Chances are, you have at least one client who has put off charitable planning so far this year. Maybe they were too busy with work or family, or maybe they were in the throes of selling a business. Regardless of what may have caused the delay, now is the time to contact The Chicago Community Trust to discuss opening donor advised funds for your clients before the end of the year.
We work fast
The Trust can make the process of opening a DAF fast and painless. In fact, once we have a completed DAF application back from a donor, we can open a fund in just a few days. With most donors, the timing around the actual contribution is what becomes most important, especially as the end of the year draws near. Here are some helpful tips to consider as you work with your clients to open, and fund, a new or existing DAF:
Cash is fast. A wire can generally be completed in 24 hours, and a contribution sent in the form of a check will count as a 2018 contribution long as it is postmarked by December 31.
Securities have advantages, but can also take time. While most publicly traded stocks can be contributed quickly, mutual funds can take up to fifteen business days, so it is best to plan ahead. Remember, the contribution date for securities will be the day that they are actually received into the Trust’s brokerage account.
Start the process for non-cash gifts now. The Trust can accept non-cash gifts, such as business interests, on a case-by-case basis—but the due diligence process can take weeks to complete. If you have clients who are thinking about funding a DAF with non-cash assets, it is best to contact us now.
While a standard donor advised fund agreement may work well for 99% of donors, there are some scenarios that require customization. The agreement may need specific language that deals with a tricky succession plan, or it may speak to specific investment recommendations that the donor wishes to have included in the fund document. Consider the following examples:
Julia and Marc are in their 50s and each has children from a prior marriage. They have a donor advised fund for which they are both named donor advisors.
Upon the second to die, they would like the fund to be split into two shares. Share A shall be a permanent endowment fund that will support organizations in Chicago working to promote economic education and financial literacy. Share B shall be further split into donor advised funds for each of Julia’s and Marc’s adult children.
Veronica has a donor advised fund with the Trust from which she recommends grants to conservation organizations across the U.S. Veronica’s fund is well over one million dollars in value, meaning she can recommend an investment manager and a custom asset allocation for her fund. Her fund agreement includes this recommendation, and further notes Veronica’s preference that the fund be invested in a way that screens for companies that have strong environmental policies and performance.
This language is important to Veronica because it aligns with her personal and philanthropic values, and it provides recommended investment guidance to her children, who are named as successor advisors to the fund.
While some providers of donor advised funds are not set up to manage custom fund agreements, the Trust has more than a century of experience developing and executing fund agreements tailored to the needs and the goals of our donors.
While a standard donor advised fund agreement may work well for 99% of donors, there are some scenarios that require customization. The Trust has more than a century of experience developing and executing fund agreements tailored to the needs and the goals of our donors.
Estate Plans
Year-end planning often involves more than just income-tax considerations. The end of the year is often a time when clients are thinking about all aspects of their wealth planning, including charitable legacy and estate planning.
We work with advisors and their clients on developing philanthropic solutions that fit within a customized estate and wealth transfer plan. This may include naming a donor advised fund as the beneficiary of a charitable lead trust to allow for maximum family participation in grant making, or it may include a conversation about the benefits of establishing a supporting organization to hold and manage business interests for charitable purposes.
Some individuals and their advisors don’t realize that the Trust can set up designated funds to support named organizations long after their death, or field-of-interest funds that support specific causes and issue areas long into the future. The donor can feel secure knowing that the Trust will continue to make grants that adapt to the changing needs of the community over time, without straying from the donor’s stated wishes.
With more than a century of experience ensuring that donor intent is carried out and that charitable legacies are honored, the Trust is happy to join professional advisors and their clients in conversations about charitable planning.
Private Foundation Conversions
Sometimes in philanthropy, things are more complicated than they need to be. If you have clients with a private foundation that is proving to be too complicated, too expensive or too structured for their needs, then a donor advised fund may be a simple solution.
Benefits of converting a private foundation to a donor advised fund with The Chicago Community Trust include:
No administration: The Trust takes care of all federal and state filing and reporting requirements.
Hassle-free grant making: Advisors to the fund can continue to support their favorite nonprofits across the country.
No minimum distribution: Unlike private foundations, donor advised funds are not required to distribute a minimum amount each year, allowing donors and advisors greater flexibility.
Investment flexibility: Donors who establish a fund with a balance of $1 million or more may recommend their own investment manager and investment strategy for their fund.
Anonymity: Because private foundation tax returns are subject to public inspection, anyone can find out who is a substantial contributor to, or a director for, a private foundation. The grants that a foundation makes each year are also included on the tax return of the foundation. A donor advised fund allows a donor to recommend grants anonymously when preferred, providing greater privacy to donors and their families.
For most private foundations, terminating and transferring to a donor advised fund with The Chicago Community Trust is straightforward. After opening a fund with the Trust, the foundation will transfer its assets to The Trust and then begin the work of closing down the foundation. The managers of a terminating foundation should consult with an attorney or tax professional to ensure that the termination follows the requirements set forth under state and federal law. As the end of the year approaches, now is the ideal time to be discussing the option of a private foundation conversion with your clients.
The Chicago Community Trust welcomes the opportunity to partner with you and your clients as you work through the complexities of real life to find simple, yet powerful, charitable planning solutions for your clients. For more information, contact Tim Bresnahan at (312) 565.2832 or tbresnahan@cct.org.
