Benefits of Working with a Community Foundation
By: Jennifer Perry, CAP®, M.B.A., Regional Director, ACF of Sedona
A question I get asked frequently is: “Why would I work with a community foundation for my charitable giving versus giving directly to a charity?” The answer can have many facets depending on each individual donor. But there are three main benefits that I encounter regularly.
- Community foundations accept many types of gifts, including non-cash assets, expanding your giving options and ensuring you are receiving the highest available tax benefit.
- Community foundations are staffed by philanthropic experts who work with you to provide insight into the local nonprofit landscape.
- Community foundations work directly with you to create a giving strategy that is customized to your financial situation and charitable interests.
Personal Charitable Relationship Manager. One of my favorite parts about working at the Arizona Community Foundation is the opportunity to partner with donors to create customized giving plans. When I was a nonprofit development director, I would work with donors and inform them about the work of one specific organization and how that nonprofit was making a difference for the people or communities we served. I would outline options for donors to support that specific charity and its singular mission.
Today, working for the community foundation as a Chartered Advisor in Philanthropy, my focus has shifted from one specific mission to the interests and intent of the donors. I work with individuals, couples and families and learn what is important to them. We talk about why they want to give back and work together to explore the impact they hope to achieve through their giving. From these discussions, we create a plan for how they can achieve their charitable goals, both during their lifetime and after they have passed away.
Through ACF, my donors have access to different types of charitable funds, can make cash and non-cash gifts, and work with experts like me to craft custom gift plans.
Increase the Impact of Your DAF – Partner with Your Local Community Foundation. One of the fastest growing charitable tools in the U.S. is the Donor Advised Fund (DAF). Donors receive tax advantages when they contribute to a DAF and can recommend grants directly to the charities of their choice. While donors have the option of opening a DAF with a community foundation, the majority of DAFs in the U.S. are administered by national financial companies. But when you choose to house your DAF at a community foundation, you gain access to local experts who can help answer questions about which charities align with your interests and where the need is in your community. In addition to these services, ACF provides the opportunity for some charitable assets to be invested by a donor’s financial advisor so the donor can benefit from our expertise in charitable giving while their invested assets continue to be managed in a centralized location. This option is so popular that nearly a third of ACF’s $1.3 billion in assets are managed by external advisors.
Increase the Impact of your Giving – Endow Your Annual Gift. Charitable funds can be set up to help a donor expand the impact of their gifts to cherished organizations. I have a donor who gives $1,000 annually to the Salvation Army and their church. The donor is retired and is required to take an annual minimum distribution from their IRA. This donor did not need the income from their IRA and was looking for ways to save on taxes from the distribution. We worked together to create an ACF Designated Fund. The donor established the fund with the $50,000 they were required to withdraw from their IRA and, because those dollars went directly to charity, it counted as a Qualified Charitable Distribution. The endowed fund will benefit the Salvation Army and the donor’s church with annual payouts totaling 4.25% of the fund’s balance, ensuring each organization receives approximately $1,000 a year in perpetuity. Through this unique offering, that donor has had the opportunity to endow their annual gift, avoid taxes and greatly increase the impact of their gifts to the organizations they were already supporting.
Make Sure Your Gifts are Supporting Current and Relevant Needs. Potential donors do not need to feel like they are restricted to giving to specific organizations. My donors often express uncertainty about where to give and feel burdened by the challenges of fully understanding all of the work being done by local nonprofit organizations. For these donors, I often suggest making a gift to one of ACF’s many community and field of interest funds. These types of funds pool donations from various people in order to expand the amount available for annual competitive grant cycles. Nonprofits from the designated region or philanthropic service area are invited to apply for grants from these funds to support current projects or needs. What is great about this option is my donors can be confident that their donation is addressing a present-day need while being part of a larger community impact. Locally we have four community funds and 11 field of interest funds benefitting Sedona and the Verde Valley. These funds include the Sedona Arts Fund, Sedona Healthcare Fund, Sedona Animal Welfare Fund, Greater Sedona Fund for the Environment, Greater Sedona Community Fund, A Roof For All housing fund, and the Pathway to Careers CTE Scholarship Fund. Most of these funds are endowed, meaning that a portion of each donation is distributed immediately while the rest is invested for the future. One of the really great things about ACF is that when a donor or group of donors wishes to support a new cause or community, we can establish a new fund that will do just that.
When people work with their local community foundation, they greatly expand the way they can give back to the things they care about.
Disclaimer – This information is for educational purposes only and should not be considered either legal or financial advice. Please see your own professional advisors for information that applies specifically to your circumstances.