One of the greatest privileges of being an estate planning attorney is working with clients who are making charitable gifts as part of their estate plan. Our clients’ charitable goals vary widely, but in many cases they leverage our local community foundation (or, in some cases, a community foundation in a different area) to support long-term charitable goals for our community that otherwise would not be workable.
Here’s how this potential partnership can work.
(Note that this post assumes an understanding of charitable giving basics. Our charitable giving primer can be found here. Also, in the interest of full disclosure, I'm on the board of our local community foundation, the Community Foundation of Central Wisconsin. Wisconsin Rapids and Wausau also have their own foundations.)
Immediate Gifts
Most people are familiar with the idea of making an immediate gift to a specific organization. There are lots of organizations doing great work that can use immediate support. However, while organizations receiving a large immediate gift may keep some in reserve, most of the funds will likely be spent within 5-10 years, often on physical assets (new building) or expanded services.
For donors who prefer to have an immediate impact and know the best organizations working in the area they care about, an immediate gift will be the best option.
However, for donors who would like to have a more sustainable impact over a longer time period, partnering with a local community foundation can provide alternative options worth considering.
Funds for Specific Organizations
The first option foundations provide is endowed funds for specific organizations. So, for example, a donor may decide to support our local Boys and Girls Club or Humane Society, but want the funds to be spent over time, not all at once. The donor can set up a fund at a local foundation. The foundation will invest the funds with a professional manager and pay an allocation (typically 4-5% of the fund balance) to the Humane Society or Club every year. This type of ongoing fund—money coming in year after year, that the organization can count on to pay salaries and keep the lights on—can be a key to an organization building capacity over the long haul.
This can be a great option for donors who want to support an organization (or organizations) but want the funds to support the organization over the long term. Sometimes our clients will mix an immediate gift with an endowed gift to an organization to both provide immediate impact and a long term funding source.
Funds for a Mission
The second option community foundations provide is a fund for a specific mission. Like a fund for a specific organization, the donor gives to the fund, and the foundation invests the funds with a professional and pays an allocation toward the mission. The difference is that instead of naming a specific organization, the donor chooses a cause or mission. The foundation runs a competitive grants process each year, and grants the allocation to the organization or organizations doing the best work in that mission area.
A mission can be as specific or general as the donor would like. Our foundation has existing mission funds that include a general fund for Portage County, a general fund for Waushara County, and funds that support education, the arts, basic needs, and environmental causes (among others). Donors can also create their own mission, such as mental health or outdoor recreation.
This can be a great option for donors who care about a specific cause and want the fund to be flexible enough to meet the donor’s objectives over the long term. So, for example, a donor whose cause is basic needs could choose to support the food pantries doing the best work today. But perhaps in 25 years some new organization will be addressing hunger in an innovative way, and at that point some of the best organizations today may be gone or weaker. Or, a donor who cares about outdoor recreation may not have a specific organization to support, but would support a variety of different recreation related projects over time. A mission fund is flexible enough to support whatever organization is doing the best work in a given area well into the future.
Funds Managed by Successors
The third option community foundations provide is funds managed by an individual or individuals selected by the donor. Again, the donor gives to their fund, and the foundation invests the funds with a professional and pays an allocation each year. A person chosen by the donor (typically a child or children) makes decisions about the organization(s) receiving the allocation, sometimes within limits selected by the donor. So, for example, a donor might set up their child to administer a fund for the general benefit of causes in Portage County.
This is a great option for donors whose main charitable goal is involving their children or other family members in continuing family philanthropy, and wants the family to have flexibility to adapt family philanthropy to changing community needs.
Scholarship Funds
A final option is scholarship funds. Again, the donor’s funds are professionally invested and an annual allocation made. The allocation supports student scholarships. Scholarships for students at a specific university are typically handled through a foundation associated with that university (for example, the UWSP Foundation). In our area and many others, scholarships for graduates of local high schools are handled through a local community foundation.
The donor can choose criteria (GPA, extracurriculars, modest means, intended field of study, and so on) based on how they would like their impact to be felt. Every year, students apply and a committee picks the student or students who best meet the criteria.
Mix and Match
Some donors are laser-focused on a particular goal, and want to concentrate their impact on that goal or mission. Those donors will be well advised to choose one of the options above and focus all of their charitable giving on that option.
More often, however, donors (particularly those making substantial gifts) want to spread their impact around. Perhaps they have some organizations they want to support now, and they also want to support those organizations over time. Perhaps they also have a mission they want to support. Perhaps they also would like to involve their children in philanthropy. They may also want to support a mix of local and national organizations.
There is such a thing, or course, of spreading funds too thin and losing impact. But in many cases, it is entirely possible and workable to do several things at once. Some of the most fun I’ve had as an estate planning attorney is working through these goals and helping the donor pick a few that best fit their vision.
Have a plan that includes charitable giving? We would love to meet with you. Feel free to call the office at 715.544.8393 to schedule a no-obligation consultation.