General Information: Designated funds are component funds whose beneficiaries have been specified by the donor when the fund is established. The community foundation assumes the oversight responsibility for ensuring that these funds are distributed as the donor intends. Many designated funds name a specific organization - the YMCA, United Way or the local High School or community library, for example.
Designated Funds can be established by an individual or couple, a family, a business or any other group of people with shared charitable interests.
Designated Funds allow you to personally receive a tax deduction, and at the same time benefit your community by advising the Foundation of your charitable intents in perpetuity.
Designated Funds give donors the opportunity to work with the Foundation's professional program staff in determining immediate or long-term needs within our community. Staff members are knowledgeable about the needs and resources of our area and can help you evaluate proposals or explore new areas of grant making.
Designated Funds can carry the name of the donor, family, company, or someone the donor wishes to honor. All grants from the fund are made in the name of the fund, in perpetuity. Donors who prefer anonymity can choose names that reflect their funds' charitable purposes.
Designated Funds are listed in the Foundation's Annual Report and are identified to grantees.
As is true of all funds of the Community Foundation of the Mahoning Valley, Designated Funds are considered components of the Foundation. They are subject to the terms and conditions of its Articles of Incorporation. Designated Funds guidelines are subject to change from time to time by the Board of Directors.
Grantmaking from Designated Funds: The Foundation sends the donor or a designated member of their family an annual report outlining the Fund's investment performance, grants paid, and earnings available for grant distribution.
Grants from Designated Funds are made through the following process: The Community Foundation of the Mahoning Valley will make an annual contribution to the named charitable organizations, based on the percentage of the annual income distribution that has been placed in the Designated Fund Agreement.
Designated Funds are made to charitable organizations as defined in Section 501 (c) (3) of the Internal Revenue Code that have been evaluated by the Foundation program staff.
Fund Sizes and Fees With endowed funds, the minimum initial contribution is $5,000.00. The principal is invested with other funds of the Community Foundation of the Mahoning Valley, and distributions are made according to the Foundation's spending policy. The Foundation shall make charitable distributions from the Fund in accordance with a "Spending Policy" adopted by the Board annually for component funds of the Foundation.
Spending Policy Goals
- Preserve and build the assets of an endowment fund and protect the purchasing power of the original gift.
- Maintain reasonable inflation adjusted spending into the future.
- The Spending Policy is designed to allow the funds to be invested on a "total return" basis to maintain and, if possible, increase the purchasing power of the funds, while at the same time providing a relatively steady and predictable level of funding for grantees. The Spending Policy in effect on the date hereof provides for the Foundation to make charitable distributions annually of a minimum of 5% of the market value of the fund at the end of the Foundation's fiscal year.
Consistent with its mission of developing permanent charitable assets for the community, the Foundation especially encourages donors to establish endowed funds.
Donors, who place their funds with the Community Foundation of the Mahoning Valley, may recommend an investment manager of their choosing, subject to approval of the Board of Directors. With an Investment Company or Trustee Bank: The minimum size of the fund varies and is determined by the investment company or trustee bank. Investment Company or Trustee Bank fees are in addition to Foundation fees and are decided by the investment company or bank on a mutually agreed upon schedule with the Foundation.
The Foundation shall annually charge an administrative fee in an amount not to exceed one percent (1.0%) of the fair market value of endowment assets. Charitable distributions and administrative fees shall be based on the market value of the fund at the end of the Foundation's fiscal year. The Foundation partners with investment company(s) and bank trust departments that conform to the Foundation's spending policy. The Foundation retains the option to change investment managers if a manager's performance is inadequate or financial reporting requirements are not met.
Tax Considerations: The tax laws passed by Congress make charitable giving attractive for many people. Your contributions to a Designated Fund at the Foundation give you an income tax deduction in the year you make the contribution.
Contributions of appreciated property can be deducted at their full fair market value. Appreciated assets given to a fund at the Foundation are free of capital gains taxes. No tax is owed on the growth of assets in your fund.
You can create a Designated Fund this year. You will enjoy the tax benefits described above in the year you make the contribution to the fund. The initial grant making from your fund will be made at the next scheduled grant-making meeting.
A charitable donation can benefit your community and provide you with a tax deduction. It is important for you to review with your accountant and attorney the tax advantages that the Foundation can provide. Since the Foundation is a 501 (c) (3) organization you may take the maximum tax deduction that is allowed by the law. You can deduct up to 50 % of your adjusted gross income for cash gifts (30% for appreciated securities) to a community foundation.
Steps in Starting a Designated Fund: Designated Funds at the Community Foundation of the Mahoning Valley can be established quickly and easily. As donor, you need to make some decisions:
- whether to create a short-term or endowed fund
- whether to use the Community Foundation of the Mahoning Valley, or an investment manager or bank as your fund's trustee
- which assets you will donate
- the purpose or field-of-interest of your fund
- the fund's name
The Foundation's attorneys have prepared a sample fund agreement that you can customize to meet your own needs. Completing this agreement can often help donors clarify their charitable objectives. You should have your own attorney or other advisor review it, as well as consulting them about the tax consequences of making any sizable charitable contribution.
For More Information: The Foundation staff is ready to help you by answering and questions you might have about a designated fund. Call the Community Foundation of the Mahoning Valley and ask about starting a designated fund. We can provide you a sample fund agreement or furnish any other information you request. The information is provided without obligation.
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