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Estate planning: Your kids … and your community

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Estate planning: Your kids … and your community

As you contemplate your legacy and adjust your estate plan over the years, it’s natural to focus on your children and family as the primary beneficiaries in your will and trust. If you’re like an increasing number of charitably-minded individuals, though, you might find that your perspectives about what exactly it means to leave a legacy are expanding beyond your next of kin. Your community is on your mind and in your heart, and you’re interested in ways you can support and improve the quality of life for people in the region we call home.

If you’re intrigued, you are not alone! Indeed, many philanthropic individuals are broadening their estate plan beneficiaries to prominently include their community or favorite cause, right alongside children and grandchildren. The team at The Community Foundation would be honored to discuss the ways we can help. Here are three options for funds you can establish with The Community Foundation to benefit our community in your overall philanthropy and estate plan:

 

Unrestricted fund

Major advantages of The Community Foundation include its perpetual structure, community-based governance, and commitment to addressing needs as they change. An unrestricted fund allows you and your family to provide support that evolves over time as priorities in the region shift. The Community Foundation’s mission is to thoroughly understand the community and improve lives within it. The Community Foundation’s board and professional staff conduct ongoing, extensive research about the needs of the community and the nonprofit programs that are addressing those needs. Establishing an unrestricted fund means you are investing in The Community Foundation to support programs that are addressing the community’s most pressing needs as well as needs that can’t be identified until the future.

 

Field-of-interest fund

A field of interest fund is an ideal way to target your giving to specific areas of community need (such as education, health, environment, or the arts). Your field of interest fund at The Community Foundation establishes parameters for grant making according to your wishes. The Community Foundation’s staff follows these parameters and uses its research and expertise to make grants that align with your intentions. Your fund can continue beyond your lifetime and for multiple generations, consistently providing grants to support your area of interest according to the terms you established when you first created the fund.

 

Designated fund

A designated fund at The Community Foundation can help you secure your favorite organization’s financial future so that its mission continues, uninterrupted, even in the face of challenges. You can set up multiple designated funds if you’d like to support more than one organization. You can even set up a designated fund to support a governmental unit, such as the parks department. A designated fund allows you to decide on the timing of the distributions from the fund, such as during the organization’s capital campaign or to support a specific program or initiative. You can serve as an advisor to the fund to recommend the timing and amount of grants to the supported organization, or you can appoint the board of directors of The Community Foundation to carry out this function according to your wishes.

And here’s a bonus! If you plan to give to an unrestricted fund, designated fund, or field-of-interest fund at The Community Foundation during your lifetime, and you’re over the age of 70 1/2, you can direct up to $105,000 each year from your IRA to the fund. This is called a “Qualified Charitable Distribution,” or “QCD.” Not only do QCD transfers count toward satisfying your Required Minimum Distributions if you’ve reached that age threshold, but you also avoid the income tax on those funds. Furthermore, the assets distributed through a QCD are no longer part of your estate upon your death, so you can avoid estate taxes, too.

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. 

Four FAQs to help you establish an endowment

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Four FAQs to help you establish an endowment or Forever Fund

Many community-minded individuals have served on the boards of directors of charitable organizations in our region. If you’ve served on a charity’s board (or several!), you are no doubt familiar with the concept of an endowment. Many charities establish endowment funds and reserve funds at The Community Foundation to help ensure that their missions stay strong during economic downturns and periods of increased community need.

What you might be less familiar with, however, is an endowment fund established at The Community Foundation by an individual or family. Every year, the team at The Community Foundation works with people like you to establish endowment funds to support the needs of our region in perpetuity.

Here are answers to four frequently-asked questions about setting up an endowment fund.

 

Why does The Community Foundation offer endowment funds (Forever Funds) to individuals and families?

The Community Foundation serves as the hub of philanthropy for many families in our community. We connect donors like you to community needs you care about, and this includes offering the opportunity to make a charitable investment that supports a range of community needs now and in the decades ahead–needs that cannot be predicted. That’s the purpose of an endowment: to provide a steady stream of dollars, far into the future, to meet community needs as they arise.

 

How does an “endowment” work?

“Endowment” is the word often used to refer to a designated pool of assets that are invested by The Community Foundation and tracked separately such that a modest portion (usually based on a percentage) of the assets are distributed each year to charitable causes, and the rest of the assets remain invested to grow in perpetuity. This growth, in turn, helps the endowment provide even more support each year to the causes for which it was established. The Community Foundation team is experienced at managing the accounting, investment, and distribution aspects of endowment funds.

 

How can I stay involved with my endowment fund after it’s established?

First and foremost, you can name the endowment fund anything you want, such as the “Smith Family Endowment Fund,” or something more anonymous such as the “Endowment Fund for Our Future.” In addition, our team is happy to keep you informed about the positive change in the community that is occurring thanks to the distributions from the endowment fund you’ve established. We can continue to keep your children and grandchildren informed, too, beyond your lifetime. In this way, your legacy continues through the generations.

 

Who decides where the endowment distributions go each year?

The Community Foundation is itself a permanent institution. Our board and staff are committed to keeping a finger on the pulse of the region’s greatest needs and maintaining a deep knowledge of the charitable organizations that are meeting these needs every day. This is The Community Foundation’s mission in perpetuity. The Community Foundation’s team is made up of dedicated and knowledgeable professionals who understand our community and build ongoing personal relationships with the people working at the region’s charitable organizations. The Community Foundation team recommends distributions from your endowment, and our independent board of directors reviews and approves these distributions to ensure that they fulfill your charitable goals for establishing the endowment in the first place.

 

What does it take to establish an endowment fund?

Setting up an endowment or Forever fund is as easy as setting up any other type of fund at The Community Foundation. Our team will prepare simple paperwork capturing the name of the endowment fund and any areas of interest you’d like to support. Then, you can transfer cash—or, even better for tax purposes, you can transfer appreciated assets such as stock or real estate. You’ll be eligible for a charitable tax deduction in the year you make the transfer to establish the fund. You can make future transfers to your endowment fund each year, too, to achieve your tax and estate planning goals. Our team is also happy to work with you and your advisors to structure a bequest to your endowment fund following your death. We highly recommend considering a bequest in the form of a beneficiary designation on an IRA because of the multiple tax benefits. Related, if you are over 70 ½, making a “Qualified Charitable Distribution” from your IRA directly to your endowment fund is a very effective charitable planning tool to avoid income tax and also satisfy your Required Minimum Distribution if you’ve reached that age as well.

 

We look forward to working with you to support our community and your favorite charitable causes for generations to come!

 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.