Below are some frequently asked questions and responses for professional advisors. If you have a question that you’d like to see discussed on this page, please contact us.

What is a community foundation?

A community foundation is a nonprofit organization designed to make it possible for anyone to support their community now and in the future. A community foundation attracts charitable dollars, manages and invests that money, and gives money through grants to support nonprofits. Community foundations are defined by the geography they serve, with a broad mission to encourage philanthropy as a tool for building better communities, and an ability to manage many charitable funds under one roof. Community foundations have a long-term view and a broad perspective. They have deep roots in community, experience working with nonprofits, and are a knowledge bank for local philanthropy. The impact of a community foundation is evident in its permanence on the one hand, and its flexibility on the other. To learn more about community foundations throughout the country, visit the Council on Foundations.

Why should my client establish a fund at the Community Foundation?

The Community Foundation can help you, and your clients, accomplish personal philanthropic and estate planning objectives in a cost-effective fashion. While our primary mission is charitable endowments, there is virtually no limit to the type of charitable goal that can be accomplished through the Community Foundation.

Are funds for clients interested in giving now, or through an estate plan?

Actually, both. There are currently over 280 different named funds operating within The Princeton Area Community Foundation. Most are endowed to provide perpetual support for causes or organizations favored by the original donors. It is also possible to create funds that distribute part, or all, of the original gift over a period of time. At other times, 100% of a gift immediately passes-through the Community Foundation to a favored charity.

How do we create a fund?

The Princeton Area Community Foundation uses a “Letter of Agreement” format to establish a fund. This simple document outlines the purposes of the fund so that we are clear on the donors intentions. Funds can be created in a matter of minutes with no costs. The Community Foundation annually distributes sample documents to a wide-array of professional advisors. If you’d like some sample documents for your office, please contact Elizabeth Wagner, Vice President of Development.

How is a community foundation different from a private foundation?

A community foundation is a collection of named funds all operating under the administrative umbrella of a single, publicly supported entity. Community foundations typically operate broad-based grant making programs. They also distribute specific grants as defined by original donor agreements.
Donations to a community foundation generally qualify for higher tax deduction. As many different funds are pooled, administrative costs are typically less. A single audit and a single 990 form cover all funds operating within a community foundation. Community foundations also pay no tax on their earnings. There are no minimum payout requirements and funds can accumulate for some future charitable purposes. While professional advisors vary on the specific amount, many will agree that private foundations are not cost-effective for donations of $1 million or less.
The end result of this pooling of funds is the saving of administrative costs; making more funds available for deserving charities.

How much money is needed to create a named fund?

Generally speaking, named funds are established with gifts of $10,000 or more. We can also work with a client to build-up a fund, over time. It is also possible to make smaller gifts that simply pass-through the Community Foundation to a cause or organization or your clients choosing. Finally, many funds accept gifts of any size from the general public.

Is the Community Foundation just for helping local organizations?

Our unrestricted endowments are limited to organizations serving Mercer County. Income from these named funds is distributed to a wide variety or local organizations through a time-tested competitive grants process. Many donors also create funds dedicated to a specific local nonprofit organization(s) or cause. Donors can also create, in their lifetimes or through a planned gift, other funds that benefit favored causes throughout the country.

Can the fund my client establishes benefit individuals?

To be a tax-deductible activity, there must be a broad charitable class. Grants can not be made to a specific person.

What about scholarships?

The Community Foundation has several scholarship funds. These are very popular with donors. Foundation staff can help with language to insure the scholarship is operating legally. There is no need for advance IRS qualification of the scholarship fund. However, we do require a minimum of $250,000 to establish a scholarship fund.

What is a donor advised fund?

This is one of our more popular options. These funds are created during a donors lifetime. Your client receives a 100% tax deduction for the original, and any subsequent, gifts. The Princeton Area Community Foundation then typically endows the fund. In future years, your client will make recommendations regarding grants from income or, in some cases, principal. The Community Foundation takes care of all due diligence, with recognition from the charity flowing to the donor.

Why is this helpful?

Many of your clients are using the income from investments to fund charitable gifts. A donor advised fund lets this continue, with the added benefit of a 100% tax deduction for the principal transferred to the Community Foundation. Many donors appreciate the ability to have us handle the check-writing and due diligence. We also offer educational services to help your client maximize their philanthropic impact.

What about fees?

There is no fee to establish a fund. Once established funds are assessed a small annual fee to cover administrative and investment management costs. As funds are pooled for investment management purposes, there can be some significant economies of scale. Typically yearly costs are less than ###%. This helps fund a wide array of educational, administrative, donor service and program work of the Community Foundation staff.

How is the endowment managed? Can my client have input?

Generally speaking, all endowed funds within the Community Foundation are pooled and operate under a single investment management policy. Our primary investment objective is to preserve, and enhance, the charitable “purchasing power” of endowed funds over time. The Community Foundation investment committee closely monitors investment performance. Individual managers are all held accountable to specific benchmarks. When necessary, changes are made. We also measure ourselves against our peers. Over time, we are confident our endowment management policy is working. Learn more about our investment management and performance …

What else do I need to know?

We are here to help you and your client. We understand decisions are made on the client’s timetable. There is never any specific time pressure related to a charitable gift to the Community Foundation. Consequently, we are always happy to meet with you, or your clients, to discuss their plans. Our goal is to help you, and your client, accomplish your objectives. Please view us as a resource and do not hesitate to contact us with any questions.