The law expands the existing 1.4 percent excise tax on net investment income for colleges and universities with large endowments. Now, more institutions may meet the threshold based on the size of their assets relative to student enrollment.
If you’re affiliated with a school or donor network affected by this provision, it’s worth reviewing your exposure.
The new law enables more taxpayers to take charitable deductions. Currently, only about 10 percent of taxpayers itemize their taxes1, which means most of the remaining 90 percent receive no tax benefit for their giving. The OBBB addresses this by allowing all taxpayers to deduct a portion of their charitable giving: up to $1,000 for individuals and $2,000 for married couples.
Second, high-income donors will see tighter limits on itemized deductions, including charitable contributions. While the charitable deduction remains intact, the cap on total itemized deductions, sometimes called the Pease limitation, has been reinstated for certain earners. This change could affect giving behavior among major donors.
Private foundations also face new compliance expectations, including:
These updates may lead to more administrative oversight and planning considerations for foundation boards and staff.
Proposed increases on excise taxes for private foundations did not make it past the Senate. These increases would have had a significant impact, especially on the largest private foundations, amounting to an estimated annual tax increase of $2.9 billion.2
The bill increases funding for IRS oversight of tax-exempt organizations, signaling a likely rise in audits and enforcement activity in the years ahead.
While this legislation is primarily tax-focused, it also has implications for the nonprofit sector. Now is a good time to review governance policies, assess compliance processes, and revisit planned giving strategies with your advisory team.
If you have questions or want to talk through next steps, your CAPTRUST team is here to help.
1 “Trends in Itemized Deductions Since TCJA,” USAFacts
2 “Understanding Proposed Tax Changes for U.S. Private Foundations,” United Philanthropy Forum
The information provided is for educational 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. Nothing contained herein constitutes financial, legal, tax, or other advice. Consult your tax and legal professional for details on your situation.
Several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) are here to stay.
These are changes to keep an eye on, especially if you’re a high-income filer or retiree:
This legislation may reshape your tax and estate strategy. While some provisions take effect in 2026, others start immediately.
This is a great moment to revisit your financial plan. Reach out to your CAPTRUST advisor to explore what these changes could mean for you—and how you might adjust your investment portfolio, estate plan, or withdrawal strategies to navigate the new tax landscape.
The information provided is for educational 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. Nothing contained herein constitutes financial, legal, tax, or other advice. Consult your tax and legal professional for details on your situation.
When it comes to safeguarding your family’s financial future and protecting your wealth, life insurance plays a pivotal role. Regularly reviewing your life insurance portfolio with an experienced advisor should be an integral part of your financial planning.
Life insurance is often an undermanaged insurance asset. Conducting a periodic or annual review of life insurance policies can identify weaknesses and lead to opportunities for improvement that can substantially reduce risk and potentially improve your long-term results.
Over time, policies acquired may not perform as originally expected. Couple this with life’s changing financial, family, and health circumstances, and it becomes imperative to monitor your life insurance policies and coverage needs regularly.
As you develop your financial plan, many elements could be labeled as set-it-and-forget-it aspects. Life insurance is not one of them. To remain effective, it requires regular attention and adjustment. Regularly reviewing your life insurance portfolio within the context of your wealth, estate, and business preservation planning is not just a prudent practice; it’s essential.
Nonqualified deferred compensation (NQDC) plans are a key tool for attracting and retaining top-tier executives, allowing high earners to save beyond the limits of qualified retirement plans. But understanding how to maximize this benefit isn’t always clear.
Increasingly, plan sponsors are realizing that many NQDC plan participants are underinformed or simply unaware of how to take full advantage of their plans. The result? A growing need for robust financial wellness solutions that offer not only education but personal financial advice.
“It’s easy to assume that people who earn a higher income must be financially well educated or financially savvy,” says Katie Securcher, a senior manager on CAPTRUST’s nonqualified executive benefits team. “But the truth is that these folks need help—help understanding their benefits and making the best use of their plan.”
The 2024 NFP “U.S. Executive Compensation and Benefits Trend Report” found only 29 percent of participants fully understand their NQDC benefits. That’s a problem, especially when participants are making long-term decisions with complex tax consequences.
The good news is, for the most part, employers know that communication and education need to improve. According to the 2024 Newport/PLANSPONSOR “NQDC Plan Trends Survey,” 72 percent of plan sponsors say improving communication and education is their top priority for NQDC plans. This outpaces other enhancements like digital tools (32.8 percent) or investment menu reviews (32 percent).
It’s important to remember that Section 409A, which created and governs NQDC plans, has only been around for 20 years. “We spent the last two decades rolling out these plans, making the benefit available, and trying to get people to participate,” says Securcher. “But the industry hasn’t done a great job advertising them or teaching people how they work.”
That’s where financial wellness comes in. “The best financial wellness programs, like the best financial advisors, don’t just explain how things work,” says Securcher. “They help participants connect the dots between their income, savings, tax strategy, and long-term goals. They show people how to balance all the various pieces of their finances and view them as part of a holistic picture.”
In the past few years, financial wellness programs have become an increasingly popular employee benefit. For both employers and employees, they have been highly desirable. And they seem to work.
A recent PLANADVISER spotlight noted a 60 percent drop in extreme financial stress among employees who engaged with one financial wellness tool. These aren’t just feel-good benefits. They have a measurable impact on participant well-being and performance.
“We have an opportunity to make a real difference for participants—but that requires engagement,” says Chris Whitlow, senior director and head of CAPTRUST at Work, the firm’s financial wellness solution for employers and retirement plan sponsors. “Many participants don’t fully realize the strategic nature of nonqualified plans until they’re at a decision point, often under pressure. That’s why education and early planning are so critical.”
Whitlow says a more tailored approach to education starts with recognizing where someone is on their NQDC journey. “We tend to see participants fall into one of three phases—early, middle, or late,” says Whitlow. “Each phase comes with a unique set of questions and planning considerations.”
“Effective education must be tailored,” Whitlow says. “Someone just getting started needs foundational guidance. Someone preparing for distributions needs highly specific, scenario-based advice. A segmented approach makes education far more relevant—and ultimately more actionable.”
Here are a few examples of what some plan sponsors are doing to educate participants.
When employees maximize their NQDC plan they’ll value it more, and they’ll advocate for it. What are the benefits for plan sponsors?
Generative AI has the potential to revolutionize participant education by making it smarter, faster, and more personalized. AI-powered tools can offer on-demand explanations of plan provisions, simulate distribution strategies, or help participants model the tax impact of deferral decisions—all in natural language.
“AI can play a meaningful role in lowering the barrier to entry for participants who may feel hesitant or unsure,” says Whitlow. “When applied thoughtfully, it can personalize the experience, introduce a sense of empathy, and help participants ask more informed questions when they engage with their advisor.”
Instead of reading through dense plan documents, participants could one day ask detailed questions about their unique financial situation and receive a tailored, plain-English answer—instantly.
AI can’t replace good, human advice, but it can be a powerful first step. Especially for early-phase participants who are intimidated or unsure, AI can help reduce the friction of getting started. “If technology helps participants approach a conversation with greater clarity and confidence, that’s a win—for them and for their advisor,” says Whitlow. “It’s not a replacement for human advice, but it can be a powerful complement.”
Whether your NQDC plan is a legacy benefit or a recent addition, now is the time to re-evaluate how well participants understand it. Do they know how to elect deferrals strategically? Are they choosing thoughtful distribution schedules? Do they understand the tax implications?
If not, the solution isn’t just plan redesign—it’s education.
“Sometimes, we hear from employers that NQDC participation is low and people don’t seem to take advantage of the benefit,” says Securcher. “Almost always, what’s happening is not a lack of interest. It’s a lack of clarity. When people get clear on what the plan can do for them—they use it.”
DISCLOSURE: The information provided is for educational 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. Nothing contained herein constitutes financial, legal, tax, or other advice. Consult your tax and legal professional for details on your situation.
Investment advisory services offered by CapFinancial Partners, LLC (“CAPTRUST” or “CAPTRUST Financial Advisors”), an investment advisor registered with the SEC under The Investment Advisers Act of 1940.
Estate planning is an iterative process organizing finances and belongings. Each estate plan varies depending on your unique situation. It reflects the complexity of your financial life, building on early foundations as complexity layers. Estate planning can ensure that transfer of property aligns with your wishes during life and after death. It can also mitigate costly expenses like estate tax and probate fees. Always consult an estate planning attorney to draft documents relevant to your specific situation.
Considering your stage in life helps identify some common estate planning steps that could be helpful to consider. Regardless of your stage in life, there are essential documents applicable to all adults.
These five essential estate documents listed above are important documents from the time a child turns 18 years old. The child is legally an adult, and the rights that parents previously had to discuss medical choices or deal with financial matters cease.
Even though a young adult may not have substantial assets, it is important to establish basic documents. A simple will granting their estate to their parents or siblings should be considered.
Another priority is establishing a Durable Power of Attorney and Healthcare Power of Attorney. Consider parents or another trusted adult for these responsibilities. In the event of an unexpected medical or personal emergency, these legal documents allow a trusted person(s) to handle the affairs of an adult unable to make decisions on her or his own.
Establishing Living Will and HIPPA Authorizations help the trusted person(s) operate within the wishes of the individual drafting the documents, empowering them to share necessary information.
Ensuring primary and contingent beneficiaries are listed on investment accounts and insurance policies also impacts the ease of asset transfer, ensuring that wealth impacts the people you want it to.
If you have a committed partner but aren’t legally married, it is important for couples to discuss and execute estate planning documents, since a non-married partner is not granted many of the state-law and federal benefits of a married spouse. A non-married partner will not have certain inheritance rights that a married couple would have. A will or trust is crucial to help ensure that upon one partner’s death the other receives intended assets, without family or government intervening. Without one, state laws usually prioritize your closest relatives, which could mean your partner is left out entirely.
As you plan your future together with your spouse, it is critical to discuss and prepare your estate plan. When you get married, your legal and financial status changes. As you potentially begin obtaining shared income, purchasing property together and filing joint tax returns, you will also want your estate plan to reflect a married relationship. Along with the five essential estate planning documents you will want to review your beneficiaries and possibly change the ownership of assets to joint.
Establishing guardianship in the event of the death of a parent is non-negotiable for parents. Without doing so, the court may determine where children may live. That may conflict with the wishes of parents with a much more intimate understanding of their children’s needs.
Life insurance is also important, as it can provide financial support to your family in the event of an untimely death, helping to replace your income and ensure your family’s needs are met.
Beyond wills, you might consider setting up a trust to oversee your children’s inheritance if both parents die simultaneously. Trust provisions can provide detailed instructions about your intentions for when and how your children receive their inheritance.
Parenthood also opens the opportunity to leverage 529 Plans to help save for children’s education. Parents can super-fund these flexible tax advantaged accounts, meaning they can contribute the equivalent of five years’ worth of annual exclusion gifting without filing a gift tax return.
Reviewing the essential estate planning documents, account beneficiaries, and any trust documents is imperative. Levels of assets, age of beneficiaries, and the time from the last draft of the document could have changed. This means that your documents may no longer reflect your wishes.
If you are elderly or dealing with illness, it’s important to create or update your will and think about setting up a revocable living trust. Make sure you have a durable power of attorney and a clear healthcare directive in place to guide decisions if you become unable to speak for yourself. Communicate your wishes openly with your family and ensure they know where to find your essential documents.
Resource by the CAPTRUST wealth planning team
The taxation of annuities is straightforward. Income from the annuity contract is split between two categories: return of investment (basis) and earnings. Basis is not taxed; however, earnings are taxed. Further, earnings are taxed at ordinary income tax rates, rather than capital gains tax rates.
Annuities are subject to early withdrawal penalties, similar to other retirement accounts. Distributions from non-annuitized annuities taken before age 59 ½ are subject to a 10 percent early withdrawal penalty tax, if those dollars are earnings rather than basis. However, early withdrawals from an annuity are taxed on a last-in-first-out (LIFO) basis, meaning all earnings must be exhausted before basis can be returned tax free.
An exception to LIFO taxation is the use of the exclusion ratio for annuitized payments received by annuitants. Instead of paying taxes on all earnings up front, annuitants can use the exclusion ratio to spread the taxable portion of each payment over their lifetime, based on the proportion of earnings to the annuity’s total value.
John is 55 years old and owns an annuity worth $100,000 that he has not annuitized. He has paid a total of $75,000 in premiums since purchasing the contract, meaning his earnings total $25,000. John would like to withdraw $30,000 from his annuity. How will John’s withdrawal be taxed for federal income tax purposes?
Step by Step:
However, if John decides to take payments through annuitization, 75 percent of John’s annuity ($75,000/$100,000) is basis, so 75 percent of withdrawals will be returned tax free.
When the owner of an annuity gives their contract to another individual as a gift, special income tax rules apply. The donor, the person who originally owned the contract, is considered to have surrendered the contract. Income tax is due on the difference between the value of the contract, known as the cash surrender value, and the amount invested in the contract, or the basis. Additionally, standard gift tax rules apply.
Using our example from above, if John intends to gift his entire $100,000 non-annuitized annuity (cash surrender value) with a basis of $75,000 to his daughter, Mary, the following would apply:
The tax rules for owners of multiple annuities can be nuanced. If someone has multiple annuities meeting specific criteria, they cannot simply withdraw funds from one contract; rather, all contracts are combined, or aggregated, when calculating taxes, and the IRS treats multiple annuity contracts as a single annuity contract.
These criteria are that the annuity owner must:
All three of these criteria must be satisfied for aggregation rules to apply. This is important, because annuities are taxed LIFO, which means earnings on the contract come out first and are subject to ordinary income tax rates.
The tax treatment of an annuity after the owner’s death depends on whether the contract has been annuitized.
When the annuitant (annuity owner) dies while receiving benefits under a term-certain annuity payment, meaning the contract specifies a fixed period for payments even if the annuitant dies, the remaining payments of the contract are made to the annuitant’s beneficiary.
In this case, the beneficiary is subject to the same tax rules as the annuitant: The portion of the payment considered return of basis is tax free and the portion considered earnings is taxable at ordinary income tax rates.
When the annuitant dies before annuitization, which is commonly referred to as the accumulation phase, there are a range of options available that impact the tax treatment of the annuity, whether the annuity’s beneficiary is the annuitant’s estate or a named beneficiary that is not the annuitant’s estate.
If the annuity proceeds are retained by the estate of the owner, the estate will owe ordinary income tax on any gain in the contract, and the annuity value will be included in the gross estate of the owner. The estate will be entitled to a tax deduction on the decedent’s final income tax return for the additional estate tax attributable to the annuity value on the decedent’s estate tax return, if any.
If the annuity proceeds are paid to a named beneficiary, any tax on the gain is transferred to the beneficiary. The beneficiary is entitled to a tax deduction for the additional estate tax attributable to the annuity value on the decedent’s estate tax return, if any.
Annuities can serve as useful vehicles for financial planning; however, nuance and complexity associated with them warrant professional guidance. Please contact your CAPTRUST advisor to answer questions specific to your annuity.
Source:
Publication 575 (2024), Pension and Annuity Income | Internal Revenue Service
Resource by the CAPTRUST wealth planning team
Important Disclosure
This content 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. Investment advisory services offered by CapFinancial Partners, LLC (“CAPTRUST” or “CAPTRUST Financial Advisors”), an investment advisor registered under The Investment Advisers Act of 1940.
Annuities were developed by life insurance companies to provide individuals with income during their retirement. However, they date back to the Roman Empire. The name is derived from the Latin word annua, meaning stipend. While annuities existed in America in some form even before the formation of the United States, the product gained widespread popularity during the Great Depression of the 1930s, when pension plans viewed insurance companies as more stable than other financial institutions.
Annuities can be either qualified or nonqualified.
Qualified annuities provide tax-advantaged, tax-deferred benefits similar to those offered by traditional 401(k) plans, 403(b) plans, or IRAs. As such, the contribution, withdrawal, and tax rules that apply to other tax-advantaged retirement plans also apply to qualified annuities. Earnings in a qualified annuity are tax-deferred until payments from the issuer are received. This tax deferral is one of the product’s most attractive features. Over time, investments in a qualified annuity can grow substantially larger than if the same funds were invested in a taxable investment. However, withdrawals before the age of 59 1/2 incur a 10 percent penalty on the taxable portion, and all distributions are taxed at ordinary income rates.
Nonqualified annuities differ in that contributions are not tax deductible. Taxes are paid only on earnings when they are distributed, while the return of basis remains tax free.
An annuity contract involves four parties: the issuer, the owner, the annuitant, and the beneficiary.
An annuity has two distinct phases: the accumulation (investment) phase and the distribution phase.
During the accumulation phase, the owner contributes money to the annuity. Choosing this option means the annuity is deferred, as opposed to an immediate annuity where distributions start immediately. Annuities can be funded with a lump sum, known as a single-premium annuity, or through periodic investments over time.
During the distribution phase, the owner receives payments as outlined in the contract. There are two options for receiving distributions:
The election for distribution typically occurs several years after purchasing a deferred annuity. Additionally, payments can be structured to cover both the annuitant’s life and the lifetime of another person—a structure known as a joint and survivor annuity.
The amount the owner receives for each annuity payment depends on several factors and is ultimately determined by the issuer. Key considerations include:
Annuities can be excellent tools when used properly, but they are not right for everyone.
Because contributions to nonqualified annuities are not tax-deductible, it is typically advisable to fund other tax-advantaged retirement plans first. However, a nonqualified annuity can be a strong option if you have already maximized your contributions to available retirement plans. There is no limit on how much can be invested in a nonqualified annuity, and funds within the contract grow tax-deferred until distribution.
Annuities are long-term investment vehicles. Withdrawals before age 59 1/2 typically incur early withdrawal penalties, and distributions within the first few years may also be subject to surrender charges imposed by the issuer. If you are confident you will not need the funds until at least age 59 1/2, an annuity may be worth considering as part of a disciplined retirement savings strategy. If your needs are shorter term, other options may be more suitable.
Sources:
Publication 575 (2024), Pension and Annuity Income | Internal Revenue Service
Resource by the CAPTRUST wealth planning team
Important Disclosure
This content 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. Investment advisory services offered by CapFinancial Partners, LLC (“CAPTRUST” or “CAPTRUST Financial Advisors”), an investment advisor registered under The Investment Advisers Act of 1940.
Events such as IPOs, mergers, or acquisitions offer opportunities to liquidate holdings and diversify. Conducting thorough due diligence and scenario modeling can show how each option may impact your long-term financial plan.
Managing the tax impact of diversification is critical. Coordinating with all professional advisors will help ensure tax efficiencies are fully identified and captured. Potential strategies include:
Another option for diversification is to donate private company shares to a charitable trust or foundation. This can diversify holdings while providing tax benefits and supporting causes that are important to you.
Structures such as donor-advised funds, charitable remainder trusts, and charitable lead trusts may be appropriate. We recommend working closely with advisors who specialize in charitable planning to select the right approach.
Remember, diversification isn’t just a financial tactic—it’s a foundation for wealth preservation and growth. By spreading investments across different asset classes, industries, and geographies, private company owners can reduce risk and unlock opportunities for long-term prosperity.
In today’s evolving markets, diversification is a powerful strategy to protect and grow your wealth, ensuring your legacy endures for generations.
Partnering with a trusted financial advisor can help tailor these strategies to your unique financial circumstances.
The information provided is for educational 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. Nothing contained herein constitutes financial, legal, tax, or other advice. Consult your tax and legal professional for details on your situation. Investing involves risk, including the risk of loss. Investment advisory services are offered by CapFinancial Partners, LLC (“CAPTRUST” or “CAPTRUST Financial Advisors”), an investment advisor registered with the SEC under The Investment Advisers Act of 1940.
A: Generally, it’s better to consolidate investments into fewer accounts and, ideally, with one advisor or investment manager.
There is a common misconception in financial management that diversification means having several investment accounts at different institutions or with multiple financial advisors. In truth, diversification refers to the variety of investments in your portfolio, not where you hold them. For instance, maintaining multiple 401(k)s with different providers is not diversification, but balancing the quantity of stocks and bonds within your 401(k) is.
Asset consolidation has four main benefits:
For cash accounts, different rules apply, and it can sometimes be a good idea to spread deposits across multiple banks to keep each account balance below $250,000. This is the maximum amount insured by the Federal Deposit Insurance Corporation (FDIC).
Before you make any moves, talk to a financial professional to discuss the best strategy. Asset consolidation will look different for each investor.
AI stocks are garnering a lot of attention lately, and for good reason. In late 2022, the technology sector saw a breakthrough in large language models, allowing AI to learn and respond in conversational language. And in 2023, when Nvidia, which makes processors that power AI technology, delivered second-quarter sales drastically higher than expected, it unleashed a fervor of excitement. In the days after, mega-cap technology stocks rose sharply, pulling the entire S&P 500 Index upward. Since then, AI-related company stocks have seen huge gains, and some huge dips as well.
Although mass adoption is distant, AI has the potential to unlock productivity in a host of different industries, and companies across sectors are now investing heavily in related infrastructure. This means AI also has huge potential to generate wealth.
Despite this potential, it is important to remember that AI is still nascent technology, and investing will be risky. AI stocks are likely to be volatile, it will be difficult to predict winners and losers, and investors could lose everything.
That’s why it’s critical to do your due diligence. Make sure you or someone with AI-specific knowledge is vetting the opportunity set on your behalf, and never invest more than you can afford to lose.
If you do decide to invest in AI, consider a diversified approach: either a portfolio of AI stocks, a mutual fund, or an exchange-traded fund (ETF). These can offer better diversification than individual stocks alone.
As with any investment, risks abound, and AI strategies will not be right for everyone. A financial advisor can help you understand how AI investments may fit into the larger context of your investment portfolio and how much risk might be appropriate.