Options to Give

To facilitate your client discussions, we’ve prepared a summary of the advantages and disadvantages of bequests, annuities and trusts. Starting a gift takes as little as $5,000, and there are a wide variety of tax benefits to giving through a Foundation. You can see an example of the comparison of planned gifts below.


Bequest

Charitable Gift Annuity

Charitable Remainder Trust

Charitable Lead Trust

Revocable

yes

no

no

no




Appropriate assets that can be used

Virtually any

Typically cash or marketable assets

Virtually any

Virtually any

Tax benefits possible

Estate

Income and estate

Income and estate

Possibly income and estate (depending on how the trust is structured)

Will this gift create a stream of payments to one or more individuals?

No

Yes (at a percentage determined by the age of the recipients)

Yes (at a pre-negotiated percentage)

No (However, this gift does allow for the transfer of property to one or more recipients with possible tax savings.)

Can additional gifts be made?

yes

no

Yes (only in the unitrust type)

Yes (only in the unitrust type)

Age limits to creating

None

Payment beneficiaries must be at least 60.

Payment beneficiaries must be at least 60. Trust may also be based on a term of years.

Calculating ages must be at least 60. Trust may also be based on a fixed term of years.

Fees/applicable costs (other than personal legal expenses)

None

None

Up to $1,000 for administrative purposes

Up to $1,000 for administrative purposes



How a Named Community Foundation Fund Compares to a Private Foundation

Private foundations have grown in popularity among affluent donors, who receive income tax benefits during their lifetime and estate tax benefits at their death. But as appealing as a private foundation can be, establishing a named fund through The Community Foundation can offer far more. We assure a donor’s privacy, reduce costs and administrative headaches, and deliver significantly greater tax benefits. Take a look at our comparison chart below to learn more.

Community Foundation Fund in Your Client's Name

Private Foundations

IRS charitable status

501(c)(3) & 509(a)(1) (public charity)

501(c)(3) (private foundation)

Tax treatment of cash gifts

Deductible, up to 50 percent of adjusted gross income (AGI).

Deductible, up to 30 percent of AGI.

Tax treatment of gifts of appreciated publicly-traded securities

Full market value deductible, up to 30 percent of AGI.

Full market value deductible, up to 20 percent of AGI.

Tax treatment of closely held stock or real estate

Full market value deductible, up to 30 percent of AGI or cost basis up to 50 percent of AGI.

Deduction limited to donor's cost basis, up to 20 percent of AGI.

Deduction carry-over available

Five additional years

Five additional years

Ease of establishment, incorporation and tax exemption

No corporation or trust required. Automatically covered by the Community Foundation's tax exempt status

Corporation or trust required. Must apply to IRS for tax-exempt status using Form 1023. (May take six months or longer to process)

Excise tax on investment income and net realized capital gains

None

Generally 2 percent; may be reduced to 1 percent under special circumstances.

Self dealing rules

Not applicable

Strict prohibition under Internal Revenue Code (IRC) Section 4941.

Minimum payout requirements

None. Can accumulate toward a sizable project or grant or reduce giving in a year when returns are low to protect principal.

Yes. Minimum 5% of average asset value each year under IRC Section 4942. Must meet the minimum distribution rules whether or not the foundation's investments earn that amount in a given year.

Donor and family can choose to be involved in grantmaking

Yes

Yes

Separate annual IRS tax return required

No

Yes

Privacy

Yes. Individual fund assets size, gifts and grantmaking are kept private and confidential. No public disclosure is required. Donors are generally recognized for grants disbursed, but can remain anonymous with Community Foundation serving as the buffer.

No. Private foundations are required to file detailed tax returns on grants issued, investment fees, trustee fees, staff salaries, asset size, etc. and to publish a notice that the return is available for public viewing (IRS Form 990-PF). These public records are often compiled into grant-seeker directories.

Investment, accounting, audit and tax returns

The Foundation handles all investments and accounting, files annual tax return and provides annual independent audit.

Trustees must perform, contract or hire staff for these services.

General administration

Community Foundation handles all financial and administrative management.

Trustees must perform, contract or hire staff for these services.

Grant administration

If donor wishes, Community Foundation can identify potential recipients, investigate applicants, make grant payments and monitor performance.

Trustees must perform, contract or hire staff for these services.

Insurance

Advisors to funds are covered by Community Foundation liability and office insurance policies. Only fundraising events and other activities will require insurance.

Liability insurance for directors and officers, employee bonding, and office insurance must be purchased.