General Information: Donor-advised funds at a community foundation such as the Community Foundation of the Mahoning Valley enable charitably inclined individuals to play an active role in grant-making without incurring the paperwork, taxes and administrative expense of maintaining a private foundation.
Donor-advised funds can be established by an individual or couple, a family, a business or any other group of people with shared charitable interests.
Donor-advised 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.
Donor-advised funds give donors the opportunity to work with the Foundation's professional program staff in making grant decisions. Staff members are knowledgeable about the needs and resources of our area and can help the donor solicit and evaluate proposals or explore new areas of grant making.
Donor-advised 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.
The names of donor-advised 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, donor-advised funds are considered components of the Foundation. They are subject to the terms and conditions of its Articles of Incorporation. Donor advised fund guidelines are subject to change from time to time by the Board of Directors.
Grantmaking from Donor Advised Funds: The Foundation sends the donor a periodic report outlining the Fund's investment performance, grants paid, and earnings available for grant distribution.
Donors make recommendations in writing for all grants that the donor wants the Foundation to consider. The Foundations asks the donor to consider the needs of the region when making grant recommendations. The Foundation's grants made from unrestricted funds over the previous five years shall be evidence of the needs and the organizations the Foundation has found most deserving of support.
Grant recommendations by donors will, in each case, be evaluated independently by the Foundation staff, to determine if they are consistent with the purposes of the Foundation and of the particular fund, and whether they meet the needs of the community as identified by the Board of Directors. The Board of Directors will give the donor's recommendations careful and thoughtful consideration. Donors should understand that their recommendations are advisory and will not be binding on the Board of Directors, which legally must retain final responsibility for all distributions made from the Foundation.
A donor, advisor, or another person or organization may not use grants from donor-advised funds to satisfy an irrevocable commitment or personal pledge made to a charity; they may not be used to pay memberships or dues. Using donor advised funds to meet these kinds of obligations is a violation of IRS regulations governing donor advised funds and can result in donor's losing the tax deduction and paying penalties.
Grants from donor-advised funds can be made to charitable organizations as defined in Section 501 (c) (3) of the Internal Revenue Code, or individuals in need that have been evaluated by the Foundation program staff.
If a donor or designee-advisor has not submitted recommendations for three years, the Foundation may deem that the donor or designee-advisor has no further interest in advising with respect to the fund. At that time, the funds alternative purpose will come into effect. The Board of Directors will use its own discretion in allocating such funds consistent with the Foundation and those of the particular fund.
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 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 donor-advised 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 donor-advised fund this year and postpone your grant making decisions until the next year if you choose. You enjoy the tax benefits described above in the year you make the contribution to the fund but can make your grant making decisions at a more leisurely pace.
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 Donor-Advised Fund: Donor advised funds at the Community Foundation of the Mahoning Valley can be established quickly and easily. As a donor, you need to make some decisions:
- whether to create a short-term or endowed fund
- whether to use the Foundation or an investment manager or bank as your fund's trustee
- which assets you will donate
- the purpose of your fund
- the fund's name
- who will serve as adviser
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 any questions you might have about a donor advised fund. Call the Community Foundation of the Mahoning Valley and ask us about our donor advised funds program. We can provide you a sample fund agreement or furnish any other information you request. The information is provided without obligation. You can reach us at 330-743-5555, or by e-mail (INFO@CFMV.ORG).
Back to Charitable Fund Options
