It’s tax prep time.
And if your house is like mine, you’re wandering around wondering where you tucked all the donation receipts.
The Community Foundation of Grundy County has a service to help – a donor advised fund.
How it works: a donor (individual, couple, family, or corporation) makes a lump sum donation at any time to start the fund. The Community Foundation gives them one charitable tax receipt, then the donor gets to choose when to make grants out of it to their favorite charities, whether local or distant, and regardless of time of year.
No more collecting donation receipts. Just one receipt to take to your accountant.
When a donor is ready to make a grant, they fill out a grant recommendation form, submit it to the Foundation, and staff mails the check to the charity with a cover letter identifying the donor – or you can remain anonymous if you like.
And because all of our funds are invested, donor advised funds can earn interest from the time of donation to the time of grantmaking. Donors get to choose the level of risk for their investment – aggressive, moderate, conservative, or low-risk – and receive quarterly activity statements showing investment gain/loss, contributions, grants, and administrative fees.
Some donors make their initial fund gift so large that it doesn’t have to be replenished over the years. This is especially helpful for those who have a major influx of income that they would then need to claim on taxes.
Other donors put enough in their fund to get them through their year of planned giving and then replenish it each year. Again, only one donation receipt per year. Nice!
Donor advised funds can be started with cash, stocks, or real estate. A big advocate of using stock to replenish his donor advised fund is Ron Wohlwend. Ron will tell you that he used to sit every December and calculate how many shares of stock equaled the amount that he wanted to donate to each of his charities. The math was a nightmare and it never turned out even.
Now Ron donates a sizable amount of stock, regardless of whether it’s an odd amount, and makes his grants in normal, even-numbered amounts.
Also, donor advised funds can be endowed or non-endowed. If they are non-endowed, the fund can be spent down to zero but usually ends after the life of the donor.
Endowed funds, on the other hand, live forever and provide a great vehicle for multi-generational charitable planning and giving.
Donor advised funds give the greatest level of flexibility and donor control. For example, one of our donors is using his endowed fund to make grants of his choice during his lifetime, but after he is gone, his fund will then make annual distributions to his church. Because he set it up in the legal document of his fund, the church won’t have to do anything – it will be automatic – what a great legacy!!
If you’d like to start a donor advised fund and try it on for size, give us a call. We believe they are a fun way to start your charitable planning!
Julie Buck is the Executive Director of the Community Foundation of Grundy County, located at 102 Liberty Street in Morris. Please feel free to contact her at 815-941-0852 or at [email protected]