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Now is the time to look into a donor advised fund

Published: Tuesday, Nov. 27, 2012 2:59 p.m. CDT

(Continued from Page 1)

I want to share with you a service at the Community Foundation of Grundy County that might make sense for you this year because of the uncertainty of next year’s charitable deductions.

Years ago, Carol and I set up an endowed donor advised fund at the Foundation. We did this to help the Foundation get a large match from the Grand Victoria Foundation. But now that we’ve been using our fund for a number of years, I can tell you that a donor advised fund is a slick and efficient way to streamline your year-end charitable giving.

Because of our fund, we don’t have to get out our checkbook each December and write a lot of checks and keep track of the receipts for tax season. We just send a list to the Foundation telling them which charities get which amount, and the Foundation staff writes and mails the check to the charities with our compliments. It sure makes tax season easier without trying to keep track of all of those donation receipts!

The short description of a donor advised fund is that you deposit money into the fund now, take the charitable deduction now and make grants to your favorite charities at any time – now or in the future.

This is especially helpful this year because we don’t know what next year’s charitable deductions will be. So instead of rushing to write checks to your favorite charities, you can write one check to the Foundation before the end of the tax year and make your grants in 2013 if you want.

Do you know of a charity who will be doing a major capital campaign in the near future? Is it a sure thing? Regardless, a donor advised fund is a perfect vehicle for this scenario. You can deposit money into your fund in 2012, take the charitable deduction, then release the grant money to the charity later when they are ready for their capital campaign. If the capital campaign never happens, you can grant that money to the charity for a different purpose. Or you can grant it to a different charity. You retain the advising rights to that fund.

There are two types of donor advised funds — endowed and non-endowed. If you choose non-endowed, you can grant all of the money at any time until the fund is zero. You can also add to the fund at any time — another benefit when tax codes change or you have an influx of cash that triggers an increase in income tax.

An endowed fund is more long-term. The principle never gets spent but it does earn income from investments and this becomes the amount that you can grant to charities each year — forever. Even after Carol and I have passed on, the Foundation will mail checks to our favorite charities every year based on the instructions we attached to our fund.

A non-endowed donor advised fund can be started with $5,000. An endowed donor advised fund can be started with any amount because the principle will always remain in the fund to generate income.

Fund holders also get to choose whether they want the Foundation to invest their fund in an aggressive, moderate, conservative or low-risk pool of funds. Our investment advisors have done a wonderful job of diversifying our accounts so that we get optimal return for balanced risk. The goal is to keep our investments as consistent as possible so that fund holders (especially endowments) have a consistent amount of grant money available for their favorite charities.

Setting up a fund is very simple. Please contact Julie Buck at the Foundation and ask her for a sample donor advised fund agreement. She will also give you a new fund question sheet and an investment report. Once you sign the document and deposit your donation, your fund is ready to go.

Cash is the easiest way to set up a fund, but don’t forget about appreciated securities. If you are thinking about capital gains, now might be a good time to donate the stock to a donor advised fund at the Foundation. But don’t delay as transfers can take time to process. We are open New Year’s Eve, but not everyone else is!

As always, please check with your CPA and financial advisor for details specific to your portfolio and income tax liabilities.

You can reach the Community Foundation of Grundy County at 102 Liberty St. in downtown Morris, or call (815) 941-0852, or e-mail julie@cfgrundycounty.com.

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