The following is a list of commonly-used terms at the Community Foundation for Southwest Washington.
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While service and investment fees support the management and investment of individual funds, these fees do not cover the other important work of the Community Foundation. The Administrative Endowment is a permanent, endowed fund whose purpose is to promote philanthropy throughout southwest Washington, cultivate and support new donors, and provide technical assistance and advice to existing charitable organizations. Annual gifts to the Community Foundation’s General Fund also support this work.
An appraisal is used to assess of the value of an asset. When contributing various types of assets such as real estate or tangible personal property, you must secure an independent appraisal to substantiate the value you can claim as a charitable deduction.
Any asset that has risen in value since it was acquired. Usually, appreciated property held for a year or more may be donated at full fair market value with no capital gains cost.
Cash, securities, real estate, or other resources owned by a person or an entity. The Community Foundation invests its assets, using the income for grantmaking. (back to top)
The sale of securities, real estate, tangible personal property, or other assets to a charity for less than their current value. You receive a charitable deduction for the difference between the appraised value and the bargain price. The Community Foundation would sell the property and retain the difference between the price it paid and the price for which the asset was sold.
A person or entity that receives distributions from an estate or a trust.
A gift you made to a person or to a charitable organization through the will of someone who has died. It can take any of several forms: a dollar amount, a specific asset, or a percentage of the residue of your estate after other bequests have been made and estate expenses have been paid.
Document that governs the operation of a corporation (including a nonprofit corporation). (back to top)
Capital Gains Tax:
A tax on the amount by which an asset’s value exceeds its cost basis at the time the asset is sold. You can completely avoid this form of taxation by making an outright gift of certain types of appreciated property to a charitable organization - including the Community Foundation. Other charitable giving arrangements enable you to reduce or postpone (but not eliminate) capital gains tax.
The portion of a charitable gift that may be deducted for income, gift, or estate tax purposes.
The Community Foundation offers a range of charitable fund types – Donor Advised, Designated, Field of Interest, Scholarship, Organization Endowment. These options allow you to choose the vehicle best suited to you and your philanthropic goals.
Charitable Gift Annuity:
You can give cash or other property to a charity – including the Community Foundation - in exchange for the contractual payment of a fixed amount of money to you (or any one or two persons) each year for life. You receive a charitable deduction in the year your Charitable Gift Annuity is established.
Charitable Lead Trust:
A Charitable Lead Trust is the reverse of a Charitable Remainder Trust (see below). Instead of paying income to one or more persons each year and then distributing the remainder to one or more charities, it pays income to one or more charities each year and then distributes the remainder to you or to one or more other persons, typically children or grandchildren.
Charitable Remainder Trust:
Like any trust, a Charitable Remainder Trust (CRT) is a distinct legal entity that owns and manages assets. It lasts either for a period of up to 20 years or for the lifetime(s) of one or more persons. Each year during its existence, it makes payments to the person(s). When it ends, its remaining assets are distributed to charity. The Community Foundation can serve as a trustee of a CRT.
Closely-held Stock Donation:
Community foundations can own Sub-Chapter S Corporation stock, making it possible for you to contribute this and interests in other types of closely-held businesses, such as partnerships and limited liability companies. To ensure proper analysis and valuation, contributions of closely-held stock and similar types of assets require thorough review by the Community Foundation prior to acceptance.
A community foundation collaborates with philanthropists from all walks of life and manages charitable gifts of all sizes. We can help you start a charitable fund, identify tax-effective giving strategies, learn about your community's most pressing needs, create a charitable legacy, support your favorite cause, or engage your family in philanthropy. There are more than 700 community foundations across the United States today.
The Community Giving Fund:
This is a permanent endowment at the Community Foundation that addresses a broad range of local needs in southwest Washington. Grants from this fund improve the quality of life for our citizens and residents by supporting organizations and programs that strengthen families with special needs, address health and wellness concerns, improve cultural opportunities, and address environmental and conservation issues, enhancing the livability of our communities.
Your purchase price for an asset, in some cases adjusted to reflect subsequent expenses or depreciation. For example, if you bought stock for $100 per share and sold it for $175, your cost basis in the stock would be $100 per share. (back to top)
Many people refer to an “estate tax” as a "death tax" partly because a death must occur before any tax on the deceased's assets can be assessed. An inheritance tax is a somewhat different type of death tax.
With this type of fund you “designate” the charitable organization(s) that your fund will support (e.g., a theater, a food bank, a school) during and beyond your lifetime. The Community Foundation actively monitors all recipient organizations. If an organization ceases to exist, loses its tax-exempt status, or changes its mission, your gift is redirected to support an organization with a similar mission.
Donor Advised Fund:
A charitable giving vehicle created for the purpose of managing charitable donations on behalf of an individual, family, or organization. This type of fund is easy to establish and is a low cost, flexible vehicle for charitable giving with numerous tax advantages. Pioneered by community foundations, Donor Advised Funds are the fastest growing charitable giving vehicle in the country. (back to top)
A tax on the value of your assets transferred to others upon your death. The tax is typically paid by your estate but can sometimes be accessed directly against those that receive transfers of assets.
In addition to endowed funds, the Community Foundation also offers non-endowed funds. Grants from these funds can exceed the 5 percent spending policy. These arrangements are made when your fund is established. (back to top)
Field of Interest Funds:
Perhaps you feel strongly about a cause but do not wish to take an active role in grantmaking. With a Field of Interest Fund, you identify and benefit a charitable purpose (e.g., economic opportunity, strong and connected neighborhoods, etc.), a category of interest (e.g., arts, education, human services, etc.) and/or a geographic area that you feel passionate about supporting.
The IRS form filed annually by most public charities, including the Community Foundation. The IRS uses this form to assess compliance with the Internal Revenue Code. It lists our assets, receipts, expenditures, and compensation of officers.
Your Fund Agreement confirms the intent and objectives of your fund. Prepared when your fund is established, the Fund Agreement guides the Community Foundation in fulfilling the intent of your fund.
Quarterly Fund Statements are sent to fund advisors, detailing their fund’s activities including investment performance, service and investment fees, and grants made to other organizations.
The individual(s) responsible for advising your fund, including “successor advisors” who will serve your fund upon the death of the original advisors, if applicable. (back to top)
See Administrative Endowment. (back to top)
IRA and Qualified Retirement Plan Contributions:
From a tax standpoint, assets in qualified retirement plans and IRAs are among the least advantageous to give to children upon death. Consider giving more tax-favored assets, such as securities and real estate, to your children and creating a Donor Advised Fund with some or all of what remains in a qualified plan or an IRA. This will establish a wonderful family legacy by providing a tool from which heirs can make recommendations regarding charitable gifts. At the same time, you will eliminate income and estate tax on the qualified plan or IRA assets distributed to the Community Foundation.
Our investment program benefits from the expertise of a volunteer Investment Committee. Appointed by the Board, all committee members are well versed in investment strategies, trends, and issues. The Committee meets regularly to review and rebalance our portfolios. (back to top)
Letter of Intent:
This letter specifies the purpose of a gift made through a Bequest or Revocable Living Trust. It can be updated as often as you like and at no charge.
Life Insurance Gifts:
You may name the Community Foundation as both the owner and beneficiary of a life insurance policy. If the policy has cash value, you can take a charitable deduction approximately equal to the cash value or the basis of the policy, whichever is less at the time of the gift. If you are still paying annual premiums and you continue to do so, the amount you pay each year will be tax deductible. Note: You can also retain ownership of a policy but name the Community Foundation as beneficiary of some or all of the death benefit, thereby reducing any estate tax that would otherwise be due. We can help you establish a fund to create a lasting legacy in memory of a loved one.
A fund set up to bear the name of your loved one and exist in perpetuity, providing a permanent source of funding to one or more charitable organizations or an area of interest meaningful to you. (back to top)
National Standards for U.S. Community Foundations:
National Standards were developed in 2000 by a group of community foundation practitioners to serve as a roadmap for legal, ethical, and effective practices within the philanthropic environment. They are philanthropy's most rigorous standards, now adopted by hundreds of community foundations – including the Community Foundation for Southwest Washington – who are committed to operational excellence. (back to top)
Open to contributions of any size from the public. Gifts made to the fund are tax-deductible. We acknowledge all gifts, keeping you apprised of the names of individuals who have contributed.
Organization Endowment Fund:
An endowed fund established with the Community Foundation for Southwest Washington by another charity to be managed and invested for the benefit of that charity. Annual income is distributed to the charity only as long as it exists. (back to top)
Enables your investment advisor to manage assets you have contributed the Community Foundation outside of our investment pool. The assets become and remain the property of the Community Foundation (thereby enabling you to receive a tax deduction). Nevertheless, we retain your investment advisor as the manager and continue to invest the funds under the Foundation’s Investment Guidelines, with an annual review of performance. The minimum gift to enter into this arrangement is $200,000.
A Private foundation is required to pay out annually 5 percent of the average market value of its assets. Community foundations do not have a payout requirement.
Personal Property Gifts:
These include artwork, cars, jewelry, and other personal property. From an income tax perspective, you can generally deduct only your cost basis, not the fair market value (although from an estate tax perspective, gifts made upon death qualify for an estate tax deduction equal to the property’s fair market value). Tax benefits for gifts made during life are most favorable if the recipient charity can use the property in connection with its stated mission.
Also known as ‘gift planning,” planned giving is designing charitable gifts so the donor can realize philanthropic objectives while maximizing tax and other financial benefits. From a donor’s point of view, planned giving is merely a part of the overall process of estate planning, which can be defined as: “caring for yourself and your assets while you are living, and providing for the transfer of assets to other persons and entities, both during your lifetime and afterwards.”
A charitable entity established and funded by one or a small number of persons, families, or entities (either for-profit or nonprofit entities), rather than by members of the general public. It can be either an operating foundation, meaning it carries on directly a particular activity such as maintaining a botanical garden, or a nonoperating foundation (sometimes referred to as a grantmaking foundation), which exists solely to make annual distributions to “public charities,” i.e., organizations established and funded by members of the general public. Most private foundations are nonoperating foundations.
Private Foundation Option:
Operating a private foundation can be time consuming and expensive, with considerable administrative and organizational duties – and related costs. Donor Advised Funds and Supporting Organizations – available through the Community Foundation - contain many of the features of a private foundation with fewer complications. In addition, they have no rigid distribution requirement (a private foundation must give away 5 percent of its assets every year).
An attorney, certified public accountant, financial advisor, who other type of professional who counsels clients on financial, tax, estate, and charitable planning, as well as on other important decisions.
Publicly-Traded Stock Gifts:
You may transfer directly to the Community Foundation appreciated stock and certain other securities owned for more than one year and receive a deduction for their fair market value on the day of transfer. In addition, you can avoid paying tax on the capital gain (the difference between the cost basis of the securities and their current value). You are allowed to use the charitable deduction to offset up to 30% of your adjusted gross income in the year you make your gift. Any unused portion of a charitable deduction can be carried forward to the next year as many as five times, subject to the same limitation each year. If you have owned appreciated securities less than one year, your deduction would equal their cost basis.
Real Estate Gifts:
You can make an outright gift of real estate to the Community Foundation and avoid paying capital gains taxes on the appreciation in the property’s value. As long as you have owned it for more than one year, the resulting income tax deduction is equal to the fair market value of the property, as determined by a formal appraisal. You are allowed to use the charitable deduction to offset up to 30% of your adjusted gross income in the year you make your gift. Any unused portion of a charitable deduction can be carried forward to the next year as many as five times, subject to the same limitation each year. (back to top)
The Community Foundation can help you structure a scholarship to benefit students at any educational level or any specific institution. Some donors choose to stay involved through advisory relationships, or as members of a scholarship committee, while others name committees to assist in selecting recipients. Either way, our staff will handle the necessary paperwork and ensure that scholarships are distributed in an equitable manner.
The policy that determines what percentage of the Community Foundation’s endowment should be spent to cover grants and operating expenditures.
A Supporting Organization is a distinct legal entity. It is established by a person, a family, or a public charity to provide ongoing financial support to one or more public charities. Although a Supporting Organization may be formed to benefit any type of public charity, the use of this form of entity is particularly common in connection with community foundations. (back to top)
Of the many distinguishing features of a community foundation, this is perhaps the most unique. Simply stated, should the purposes of any fund within the Foundation become “impossible, impractical, or illegal” to perform, the Board is responsible to redirect the purposes of the fund, keeping in mind to the extent possible the original intent of the donor. (back to top)
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