Waukesha County Community Foundation WCCF -Setting Up A Fund

Setting Up A Fund

Endowment Fund Fees, Investment Management and Fund Distribution

Once you have decided to establish a named fund, there are a few other decisions to make. Most of these comments apply to individuals, but may also have implications for private foundations, nonprofit organizations, and businesses. You can create your fund now, establish it in your will, or create it through a trust arrangement that benefits your family as well as the charity. Creating it now, of course, allows your fund to begin to have impact much earlier. Think about tax benefits of your giving. You may also want to think about how to make additional gifts to the fund to keep it growing.

You must decide what to give-possibilities include cash, shares of public stock, closely-held stock, real estate, life insurance, or other assets. Giving assets that have appreciated in value, such as stocks or real estate, may provide additional tax advantages to you by allowing you to avoid capital gains taxes that you would have to pay if you sold the same asset.

You also must decide how to give, meaning which type of fund best meets your values and giving objectives. It could be a Donor Designated Fund, Donor Advised Fund, Field of Interest Fund, or Unrestricted Named Fund. We have provided two forms for you to review as you deliberate.

Step One: Statement of Intent Form
Step Two: Fund Agreement Form

A community foundation mobilizes the giving power of its entire constituency to enhance its impact. Using contributed funds, assets are managed together for safety, cost efficiency, and diversity to result in greater earnings that are used to improve our community. Having professional management of funds gives donors comfort and security. Having a local Board of Directors assures donors that their gifts will be used to address community needs through careful and knowledgeable allocation.

Federal tax laws provide significant incentives for gifts to a community foundation. Gifts given during a donor’s lifetime are deductible to the maximum extent allowable under current law: gifts of cash are deductible up to an amount equal to 50% of the donor’s adjusted gross income. Gifts in excess of that 50% may be carried over for five years following the year of the gift.

It is significant to note that gifts of appreciated property (stocks, bonds, real estate, etc.) to a community foundation are deductible at the fully appreciated value up to 30% of adjusted gross income, with the aforementioned five year carry-over provision. Taxation of capital gains is avoided.

By making a deductible gift to establish an endowed fund, donors assure that the distribution of charitable dollars flow for many years into the future.

Outright gifts are the easiest and most immediate gifts to make. Although many assets can be given, the most common include:

Cash
Stock (or securities)
Bonds
Real estate
Valuable personal property
Retirement plan assets

Deferred gifts, also called planned gifts, are welcome. Usually such gifts are part of one's estate planning process. Most often they result in a gift coming to the Foundation at one's death, although there are exceptions. They can be used to establish a fund, or to add to a fund created during one's lifetime. Although the methods used to set up your best giving strategy are sometimes complex, deferred gifts can be best for meeting your overall giving and estate objectives. There are many knowledgeable and competent professional advisors in our area that can help you with your planning, and we recommend that you consult with one or more of them as you plan. They can help to explain these common gift vehicles to you:

Bequests, or a codicil, through your will
Life insurance cash value
Life insurance death benefit
Annuities
Charitable remainder trusts
Charitable lead trusts

For corporations and businesses, the Waukesha County Community Foundation could provide simplicity for your charitable giving interests. If a company foundation exists, charitable assets can be transferred to the Community Foundation. The administrative and reporting requirements are handled by the Community Foundation, along with investment management.

On occasion private foundations transfer their assets to a community foundation. There are reporting requirement advantages in a community foundation. Donors sometimes also may no longer want to handle the administrative duties of a private foundation. Importantly, however, the donor's charitable intentions are preserved.

Charitable organizations can transfer their investment assets or endowment funds to the Community Foundation, which would serve as the umbrella organization for the charity. The benefits are many, including freedom from setting up a separate foundation, tax reporting, federal and state regulatory registration, annual auditing, and investment management. Other Community Foundation donors would be invited to add to the charity's fund.

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