates before year-end.

Roth conversions can be beneficial for investors who expect higher tax rates—or a higher tax bracket—in the future.

“Think about your taxes cumulatively, throughout your life versus just this year,” says Allen. “With projections, you can take advantage of opportunities in lower-tax-bracket years, such as Roth conversions. You’ll pay taxes for the year the money is converted, but any future growth on those funds can be withdrawn tax-free in retirement, assuming you meet the withdrawal rules.” Also, Roth accounts aren’t subject to required minimum distributions.

For executives with NSOs, exercising stock options may push you into a higher tax bracket. Consider this as a strategy to take advantage of lower tax rates than may exist in future years.

State and Local Tax Planning

While the 2017 Tax Cuts and Jobs Act has limited state and local tax deductions to $10,000 for federal taxes, individuals who have higher state taxes may have other deductions they can take advantage of.

In some states, you can make charitable contributions to specific state-approved organizations and receive a state tax credit in return. This can reduce your state tax liability while providing a federal deduction for the charitable contribution. Consult with your financial advisor for more details about your state.

Some states allow for a state tax deduction for 529 plan contributions made to their state plan. The rules on whether a deduction exists and to what extent vary by state but can be a great way to save for education and capture a state tax deduction.

Additional Tax Strategy Tips

Although they may not impact your current year’s taxes, these strategies can have a significant impact on the creation and preservation of wealth. They may be impactful as part of a long-term tax strategy that considers cumulative tax benefits.

Each year, you can give up to $19,000 per recipient without the gift counting toward your lifetime exemption. These gifts can remove assets from your estate, lowering your taxable assets and reducing future estate tax liability. This amount is indexed each year.

If you exceed the income limits for contributing directly to a Roth IRA, you can use a backdoor Roth strategy. This involves making a nondeductible contribution to a traditional IRA (which is not subject to income limits) and then converting the account to a Roth IRA. Since the contribution is nondeductible, you need to pay taxes only on any growth that was converted. Future withdrawals from the Roth account would be tax-free, making this an excellent strategy for building tax-advantaged wealth over time. It is important to understand the pro-rata rules for IRAs before engaging in this strategy.

End-of-year tax planning requires a nuanced approach to managing income, investments, charitable giving, and estate planning. By leveraging these advanced strategies, it’s possible to preserve wealth, reduce tax liabilities, and help ensure your financial legacy.

Work closely with your trusted tax advisor or wealth planner for help navigating the complexities of the tax code and optimizing strategies that are tailored to your individual financial goals and circumstances.

Background

On September 15, the IRS released final regulations under SECURE 2.0 addressing catch-up contributions. Under the final regulations, plan sponsors must implement Roth catch-up contributions in good faith beginning January 1, 2026, for retirement plan participants age 50 or older who earned more than $150,000 in Federal Insurance Contributions Act (FICA) wages from their employer in 2025 (high earners). Operating in good faith gives plan sponsors time to resolve any issues before the IRS begins enforcing the new regulations on January 1, 2027.

The guidance emphasizes coordination among stakeholders, flexibility in communication strategies, and proactive monitoring of contribution limits. Effective coordination among service providers is also essential to manage plan design variability. For example, a company using multiple payroll systems and a third-party administrator may hold regular meetings to ensure consistent application of Roth catch-up contribution rules across all platforms and vendors.

The following industry best practices are designed to promote consistency, compliance, and operational efficiency among payroll providers, plan sponsors, recordkeepers, and third-party administrators (TPAs).

Best Practices

1. Understand the Catch-Up Elections

Under SECURE 2.0, plan sponsors have several options for implementing the Roth catch-up contribution requirement for high earners. One option, the deemed Roth catch-up election, allows employers to adopt a policy that automatically converts pre-tax catch-up contributions to Roth once a participant exceeds the IRS 402(g) limit (e.g., $24,500 in 2026). Accurate contribution monitoring is critical, requiring payroll systems to separately track pre-tax and Roth deferrals. For example, the system can be configured to detect when the limit is reached and automatically redirect subsequent catch-up contributions to Roth, minimizing the need for manual intervention.

Plan sponsors typically implement this policy at the start of the year and notify participants in writing, allowing them to opt out if desired.

Another option, the separate election for pre-tax and Roth catch-up contributions, allows a participant to choose in January to have all catch-up contributions designated as Roth-regardless of whether they exceed the IRS 402(g) limit during the year.

Additional election options include spillover and no Roth.

Please see the table below for a comparison of the main catch-up election methods available.

MethodDescriptionWho It Applies ToPros
Separate ElectionParticipants make a distinct election for catch-up contributionsAll participants: Roth mandatory for high earners (FICA > $150,000)Clear participant control
Straightforward compliance
Spillover ElectionParticipants make a single election; catch-up contributions begin after 402(g) limit is satisfiedAll participants: Roth mandatory for high earners (FICA > $150,000)Familiar designLess participant confusion
Deemed Roth ElectionCatch-up contributions automatically treated as Roth for high earners when necessaryHigh earners
(FICA > $150,000)		Simplifies compliance
Reduces participant error
No Roth ElectionCatch-up contributions disallowed for high earners in plans without Roth deferralsHigh earners in non- Roth plansNo need to implement Roth

2. Roth Catch-Up Identification

Employers should coordinate with their recordkeeper to determine how to best communicate which employees are eligible for Roth catch-up contributions based on prior-year FICA wages. Many recordkeepers are using a Roth catch-up indicator to identify employees age 50 or older who earned more than $150,000 in FICA wages during 2025.

3. Participant Communication

Participant communications should clearly outline the rules for Roth catch-up contributions. For example, the Summary Plan Description (SPD) and annual notices may include a dedicated section explaining the automatic Roth catch­ up contribution options. Messaging should be adaptable to the audience and may require more detailed or customized language depending on plan administration to ensure clarity and compliance.

4. Errors and Corrections

Plan sponsors that offer a deemed election, should be aware of the two correction methods.

5. Plan Sponsor Action Checklist

Questions for Payroll Providers:

  1. Can you identify employees who earned more than the $150,000 in FICA wages for 2025?
  2. Can you provide the report by the first payroll in 2026?
  3. Can you track pre-tax and Roth deferrals separately?
  4. Will you automatically switch catch-up contributions to Roth once the IRS 402(g) limit is reached?
  5. Will you revert to original deferral elections on January 1 each year?

Questions for Recordkeepers:

  1. Will you assist in updating plan documents to reflect Roth catch-up deferrals?
  2. How will you coordinate with our payroll provider to ensure accurate date exchange?
  3. What catch-up election options are available to the plan?
  4. Will you help communicate changes to participants, including Roth election options?

Detailed Examples

Example One: Deemed Roth Catch-Up Election

John elects to contribute $26,000 in 2026. Once his pre-tax deferrals reach the IRS 402(g) limit of $24,500, the remaining $1,500 is automatically treated as a Roth catch-up contribution under the deemed election.

Example Two: Error Correction Methods

A payroll provider mistakenly processes $2,000 of pre-tax catch-up contributions as Roth. The recordkeeper identifies the error during year-end testing. Using the Form 1099-R correction method, the $2,000 in pre-tax deferrals is converted to Roth and reported as taxable income.

Example Three: Election Methods

Plan A uses the spillover method. Emily elects a single deferral rate, and once she reaches the 402(g) limit, her catch-up contributions automatically spill over as Roth. In contrast, Plan B uses the separate election method. Mark specifies a separate rate for catch-up contributions, and his payroll provider designates all catch-up as Roth for the year.

Sources:

IRS RIN 1545-BR11 RE: Catch-Up Contributions

SPARK Institute

Disclosure: The information published herein is provided for informational purposes only, and does not constitute an offer, solicitation, or recommendation to sell or an offer to buy securities, investment products, or investment advisory services. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Nothing contained herein constitutes financial, legal, tax, or other advice. Consult your tax and legal professional for details on your situation. 

There are several strategies for giving to charity as part of a legacy plan. Each approach works differently, so it’s important to understand how they work and consider what impact you want to make. Choosing the right strategy can help ensure your estate planning reflects your values and goals.

Estate Transfer Taxes: A Primer

The estate tax is a tax on the transfer of wealth after a person’s death. It is calculated based on an individual’s net worth, with certain bequests subtracted and prior gifts that used part of the exemption added back in. An estate tax credit or exclusion then applies to determine if estate tax will be due.

In 2025, the estate tax exemption is $13,990,000 per individual. If the calculation leaves less than the exemption amount, no estate tax will be due. Keep in mind that some states may have their own estate or inheritance taxes as well.

One important provision is the unlimited charitable deduction. In other words, there is no limit to how much you can contribute to charity. Bequests to qualified charitable organizations can reduce your taxable estate, making this an effective way to create impact while potentially lowering or eliminating estate taxes.

Naming a Charity as a Beneficiary of an IRA or Retirement Plan

People who have assets in an individual retirement account (IRA) or pre-tax assets in an employer-sponsored retirement plan can name a charity as the beneficiary. This can be a simple way to make a charitable impact while effectively removing these assets you’re donating from your taxable estate.

Because of their tax-exempt status, charities that receive these assets do not pay income taxes on them—unlike individual beneficiaries.

Often, individuals choose to segment their charitable gifts by creating a separate retirement account designated just for charity, while naming other beneficiaries for their remaining accounts.

Make an Outright Bequest in Your Will

If you are updating or establishing your will, a direct bequest can also be a simple way to leave a charitable legacy. Generally, this involves working with an attorney to add language specifying the charities you want to support and the exact amount of the gift you want to give to each one. This approach is well suited for smaller bequests and donations intended for general use by the organization. However, establishing charitable bequests in a will can be harder to change if needed, as the document will need to be updated.

Instead of naming specific charities in your will, you can designate a donor-advised fund (DAF) and fund it through your estate. This option offers greater flexibility if your desired causes change over time, as distributions to charities are determined later. However, it does require a trustee to carry out your wishes regarding those distributions.

Specifying fixed amounts can create challenges if your estate’s liquidity is uncertain. Discuss these details with your attorney to ensure your intentions are honored effectively.

Donor-Advised Funds

A DAF is a charitable investment account managed by a sponsoring charitable organization. Contributions to the fund provide donors with a charitable tax deduction based on the type of asset donated. Once assets are contributed, they are removed from the donor’s estate. These funds can be invested, allowing them to grow and create an ongoing impact.

DAFs can be set up with a trustee and successor, enabling future generations to direct distributions to charities. Many individuals establish a DAF during their lifetime as part of their annual giving strategy. This approach supports ongoing philanthropy and engages heirs in the mission of giving, ensuring continuity of charitable values across generations.

Using a Charitable Trust

A charitable trust can be another effective strategy for legacy planning. While there are many ways to structure these trusts, they generally fall into two main categories, distinguished by when the charity receives the assets.

Charitable Lead Trust (CLT)

Charitable Remainder Trust (CRT)

Note: Establishing a charitable trust involves legal and administrative costs. Consult with an attorney or financial advisor to determine the best structure for your goals.

Charitable Lead Trusts: More Information

A charitable lead trust (CLT) allows you to strategically leverage assets to accomplish multiple goals: providing a charitable impact and passing assets to heirs. This type of trust usually works best with assets that are expected to appreciate over time. A CLT can be set up during your lifetime or through your will after death.

Assets that pass by way of a CLT after death are not subject to estate taxes, but they do not receive a step-up in basis for the non-charitable beneficiaries. CLTs are not tax-exempt. The non-charitable beneficiaries are responsible for paying taxes on income generated by the trust.

Here’s how a CLT works.

Charitable Remainder Trusts: More Information

Unlike CLTs, charitable remainder trusts (CRT) are tax-exempt entities. This allows assets funding the trust to be sold and diversified, creating a stream of income for the non-charitable beneficiaries.

This type of strategy would usually be leveraged while the donor is alive to take advantage of a charitable deduction, providing a stream of income to themselves or their heirs, and removing taxable assets from their estate. A portion of the donation would be brought back into the estate at death through the charitable income tax deduction.

If you choose to pursue this strategy, it is important to make sure the trust is structured properly. Payment amounts and durations must be calculated to align with beneficiary income needs and the desired charitable deduction.

Here’s how a CRT works:

  1. The donor creates the trust and funds it with a principal amount.
  2. A fixed payment is provided from the trust to beneficiaries for their lifetimes, not to exceed 25 years.
  3. When the payment period ends, the remaining balance of the trust is distributed to the named charities.

Sources:

Internal Revenue Services| Estate Tax. Last Updated: October 29, 2025

Resource by CAPTRUST wealth planning team

This article does not constitute legal, accounting, or tax advice. This material has been prepared solely for informational purposes. This article is not individual investment advice. The information and statistics in this content are from sources believed to be reliable but are not guaranteed by CAPTRUST Financial Advisors to be accurate or complete. If you have questions or concerns regarding your own individual needs, please contact a CAPTRUST representative for further assistance.