Don’t worry, this article is not a movie review. It’s the story of a different Magnificent Seven. One in which the protagonists aren’t cowboys but instead seven of the largest and most important companies in the world: NVIDIA, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla. In this story, you’ll hear about what makes these companies industry leaders, the challenges they’ve overcome, and the ending that’s yet to be written. 

Defining Magnificent 

Let’s begin with answering the question, what great deeds does a company have to perform to warrant the audacious title of magnificent? 

This is an illustration of a cowboy hat with a star and the number seven on it.

For starters, you would expect it to be the kind of company that conveys durable superiority worthy of the history books. It would have to be so dominant that it becomes a household name. And the industries in which it operates would need to be among the largest and most profitable in the world.  

But even that isn’t enough. 

Despite its tremendous size, this company would still be growing much faster than the average company. It would also need to be a financial powerhouse with a credit rating that bests most sovereign nations. Most importantly, it would need to be at the forefront of innovation such that its dominant position is not just maintained but strengthened.  

All of the Magnificent Seven—except Tesla*—meet these criteria.  

*Tesla has a BBB credit rating (the others are all AA- or better), has not grown so far in 2025, and is in the auto industry, which is not one of the most profitable industries in the world. (Source: FactSet Research Systems)

And the company needs to have staying power. In a typical innovation cycle, dominant companies are toppled by innovative upstarts that build a better mousetrap and become the next leaders. But the Magnificent Seven have seen that playbook and sidestepped it; they have remained at the forefront of innovation in their industries and continue to aggressively lead.  

And these companies are spending big to stay ahead—not just on buildings and equipment but on top engineering talent, an increasingly rare commodity. 

Collectively, these companies are more valuable than China’s stock market—the largest market in the world, other than the U.S. NVIDIA, the largest of the Magnificent Seven by market value as of September 3, 2025, has a market value larger than every country’s gross domestic product, except the U.S., China, and Germany. It’s understandable when regulators get nervous about companies that are this big and powerful. 

It’s no coincidence that all of these companies hail from the U.S. The U.S. offers a combination of economic durability, entrepreneurship, availability of capital, reliable markets, favorable regulatory policy, and global influence, among other factors, which allow big ideas to thrive and grow. It’s in this fertile soil that industries that didn’t exist only a few decades ago have grown to become the largest in the world. 

Here Comes the Law 

As a Yale Law School student, Lina Khan (2016) famously wrote an article, “Amazon’s Antitrust Paradox,” portraying Amazon’s business practices as anticompetitive, even though it hadn’t risen to the traditional standard of antitrust behavior.  

Less than five years later, she became the chair of the Federal Trade Commission (FTC) under President Biden—an appointment that likely sent a shiver down the spine of the Magnificent Seven.  

Changes to the antitrust guidelines under Khan’s tenure were designed to enhance the agency’s ability to scrutinize mergers that could harm competition, particularly in concentrated markets.  

The push to regulate these tech giants has proven bipartisan. The Trump administration’s decision to appoint a chair that had served in Khan’s FTC (Andrew Ferguson) indicates the legal challenges may not be over anytime soon.  

But a magnificent doesn’t crumble in the presence of adversity.  

For more than a decade, the alphabet soup of regulatory agencies inside and outside the U.S. has been trying to fell these giants without landing a significant blow to any of them. However, a few consequential cases are still winding their way through the courts as of this writing, including the potential breakup of the Google digital advertising platform within Alphabet. 

Other Challenges 

Not all adversity has been of the legal variety. 

In early 2025, Chinese hedge fund High-Flyer released DeepSeek, an AI model that shocked the U.S. technology industry. DeepSeek was created despite a semiconductor export ban that prevented access to the same leading-edge chips that its American competitors used. It was, in many ways, superior and was built at a fraction of the cost. Magnificent Seven shares temporarily sank as investors worried that the Chinese were leapfrogging us and all of that spending was wasted. 

There have also been a number of self-inflicted challenges. 

In 2021, Meta embarked on a high-profile spending binge on the metaverse—prompting a name change from Facebook. Its stock plunged 75 percent before the company pivoted and declared 2023 a “year of efficiency.” 

Apple struggled with underinvestment, failing to deliver on promised artificial intelligence (AI) features for iPhones. The result: a 33 percent decline in shares earlier this year (Source: Gurman and Bennett, 2025). 

Tesla may have sabotaged its own business after CEO Elon Musk campaigned and served for the Trump administration. This drew the ire of much of its customer base, many of whom belong to the opposing political party. 

These drawdowns were short-lived, and many of the recovery rallies resulted in new all-time highs. Investment continued, benefiting NVIDIA, the primary vendor of the AI-oriented semiconductors.  

Meanwhile, Microsoft impressed investors with strong AI revenue. Tesla redirected investor attention to the future of robotaxis and Optimus humanoid robots. Apple visited with the president, which eased tariff concerns. Meta reported accelerating revenue growth in its June quarterly earnings. 

Growing Pains or Fatal Flaws? 

The next chapter in the Magnificent Seven’s story will almost certainly hinge on the success—or failure—of AI. Despite enthusiasm around the game-changing possibilities AI promises, skepticism abounds.  

Skepticism around new technologies is nothing new. Maybe you’ve heard these: 

“There is no need for any individual to have a computer in their home.” (Ken Olsen, president of Digital Equipment Corporation, 1977) 

“By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” (Paul Krugman, Nobel Prize-winning economist, 1988) 

Tell the world you’re creating the next big thing, and someone with some extra time on their hands will find an amusing flaw. The early stages of consumer-facing AI have provided plenty of fodder for pranksters looking to make this new technology look foolish. 

Known as hallucinations, these responses are based on errors or biases in the data that trained the AI system. From made up legal cases to including glue in a recipe for pizza, these mostly harmless mistakes make it clear that AI always needs to be fact checked and still has a long way to go.   

AI Self Reflection 

The most credible longer-term argument against AI goes something like this: So the industry is squeezing power supplies and hurting the planet to put people out of work? That isn’t as easily brushed aside. Power outages, climate change, and labor displacement are the kinds of problems that could lead to a severe backlash. 

Ask Microsoft Copilot what the primary negatives about itself are, and it responds with a laundry list:  

As the leaders of this technological revolution, the Magnificent Seven are the targets of this skepticism and will have to champion the merits. It will take more than generating pictures of cats in space or helping kids cheat on their homework to sell the public on the benefits of AI. 

A Bright Future? 

Back to the movie from 1960… 

Despite well-laid plans, some of the villagers lose faith and betray the cowboys, allowing the bandits to take over and run the Magnificent Seven out of town. But the heroes don’t give up. They ultimately return to save the day, resulting in a happy Hollywood ending.  

Is something similar happening with our Magnificent Seven companies today? The regulators, naysayers, and even some in the court of public opinion seem eager to run them out of town.  

Of course, it’s not as black and white as it is in the movies. But if the bandits of soaring government debts, demographic headwinds, and inflation continue to terrorize the economy, we may need the pro-growth and deflationary forces of the Magnificent Seven to save the day. 

And if they succeed in leading us into the next decade, we may need to find a more impressive superlative to describe them—because magnificent might not be enough. 

This text box lists other companies that have grown in size and importance such that they might eventually be worth of inclusion in the "Magnificent' club. They are: Broadcom, Oracle, and Palantir

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.

History of 529 Plans

In the late 1980s, Michigan, Florida, Ohio, and Wyoming introduced prepaid tuition programs to help families manage rising college costs. In 1994, a federal court ruled that Michigan’s plan was tax-exempt. Following this decision, the IRS announced it would review the tax status of each plan individually, prompting states to intensify their lobbying efforts in Congress for federal tax benefits and to encourage college savings.

In 1996, Senators Bob Graham of Florida and Mitch McConnell of Kentucky—both representing states with prepaid savings programs—led a bipartisan effort to secure federal tax relief for all college savings programs. This effort resulted in the creation of Section 529 of the Internal Revenue Code.

Today, 49 states and the District of Columbia offer 529 plans, helping dramatically increase savings to meet the rising costs of education. While 529 plans evolved from prepaid savings programs, they are not the same. Many states offer one or both options.

Getting Started with Plan Selection

Step One: Determine Which 529 Plan to Use

While most states offer their own 529 plans, you can invest in any state’s plan. If your home state provides a tax deduction or credit, it often makes sense to use that plan. Some states also allow state income tax-free withdrawals for qualified expenses, and more than 30 states offer some form of tax benefit.

If your state does not provide a tax advantage, consider comparing plans based on:

Step Two: Determine the Owner of the Account

Parents or guardians are typically the best choice as account owners because they maintain control over the account and can help ensure funds are used as intended. Grandparents and other relatives can open their own 529 accounts or contribute to an existing one. The beneficiary is the student who will use the funds.

Financial Aid Considerations

Funds in a 529 plan count toward the student aid index (SAI), which measures a family’s ability to pay for college and affects need-based aid eligibility. Parent-owned accounts are assessed more favorably on the Free Application for Federal Student Aid (FAFSA) than student-owned accounts.

Beginning with the 2024-25 academic year, grandparent- or other relative-owned accounts do not affect FAFSA eligibility, although they may impact the College Scholarship Service (CSS) profile used by some private colleges.

Unlike a custodial account, the owner maintains oversight of investments and can change the beneficiary for any reason.

Contributions

Each state sets a lifetime contribution limit for its 529 plan, typically between $235,000 to $550,000 per beneficiary. Unlike individual retirement accounts (IRAs) or 401(k)s, there is no annual federal contribution limit for 529 plans. Yet, gift tax rules still apply. An individual can contribute any amount up to the annual gift exclusion amount per beneficiary each year without triggering gift tax consequences. In addition, 529 plans allow a special five-year election that lets clients front-load up to 5 years’ worth of annual gifts for each beneficiary.

Although anyone—parents, grandparents, relatives, and friends—can contribute to a 529 plan, the account owner retains control over the funds. Contributions must be made in U.S. dollars, and non-cash assets such as stocks or property cannot be held within a 529 plan.

Investments Within a 529 Account

Each investment provider will offer different options, but most plans include target-date funds, objective-based portfolios, and individual mutual funds. Target-date funds are designed around the year that the beneficiary is expected to begin withdrawals. They simplify asset allocation by automatically rebalancing to become more conservative as the withdrawal date approaches.

Objective-based portfolios focus on specific investment goals rather than risk level or asset class. For example, a growth portfolio may seek long-term capital appreciation by investing in companies with strong growth potential. This approach can be suitable for investors who typically buy individual stocks but want greater diversification to meet long-term goals.

Some plans also allow you to build a custom portfolio using a mix of mutual funds, giving account owners flexibility to tailor investments to their preferences.

Withdrawals from a 529 Account

One of the most appealing features of 529 savings plans is that withdrawals used for qualified education expenses—including the earnings within the plan—are exempt from federal income tax. Qualified expenses include tuition, fees, books, room and board, and computers for higher education and post-secondary programs. Additional qualified expenses include up to $10,000 per year per beneficiary for K-12 tuition and a lifetime limit of $10,000 per person toward student loan payments. To receive tax-free treatment, withdrawals must occur in the same calendar year that the expenses were paid.

Nonqualified expenses include transportation, sports, entertainment, and student phone bills. The earnings portion of withdrawals for nonqualified expenses is subject to federal and state income tax and a 10 percent federal penalty.

It is important to note that not all states conform to federal tax rules for 529 plans. For example, some states impose income tax on earnings used for K-12 tuition, while others apply their own rules and penalties on non-qualified distributions. Clients should be sure to review their state’s specific rules before making withdrawals.

Additional Options for unspent 529 Funds

If the original beneficiary does not use all the funds in a 529 plan, there are several ways to reallocate the money.

Sources:

Internal Revenue Service. n.d. “Internal Revenue Service | an Official Website of the United States Government.” Irs.gov.  https://www.irs.gov/

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.

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.

Allowances

An allowance gives children a taste of financial independence. It empowers them to save, budget, and plan for their goals and desires. How much to give depends on family values and the household budget. Parents should also decide which expenses allowances will cover and how much should be set aside for savings.

There are several approaches to allowances:

If you choose to give your child an allowance, keep these three tips in mind.

  1. Set clear parameters. Discuss what the allowance can be spent on and how much should go toward savings.
  2. Establish a schedule. Pay the same amount on the same day each week to build consistency.
  3. Teach goal-setting. Help your child create short- and long-term savings goals, such as buying a toy or saving for a special outing.
  4. Plan for raises. Reward responsible money management with occasional increases.

Opening a Bank Account

A child’s first bank account is an excellent way to introduce the concept of saving. It provides a hands-on lesson in how a savings account works and gives children the satisfaction of making deposits and watching their money grow.

Many banks and credit unions offer kid-friendly programs with activities and incentives to teach financial basics.

Beyond opening the account, parents can reinforce good saving habits by showing children the power of compounding—how deposits earn free money over time. Additionally, offering matching contributions toward a long-term goal can further motivate consistent saving. It’s also important to allow occasional withdrawals; young children may lose interest if the money only goes in and never comes out.

Saving for Financial Goals

Getting children excited about saving for financial goals can be challenging, especially when money from birthdays, holidays, or milestones feels like it should be spent immediately. The value of saving for the future isn’t always obvious, so parents play a key role in making it engaging and actionable.

Let children set reasonable goals. This creates a sense of ownership and incentive to save. Encouraging bucketing, where money is divided into portions for saving, charity, and savings is an example of this approach. Make the plan actionable by writing down the goal and the amount that must be saved during each period. This distinction between short-term and long-term goals helps children understand the process. Visualization also matters. Taping a picture of the goal to a savings jar or to regularly scheduled deposits can strengthen the connection between saving and achieving the goal. Three other tips include:

Raising Savvy Consumers

Commercials, peer pressure, and advertising are designed to influence behavior. Children are naturally tempted to spend, and learning to make wise purchasing decisions takes time and guidance. To help them grow into savvy savers and consumers:

Build Financial Confidence for Life

Teaching your children about money is one of the most valuable investments you can make in their future. Start small, stay consistent, and turn everyday moments into lessons that last a lifetime. If you’d like more ideas for building financial confidence at home, a CAPTRUST advisor can help.

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. 

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.

Increasing Taxable Income

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

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.