Community Foundation of Acadiana offers an attractive alternative to
commercial gift funds and private foundations.
Some clients may come to you with the belief that a private foundation provides their only option for long-term involvement with assets they set aside for charitable purposes. In reality, a named fund or supporting organization at a community foundation offers numerous advantages to these clients, provides real ways for them to stay engaged in giving and avoids many of the hassles of private foundation management.
If your client has an existing private foundation, they may find that there are several benefits to transferring it to an advised fund with the community foundation. Through a simple transfer process, your client may be able to avoid some of the hassles (and costs) of private foundation management.
Each approach allows your clients to remain involved in grant making, if that is their desire. At the same time they will be able to ensure that their intent, name and pattern of charitable giving are maintained—in perpetuity if they wish.
Establishing a Fund
It is easy to help your client establish a named charitable fund and the task can be completed in less than a day. First, decide what type of contribution the client would like to use to establish the fund. A donor can contribute cash, securities, or other property. Select a name for the fund. Clients can use their own name, the name of a family member or one they invent. Designate current fund advisors such as the client and spouse, and successor advisors such as children. Complete and sign a simple governing document that we will provide and help customize for the donor.
Once a fund is established, donors may add to the fund at any time in any dollar amount, specify how grant disbursements are to be acknowledged (in the name of the fund or anonymously), and once a donor advised fund has been established, the donor may recommend distributions from their fund to charities, locally or throughout the United States.
The Supporting Organization Option
Generally, it is possible for a private foundation with $1 million in endowed assets, or the potential to reach $1 million in endowed assets in the future, to become a supporting organization of a community foundation. Besides easing the administrative and cost burdens of managing a private foundation, transferring it to a community foundation permits the private foundation to follow public charity rules (as opposed to private foundation rules).
Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form with distribution of its assets to a public charity. The two primary requirements for the termination of a private foundation are that the private foundation must distribute all of its net assets to one or more tax-exempt organizations and that each organization has been in existence for a continuous period of at least five years preceding the distribution. Our community foundation fulfills both of these requirements and the private foundation's assets typically form a permanent donor advised fund under a similar name.