Private Foundation or Community Foundation?
You are charitably inclined and seeking a way to carry out your short- and long-term philanthropic objectives. You've wondered about establishing a private foundation. However, if you set up the “Jane and John Doe Foundation” as a private foundation, you'll typically:
- Spend time and money creating a new organization
- Annually file a detailed federal tax return
- Pay excise tax on net investment income
- Research and determine annually which organizations should be awarded grants
- Be sure that grants paid out each year equal or exceed 5 percent of the foundation's asset value
- Assume expenditure responsibility for certain types of grants
- Adhere to rules relating to the total voting stock held by "disqualified persons"
- Avoid a long list of other "self-dealing" transactions
- Avoid investments which jeopardize the foundation's charitable purposes
- Pay additional taxes for failure to take corrective action
- Recognize the stricter income tax deduction limits for gifts to the foundation
- Make available the names and addresses of substantial donors
- Cover administrative and staffing costs as required
If you establish the “Jane and John Doe Fund” as a donor-advised fund with the Community Foundation, there's a myriad of benefits:
- Establish the fund in minutes, not months
- Choose the fund's name (or it can be anonymous)
- No up front set-up costs
- Anyone can add to the fund at any time, in any amount after the $10,000 minimum — either during your lifetime or through an estate gift
- You're an active partner with the Foundation because you can make annual or more frequent grant recommendations on distributions from the fund
- You can name successor advisors to perpetuate and encourage family involvement
- No ongoing federal excise taxes on investment income
- No mandatory annual pay-out requirements
- More advantageous income tax deductions
- We handle the administrative work for you
- We research important community needs for you and conduct site visits to nonprofits
- We handle annual audits, tax filings, and all correspondence for your fund
- We write and distribute grant checks ($250 minimum) in the name of your fund
- We follow-up with grantees to find out the results of those grants
- We do this for an annual unrestricted assessment of 1.25% of the endowed fund’s market value
Your grants can be made locally, regionally, or nationally. Your fund is professionally invested and actively managed. And you receive periodic reports on the status and activity of your fund.
To establish your family legacy through a donor-advised fund that is custom-tailored, flexible, and permanent, give us a call! We'll help you translate your philanthropic vision into action.
As with any financial decision, we encourage you to discuss the Community Foundation option with your financial or legal advisor. We're happy to answer any questions they may have.