Many community-minded individuals have served on the boards of directors of charitable organization boards in our region. If you’ve served on a charity’s board, you are no doubt familiar with the concept of an endowment. Many charities establish funds at the Community Foundation to help ensure that their missions stay strong during economic downturns and periods of increased community need.
However, you might be less familiar with endowment funds established by individuals or families at the Community Foundation. Each year, our team assists people like you in creating funds that support our region indefinitely.
Here are answers to four frequently-asked questions about setting up an endowment fund.
Why does the community foundation offer endowment funds to individuals and families?
The Community Foundation is the philanthropic hub for many families in our community. We connect you with causes you care about, allowing you to make a charitable investment that supports community needs both now and in the future—needs that are unpredictable. Therefore, an endowment provides a steady stream of dollars, far into the future, to meet community needs as they arise.
How does an “endowment” work?
An endowment is a pool of assets invested by the Community Foundation and managed separately. Each year, a portion of the assets is distributed to charitable causes while the remainder continues to grow. This growth ensures increased support for the causes you care about. Our team is experienced at managing the accounting, investment, and distribution aspects of endowment funds.
How can I stay involved with my fund after it’s established?
You can name your fund anything you like, such as the “Smith Family Endowment Fund” or the “Endowment Fund for Our Future.” We’ll keep you informed about the impact of your fund on the community. Additionally, we can keep your children and grandchildren informed, ensuring your legacy continues for generations.
Who decides where the endowment distributions go each year?
As a permanent institution, the Community Foundation’s board and staff stay attuned to our region’s greatest needs and organizations addressing these needs. This is the Community Foundation’s mission in perpetuity. Our team recommends distributions from your endowment, and our independent board of directors approves these distributions to meet your charitable goals.
What does it take to establish an endowment fund?
Setting up an endowment fund is straightforward. Our team will prepare simple paperwork capturing the name of the fund and any areas of interest you’d like to support. You can then transfer cash or appreciated assets such as stock or real estate, for tax benefits. You’ll be eligible for a charitable tax deduction in the year you make the transfer.
You can also make future transfers to your endowment fund each year to achieve your tax and estate planning goals. Our team is happy to work with you and your advisors to structure a bequest to your fund.
We recommend considering a beneficiary designation on an IRA for multiple tax benefits. Additionally, making a “Qualified Charitable Distribution” from your IRA directly to your fund is an effective planning tool to avoid income tax and satisfy your Required Minimum Distribution if you are over 70 ½.
Contact Michael Nuno, Vice President of Philanthropic Services, at mnuno@pacf.org to learn more. We look forward to working with you to support our community and your favorite charitable causes for generations to come!
