Shift away from private foundations opens a door
By JUDI McCARTHY / These are interesting times in the world of philanthropy. Corporate giving and foundation grantmaking are expected to flatten or drop in 2009, with rare exception. As individuals, we are besieged with calls and mailings from nonprofit organizations in need, especially those caretaking citizens devastated by the economic downturn. Our hearts are stirred, and our checkbooks are opened for another cash payout.
But now again, we weigh the altruistic with the pragmatic, asking ourselves, "What am I really accomplishing here? Isn't there a better way?"
Once upon a time, budding philanthropists established private foundations to create personal legacies (and minimize their tax burdens). Now, stirred hearts and legacy-building notwithstanding, change is in the air.
In April, the Wall Street Journal described a trend among donors today: their shift away from opening and operating private foundations. Except for the very wealthy, many donors find that the administrative and financial demands of a private foundation are too bothersome and costly. Increasingly, philanthropic people with even modest assets are discovering the value of -- and the value in -- donor advised funds.
Charitable individuals and families can establish donor advised funds through America's 700-plus community foundations, via commercial gift funds, and within some universities and religious foundations. At the Kern Community Foundation, for example, donor advisors establish funds of $10,000 or more to pursue their personal charitable goals. For many, this is their first step in creating a legacy of good.
Like others around the nation, the Kern Community Foundation is a public charity, providing donors with many benefits:
* Flexibility. Some donors have non-cash assets that they would like to convert to charitable use, either during their lifetimes or by charitable bequest. Community foundations can accept securities, including closely held stock, mutual fund shares, IRAs, 401(k) and 403(b) plans, life insurance, land, charitable lead and remainder trusts, and private foundation assets. Commercial gift funds cannot necessarily handle the same array of assets.
* Donor intent. Giving through a community foundation, a donor can support a specific cause, a favorite nonprofit organization, an educational institution, or a religious entity. A board of directors provides legal oversight for all grants. At the Kern Community Foundation, donors may support organizations within Kern County or outside the area.
* Professional assistance. Any community foundation, ours included, welcomes the opportunity to work with a donor's attorney, CPA, or other financial advisor to facilitate the donor's desired legacy. This is a mutually beneficial partnership.
* Tax deductions. Gifts to community foundations qualify for higher deductions compared with private foundations: up to 50 percent of adjusted gross income on gifts of cash, compared with 30 percent for private foundations.
* Flexible grant payouts. Private foundations are required to pay out 5 percent minimum of net asset value annually. In contrast, a community foundation consults with each donor to determine the size and frequency of grant payouts.
* Ease. Giving through a community foundation, a donor has none of the hassles of a private foundation: start up costs, excise tax, tax returns, accounting. Investments are handled with highest degree of professionalism; Kern Community Foundation assets are managed by the California Community Foundation, in service since 1915.
* Grantmaking expertise and due diligence. For donors concerned with local issues, the Kern Community Foundation helps to identify and assess grantees, provide input on community needs, and ensure that recipients are qualified and effective. The Foundation can help donors identify a grantmaking strategy and leverage their gifts with the resources of others to address Kern County needs. Commercial gift funds do not typically offer such personalized advice. Private foundations must arrange and support their own grantmaking.
* Acknowledgment or anonymity. Gifts made from donor advised funds can be made privately or publicly, as desired.
Now in its 10th year of service, the Kern Community Foundation connects people who care with causes that matter -- to donors and to the community at large. What is the legacy that will outlive you? How can we help?
Judi McCarthy is chairwoman the Kern Community Foundation board and an advocate for girls.
