Donating Appreciated Assets- Community Foundation, DAF and Private Foundation.

[ElainePDX]

Didn't see anything elsewhere about family foundations, although I seem to recall a Saverocity post way back when that mentioned/addressed this.

We started a tiny one through the Oregon Jewish Community Foundation after we inherited some money on the death of our parents. I know there is also an Oregon Community Foundation where friends/organizations have accounts and there are countless others elsewhere.

Basically we move a stock/mutual fund/other investment to OJCF. They immediately sell the asset and credit our account. We can then direct the foundation to make grants as we see fit. We take the donation in the year we make it, but can direct the foundation to make grants at any time in the future. The foundation offers a few options for investing the money that sits there. We use this strategy to both make regular donations throughout the year and to bump up a year's charitable giving if our autumn calculations indicate we could use more donations to save on our taxes that year.

Moving an asset to OJCF is a good way to unofficially balance our portfolio, or get rid of an investment we no longer want to have. We don't use it for assets that have fallen; we'd rather take that as a loss to balance other gains we make elsewhere.

Anyway, the thread on the Cash+ card from US Bank - which allows you to choose to get 5% back on some charitable donations - reminded me of this, so I thought I'd start a thread over here.

 

[Matt]

Great that you are doing this! I don't think it is right for most people, as costs can be prohibitive, but a similar concept can be created with a Donor Advised Fund. EG http://www.fidelitycharitable.org/

The benefits for the foundation over the DAF revolve around greater control of a foundation, and the ability to work for it too, and benefit from the employee nature of that relationship.

 

[ElainePDX]

Actually what we have is a donor advised fund under the umbrella of the foundation. There is a high powered volunteer board that manages all the funds that remain in donor advised funds until the donor(s) direct the foundation to send money to a non-profit of their choice.

It has worked quite well for us. We especially like being able to realize in November that we could use some more charitable contributions to save taxes. We just move an asset, get the write-off in that year, and then can make grants from it at our leisure and/or when good causes come to our attention.

Haven't paid much attention to fees. We make interest on what sits there - assuming the board has invested it well - and when I just looked on a statement, saw we paid $6.36 in fees/expenses during the last quarter on the roughly $3500 that was sitting there this quarter. I love that I can just pop off an email, ask them to send a check to an organization, and it is done.

 

[Matt]

Actually what we have is a donor advised fund under the umbrella of the foundation. There is a high powered volunteer board that manages all the funds that remain in donor advised funds until the donor(s) direct the foundation to send money to a non-profit of their choice.

It has worked quite well for us. We especially like being able to realize in November that we could use some more charitable contributions to save taxes. We just move an asset, get the write-off in that year, and then can make grants from it at our leisure and/or when good causes come to our attention.

Haven't paid much attention to fees. We make interest on what sits there - assuming the board has invested it well - and when I just looked on a statement, saw we paid $6.36 in fees/expenses during the last quarter on the roughly $3500 that was sitting there this quarter. I love that I can just pop off an email, ask them to send a check to an organization, and it is done.

You aren't popping off an email and having them send a check for you for $25 a year. There are more fees than this at play.

 

[ElainePDX]

You aren't popping off an email and having them send a check for you for $25 a year. There are more fees than this at play.

Indeed. I put small donations like that on a cc. I direct OJCF donations for $100 or more. I will look more into the fee question.

 

[midnightinharlem]

Very interesting. I will have to look into this. Thanks for sharing.

 

[Matt]

Indeed. I put small donations like that on a cc. I direct OJCF donations for $100 or more. I will look more into the fee question.

I meant the 6.36x 4 = $25

There must be custodian and filing fees that are distinct from these, or they charged a phenomenal amount to construct the foundation.

 

[ElainePDX]

Here's what I found on the website ( http://ojcf.org/ )
-----------------------------------------------------------------------
For Donor Funds, fee is a percentage of market value:

1.35 Fee on 1st $2 million in Investment Pools
1.05 Fee on $2 million to $5 Million in Investment Pools
.85 Fee on amount over $5 Million in Investment Pools
.80 Fee on Money Market Pool

No matter what your means, OJCF makes it easy by helping you manage your current philanthropic giving....
Since 1989, OJCF’s mission has been to create, promote and facilitate a culture of giving and to serve as a guardian of permanent funds available to safeguard the quality of Jewish communal life in Oregon and Southwest Washington.

The Foundation:

• Helps individuals create permanent charitable endowments for the benefit of their favorite organizations
• Helps individuals manage their current philanthropic giving
• Offers unparalleled flexibility by offering a variety planned giving tools allowing donors to give when, where and how they want
• Manages and administers agency funds on behalf of Oregon and SW Washington Jewish charities

-------------------------------------------------------------------------------------
We can direct gifts to non-profits of our choice; they need not be Jewish. Rest assured we fall into the .80 and 1.35 pools, depending on whether we ask them to invest the money or just warehouse it in a money market fund. We've done both.

 

[Matt]

Yep- that's more like it! Back to my point, a DAF with someone like fidelity would start out at .6% and drop before 1M tier. So it would be better for families due to the cost.

Not knocking the idea, just the expense to execute the idea.

 

[ElainePDX]

It works for us. I like that our fees at least go towards hopefully good stewardship of community funds. And they have fun annual meetings/occasional receptions with great food ! My fav was when they took over an ice cream parlor to introduce the in-coming board president:
http://www.rubyjewel.com/press/

In all seriousness, the fees don't seem terribly high, and the foundation plays an important part in sustaining the community. We have friends who have their family foundation at the Oregon Community Foundation which is quite similar and was the model for the OJCF.

 

[Matt]

It works for us. I like that our fees at least go towards hopefully good stewardship of community funds. And they have fun annual meetings/occasional receptions with great food ! My fav was when they took over an ice cream parlor to introduce the in-coming board president:
http://www.rubyjewel.com/press/

In all seriousness, the fees don't seem terribly high, and the foundation plays an important part in sustaining the community. We have friends who have their family foundation at the Oregon Community Foundation which is quite similar and was the model for the OJCF.

I've found an interesting thing when trying to talk with people about their advisors - the reality is that you are paying more money, but there is often an emotional attachment to them. It's a dangerous subject to broach because on the one hand, i'll be charging advisory fees myself soon, and these will be higher than other options available, but on the other it depends what you really get in terms of service for that dollar.

Speaking frankly, saying that you are OK with higher fees because they take you to ice-cream parlors and do some work for the community is like accepting high management fees from a wirehouse to deliver mutual funds. To say 'the fees don't seem too high' when talking about the difference of paying an average of 0.5% (or less) vs 1% (or more) is unusual, especially if you are wondering about the difference between Vanguard, TD and Fidelity for a low cost option in your personal investments.

I've hit these emotional walls in the past with family members and backed off them, we have one where they are invested in funds where the company owner has been banned by the SEC from investing after his products (prop REITs) were found to be breaking laws for how poorly they were structured and sold to unsuspecting folk. The family reply 'oh <my broker contact> has always done right by me' - meanwhile they own these toxic funds...

So... I won't PUSH you to change. But I would ask you to think about it like your own personal investments with regard to management fees.

 

[ElainePDX]

Speaking frankly, saying that you are OK with higher fees because they take you to ice-cream parlors and do some work for the community is like accepting high management fees from a wirehouse to deliver mutual funds. To say 'the fees don't seem too high' when talking about the difference of paying an average of 0.5% (or less) vs 1% (or more) is unusual, especially if you are wondering about the difference between Vanguard, TD and Fidelity for a low cost option in your personal investments.

@Matt - I appreciate your feedback but respectively disagree. First of all, we rarely have more that $5,000-$6,000 in the foundation at any given time, so we are talking about less than $100 a year. Our personal investments involve higher amounts so the fees become more significant for them.

Secondly, "do some work for the community" really doesn't do it justice. Many community agencies and organizations, all non-profits, like the old age home, the religious schools, the synagogues, adult ed groups, women's organizations, etc. do significant fundraising, but do not really have the expertise in house to manage the funds they raise. The Foundation can do this for them. If my 1.35% helps provide the infrastructure to do that, I am happy to help underwrite it.

As for the ice cream, that was meant as a joke, but providing a venue where community philanthropists, agency heads, and other active participants can mix, mingle and learn is always a plus. These are folks who take stewardship seriously and I appreciate opportunities to get together with them, whether it be to learn about bequests and planned giving or to share some ice cream!

 

[DarcyMae]

Our family established a scholarship at my alma mater after the death of my father. We got to dictate the scholarship requirements (area of study, etc) and provided the initial endowment. The school handles the investing and distributes scholarships each year that there's sufficient funds and when there's a student that meets the scholarship requirements. Any of us are welcome to write tax-deductible checks to the scholarship fund at any time, to increase the endowment. We found this the simplest way to honor our Dad in a meaningful way without requiring anyone to administer foundation funds long term.

 

[cocobird]

I've read that a substantial portion of charitable foundations are funded with less that $50,000, which surprised me. My financial advisor has established a foundation to introduce his nieces and nephews to charitable work and giving back. I thought that was a great way for the younger generations to get involved.

 

[Paul]

@Matt - I appreciate your feedback but respectively disagree. First of all, we rarely have more that $5,000-$6,000 in the foundation at any given time, so we are talking about less than $100 a year. Our personal investments involve higher amounts so the fees become more significant for them.

? $5-6K? Not sure I follow? Is there a (much larger) pot of money outside the Foundation that you then move into the Foundation when you want to offer grants? I guess I am bewildered at the sums involved.

 

[ElainePDX]

? $5-6K? Not sure I follow? Is there a (much larger) pot of money outside the Foundation that you then move into the Foundation when you want to offer grants? I guess I am bewildered at the sums involved.

I am traveling so will reply in more detail later if this isn't clear. The foundation houses numerous family funds as well as funds from most local Jewish nonprofits. Each fund has donor/directors who control where their money can go. We keep about $5000 in ours and just transfer in more funds as necessary or to take advantage of an equity that has grown in value. (We donate it to the foundation, they sell it immediately, and it gets credited to our fund for future use.)

 

[Matt]

I am traveling so will reply in more detail later if this isn't clear. The foundation houses numerous family funds as well as funds from most local Jewish nonprofits. Each fund has donor/directors who control where their money can go. We keep about $5000 in ours and just transfer in more funds as necessary or to take advantage of an equity that has grown in value. (We donate it to the foundation, they sell it immediately, and it gets credited to our fund for future use.)

Quick question- do you transfer in appreciated assets - equities/funds etc, or do you sell and wire in money?

Edit - Nevermind- I see you covered this in your first post.

 

[Matt]

To help clear up confusion on this thread, Elaine is not describing a Family Foundation (as it is commonly known) these are reserved for HNW and more likely UHNW individuals to create lasting legacy's.

Instead, what we have here is called a Community Foundation, which is a group of people pooling into a communual fund. This costs more than individual Donor Advised funds, and both cost LESS than a Foundation.

A Family Foundation is NOT advisable for most people due to the prohibitive costs attached. However Donor Advised Funds (DAF) are a great way to donate appreciated stocks to avoid capital gains taxes and create bigger deductions.

Community foundations for their additional fee offer a sense of community, and are likely most prevalent when you have a religious body involved, as these are collective groups of people. I can see the appeal for people who are community focused, but if you simply want to give to charity, get the best deduction, and not pay high fees- the answer is a DAF.

 

[ElainePDX]

Community foundations for their additional fee offer a sense of community, and are likely most prevalent when you have a religious body involved, as these are collective groups of people. I can see the appeal for people who are community focused, but if you simply want to give to charity, get the best deduction, and not pay high fees- the answer is a DAF.

Not sure about other states, but in OR we have the Oregon Community Foundation too.

 

[Matt]

Not sure about other states, but in OR we have the Oregon Community Foundation too.

Certainly, you can have any number. I am sure that my new hood has something like this too as they have a lake orientated community. I'm just making the broad reference towards community and religion... these days there is less and less community and religion tends to be one of the few remaining cohesive factors that might encourage the foundation approach.

 

[curtis1120]

I'm going to side with Elaine on Community Foundations. They are wonderful asset to the community that supports them. Ours has leadership workshops for community members and helps local non-profits with marketing, organizational structure etc. They also match non-profits and donors in a way that Fidelity just can't. One of the best things our community foundation has done was establish 6 stratigic initialtives in Health, Education, Economy, Civic Health, Environment and culture. Then they measure those and help donors give to causes that not only feel good, but make an impact. For instance, they meaure voter turnout which they categorize as Civic Health. Nationally we can measure childhood obestiy, but the foundation measures how we are doing in our community with protection of greenspaces, access to good jobs and a host of other facets of our community.

 

[ElainePDX]

Here's an excerpt from:
http://www.cnbc.com/id/101923695?__source=yahoo|finance|headline|headline|story&par=yahoo&doc=101923695&utm_content=bufferb1915&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer#.

HT to George of TBB fame who tweeted the link.

I am pasting it in here since it is a nice explanation of donor-advised funds and how they compare to private foundations. Most of this info is probably already available in this thread, but this is a nice summary/explanation for folks who haven't read everything above or know little about the topic.

There are a wide array of charitable-giving vehicles, each with its own pros and cons. In recent years, donor-advised funds have become a popular choice among high-net-worth investors because they are relatively easy to establish, have lower expenses than do private foundations and are administered by the public charities that sponsor them.

Donor-advised funds allow philanthropists to make irrevocable contributions of cash or assets, get an income-tax deduction and take their time deciding which charities to support. Fund sponsors typically handle due diligence on potential grant recipients, make grants and oversee other tasks that private foundations must do on their own.

While private foundations must give away 5 percent of their assets a year, donor-advised funds aren't subject to the same requirement, although they can make grants only to IRS-qualified tax-exempt charities, known as 501(c)(3) organizations. Some fund sponsors allow donors to have complete say over how to invest assets in their accounts, while others offer only a menu of investment options, which is a drawback, according to some advisors.

"Donor-advised funds offer a lot of flexibility on the timing of gifts to charity," said Elizabeth C. Hickman, a senior investment advisor at South Texas Money Management, one of CNBC's top 100 fee-only wealth management firms. "They can be a good option for someone who has had a big liquidity event and needs a bigger charitable deduction for a given year, she said, adding, "The funds allow donors to be more-intentional on the back end about which charities they support."

There are now more than 200,000 donor-advised funds in the U.S., with total assets exceeding $45 billion, according to the National Philanthropic Trust, a charity that specializes in donor-advised funds. Despite rapid growth in the number of donor-advised funds in recent years, many wealthy Americans still go the private foundation route.

The community foundation that hosts our donor advised fund is happy to help folks who are not high end worth investors and/or philanthropists. There are a fair number of little folks like us who participate. They also developed a ground-breaking model that teaches teens about philanthropy through a two year program when the kids fundraise, visit local non-profits and eventually make grants to them.

 

[Matt]

community foundation that hosts our donor advised fund is happy to help folks who are not high end worth investors and/or philanthropists.

Donor advised fund accounts at Fidelity start from $5k. The high end/philanthropist profile is for a family foundation (hence earlier confusion here).

 

[ElainePDX]

I am about to change the title of this thread to make it more clear to new folks. That's all .

 

[Matt]

I am about to change the title of this thread to make it more clear to new folks. That's all .

I'm going to change it again...since you are primarily talking about neither of these.

Also, for a 'why it is better to donate the asset

' http://saverocity.com/finance/donating-stock-to-charity/