The Philanthropy Brief: April Edition
Introducing The Philanthropy Brief: Insights for Trusted Advisors
At The Community Foundation of Muncie & Delaware County, we understand that charitable giving is an essential part of many clients' financial and estate plans. As a trusted resource for philanthropy, we work alongside professional advisors—attorneys, CPAs, accountants, and financial planners—to help their clients achieve meaningful, tax-efficient, and impactful giving.
The Philanthropy Brief is designed specifically for professional advisors looking to deepen their understanding of charitable strategies, planned giving options, and the unique benefits of working with The Community Foundation. Through these posts, we aim to provide practical insights, real-world examples, and expert perspectives to help you guide your clients in aligning their financial plans with their philanthropic goals.
By working together, we can ensure that generosity is not only maximized but also makes a lasting difference for our community. Let’s create a future where giving is both strategic and deeply personal—because when advisors and The Community Foundation collaborate, we all make an impact that extends beyond today.
We’re here for you.
Your Community Foundation helps you serve your charitable clients.
The Community Foundation team is honored to work with attorneys, CPAs, and financial advisors as you help your clients achieve their charitable giving goals. Put us on speed dial–we want to be your first call when the agenda turns to philanthropy!
As part of our service to you and other advisors, The Community Foundation is committed to letting you know about trends and developments that may impact your clients’ charitable giving strategies. To that end, here are three topics that are popping up frequently in our conversations with both donors and advisors:
–Trust is at the foundation of your client relationships, and the team at The Community Foundation shares this sentiment about our relationship with you, your clients, our local nonprofits, and the community we serve. Discover why The Community Foundation is a trusted source for all things charitable giving.
–Deciding whether a private foundation or a donor-advised fund is the best vehicle for your client can be challenging, especially if the client walks in the door with preconceived notions. A donor-advised fund at The Community Foundation may be more flexible and effective than you assume, and often is the ideal tool to achieve clients’ tax and charitable giving goals.
–You may not encounter charitable gift annuities (CGAs) often, but when you do, it’s good to know the basics. We’ve put together a few quick pointers as a refresher course on how a CGA works and when it might be a good fit.
Please reach out at any time you’re dealing with a client matter related to charitable giving. We can almost always provide a solution; if not, we will recommend the best next steps for you and your client.
Happy spring!
Trust matters: Your clients’ go-to resource for community impact
When you’re working on the charitable components of a client’s estate or financial plan, one of the first areas you’ll likely explore is the structure. Certainly, you are familiar with both private foundations and donor-advised funds as useful charitable giving tools. Before you jump into one or the other for a particular client, though, it’s important to review the similarities and differences between the two so that you can best achieve your client’s goals.
To help you evaluate a client’s options, here are three common myths about the differences between private foundations and donor-advised funds.
Myth #1: Donor-advised funds are all the same, and only private foundations can be customized
Private foundations will always differ from donor-advised funds in important ways, not only because of their status as separate legal entities and the deductibility rules for gifts to these entities, but also due to the opportunities for customization of governance. But it is a mistake to assume that a donor-advised fund is a cookie-cutter vehicle. Indeed, “donor-advised fund” is simply a term used to describe the structure of a fund and its relationship with a sponsoring organization such as The Community Foundation. The donor-advised fund vehicle itself is highly flexible. Here’s why:
–Donor-advised funds are popular because they allow your client to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, your client can recommend gifts to favorite charities from the fund when the time is right.
–A donor-advised fund at The Community Foundation is frequently a more practical choice than a donor-advised fund offered through a financial institution. That’s because at a community foundation, your client is part of a community of giving and has opportunities to collaborate with other donors who share similar interests. Plus, The Community Foundation is itself local and is deeply knowledgeable about the needs of our region and the nonprofits meeting those needs.
–The Community Foundation can work with you and your client to develop a charitable giving plan that spans multiple future generations. That is because the team at the community foundation supports your clients in strategic grant making, family philanthropy, and opportunities to learn about local issues and nonprofits making a difference.
Myth #2: Deciding whether to establish a donor-advised fund or a private foundation mostly depends on size
The size of a donor-advised fund, like the size of a private foundation, is unlimited. The United States’ largest private foundations are valued well into the billions of dollars. Information about private foundations, ironically, is not so private. The Internal Revenue Service provides public access to the Form 990 tax returns of private foundations. That is not the case for individual donor-advised funds.
Similarly, donor-advised funds are not subject to an upper limit. Although information on the asset size of individual donor-advised funds is not publicly available, anecdotal evidence suggests that the assets of some donor-advised funds may total in the billions of dollars.
Indeed, a donor-advised fund of any size can be an effective alternative to a private foundation, thanks to fewer expenses to establish and maintain, maximum tax benefits (higher deductibility limitations and fair market valuation for contributing hard-to-value assets), no excise taxes, and confidentiality (including the ability to grant anonymously to charities).
The net-net here is that the decision of whether to establish a donor-advised fund, a private foundation, or both is much less a function of size than it is of other factors tied more closely to the objectives a client is trying to achieve.
Myth #3: Donor-advised funds and private foundations are mutually exclusive
Ensure you’re aware of the benefits of utilizing both a donor-advised fund and a private foundation to achieve clients’ charitable objectives. For example:
–Donor-advised funds can help meet the need for anonymity in specific grants, which is typically challenging when using a private foundation alone.
–A donor-advised fund can receive a client’s gifts of highly appreciated, non-marketable assets, such as closely held stock and real estate, and benefit from favorable tax deduction rules not available for gifts to a private foundation.
–An integrated donor-advised fund and private foundation approach can help a client balance and diversify investment and distribution strategies, ensuring that giving to important causes remains steady even in market downturns.
Some private foundations have transferred their assets to a donor-advised fund at The Community Foundation to carry on the foundation’s mission. Terminating a private foundation and consolidating giving through a donor-advised fund is sometimes the best alternative for a client when the day-to-day management and administration of the private foundation has become more time-consuming than expected and is taking time and focus away from nonprofits, the community, and making grants.
Along these lines, some families find that the tax rules related to investments, distributions, and “self-dealing” have become more complex and may even prevent the family from maximizing the tax benefits of charitable giving. Finally, the administrative load of managing a private foundation can become overwhelming, especially if the family members who initially handled these functions have retired, passed away, or become busy with other projects.
The bottom line here is that we encourage you to reach out to the team at The Community Foundation anytime you are evaluating how to structure a charitable giving plan that achieves both your client’s philanthropic goals and financial objectives. Our team is here to help. In many cases, the community foundation’s tools and services are a great fit for your client’s needs. If not, we will point you in the right direction.
As attorneys, CPAs, and financial advisors, you are well aware that trust forms the foundation of your relationships with clients. Your clients are seeking a similar level of trust with the people and organizations that are helping carry out their philanthropic wishes.
Weighing the Options: Private Foundation or Donor-Advised Fund?
Chances are, you’ve already begun to notice that a major transfer of wealth is happening as your Baby Boomer clients establish financial and estate plans to pass their wealth to their Gen X and Millennial children.
The dollars involved are eye-popping. Most attorneys, financial advisors, and CPAs have seen the Cerulli study’s estimate that $124 trillion in wealth in the U.S. will transfer through 2048. The research estimates that most of this wealth–$105 trillion–will pass directly to children, grandchildren, and other heirs. And, notably, the study estimates that $18 trillion will flow to philanthropy.
As the transfer of wealth gains momentum, advisors have a major opportunity to position themselves as trusted experts who can help clients not only structure efficient lifetime and estate gifts to heirs, but also help ensure that clients’ charitable wishes are achieved. It’s crucial for advisors to know that The Community Foundation is here to help incorporate philanthropy into clients’ financial and estate plans.
Here’s why this is so important:
There’s a knowledge gap. Clients may not be aware of the options and benefits of charitable planning. Even many of your affluent clients may still be writing checks to their favorite charities, not realizing that gifts of appreciated stock, for example, can be more tax-efficient, and that tools at The Community Foundation, such as donor-advised funds, can be incredibly useful.
Next-level strategies are key. Your ultra-wealthy clients will likely need to implement sophisticated strategies for transferring assets smoothly and tax-efficiently. Clients want to maximize the results of their charitable gifts while also protecting their families' interests. Leaning on The Community Foundation to help structure gifts of complex assets, such as closely-held business interests, can make a huge difference in reducing a client’s tax bill and achieving meaningful community impact.
Legacy planning starts now. It’s tempting to put off addressing a client’s wishes to support favorite charities in an estate plan. “We’ll look at that in a few years,” is a common but less-than-ideal approach. That’s because charitable bequests are best addressed as part of a comprehensive estate and financial plan. Naming a fund at The Community Foundation as the beneficiary of a client’s IRA, for example, is an extremely tax-efficient way to accomplish charitable wishes.
Our team is here to augment your expertise in charitable giving strategies. Not only will you be better able to meet clients’ needs, but you’ll also strengthen relationships and improve client retention. Please reach out to learn more about how The Community Foundation can help your clients make a lasting impact with their wealth while achieving their financial goals.
Refresher course: Charitable gift annuities
Several advisors have shared with us recently that they’re fielding more questions about charitable gift annuities (CGAs). It’s quite possible that CGAs are landing on clients’ radars these days for a couple of reasons:
A $54,000 opportunity
The word is finally getting out about the availability of a one-time Qualified Charitable Distribution (QCD) transfer via a “split-interest gift,” such as a Charitable Gift Annuity (CGA) or a Charitable Remainder Trust (CRT), under the “Legacy IRA” provisions enacted a couple of years ago. Adjusted for inflation, the ceiling for 2025 is $54,000. Because the law effectively mandates that the CGA or CRT be created solely to receive a QCD, your clients may gravitate toward the CGA, which is less complicated than making a relatively small CRT.
Payout rates are still high.
Current charitable gift annuity payout rates, as suggested by the American Council on Gift Annuities (ACGA), are generally higher than in previous years. Rates were increased in January 2024 and remain in effect for 2025. With the status of interest rates uncertain as 2026 approaches, some clients may want to consider taking advantage of a CGA this year.
What do you need to know about how and why a charitable gift annuity can be an effective planning tool for certain clients? Here are the basics:
–Through a charitable gift annuity, your client transfers assets to a charitable organization in return for a lifetime income stream and a partial tax deduction.
–When the client dies, the remaining funds are retained by the charity.
–The charitable donation portion of the transaction is calculated based on Internal Revenue Service rules for determining the amount of the contribution that is in excess of the present value of the annuity (these are the rates that are relatively high right now).
–Your client can fund a charitable gift annuity with a variety of assets, including marketable securities and cash.
–Actuarial calculations are used to establish the payout amounts, paid in equal installment payments that are considered a partial tax-free return of the client’s original gift.
–Generally, a large residual flows to the charity after the client’s death.
–The charity’s own assets, not just the donated assets themselves, back the annuity payouts. Because of this dynamic, charitable gift annuities are regulated by most states to ensure that the charity has enough reserves to meet obligations.
Please reach out to The Community Foundation team when a client asks about charitable gift annuities or any other type of charitable gift. Keeping up with the rules and regulations for charitable gifts of all kinds is one of the many ways our team is here to help you serve your charitable clients. We’re honored to be your first call on all things philanthropy!
The team at The Community Foundation is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice. Please consult your tax or legal advisor to learn how this information might apply to your own situation.
The Philanthropy Brief
The Philanthropy Brief: Insights for Trusted Advisors is designed specifically for professional advisors looking to deepen their understanding of charitable strategies, planned giving options, and the unique benefits of working with The Community Foundation.