The affiliates of the Western Indiana Community Foundation (Attica, Covington, Southeast Fountain, and Vermillion County Community Foundations) have endowment funds open to receive gifts. An Endowment Fund is a fund in which monetary gifts are placed and invested. The amounts contributed as donations are pooled together and endowed - meaning the donations are locked in and never spent. The earnings on the donations (endowed funds) are what are issued as grants.
You can create a named fund with the Foundation with a minimum donation of $1,000. Payouts for grants and scholarships begin when the fund has reached a balance of $10,000 for a full calendar year.
When making a donation, the choice of "fund type" lies entirely with the donar. THERE ARE KEY FUND TYPES
Parks and Recreation
Education and Scholarships
Arts, Culture and Historic Preservation
Churches and other Christian Purposes
DESIGNED GEOGRAPHIC AREA (SCHOOL DISTRICT) TO BENEFIT FROM, AND HOLD, A GIFT
The purpose of each endowment fund describes the philanthropic aims of the donors who established the funds. Any individual, business or group may contribute to these existing funds in any amount. In addition, donors may express their own philanthropic desires by establishing a named fund with a gift of $1,000 or more (grant/scholarship payments occur when the fund balance reaches $10,000).
A TYPE OF CHARITABLE FUND HE/SHE WISHES TO ESTABLISH
Types of Charitable Funds:
All fund founders choose whether they wish to establish an "Endowed" or "Non-endowed" fund.
What is an endowed (Permanent) fund? An endowment is a permanent fund in which the principal is preserved and invested. A portion of earnings is utilized annually to provide grants or scholarships according to the wishes of the founding contributor(s).
What is a non-endowed (Pass-Through) fund? Pass-Through Funds are non-endowed funds established by individuals, families, or groups to engage in community philanthropy for a period of time. These funds are intended to be spent in their entirety. They may be used for any charitable purpose. Common reasons are to raise funds, complete a charitable project, or engage in family philanthropy. Such funds take advantage of the charitable status, recognition, and administrative services provided by the Community Foundation.
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The Acorn Program helps donors start small to make a big difference, building charitable endowments in much the same way they build retirement plans -- through regular contributions. A payroll deduction plan can be used to build the fund. Many corporations have matching gift programs. Gifts to an Acorn Fund are tax deductible, and investing in them speeds their growth. When the Acorn Fund reaches the pre-determined value, it converts to a grant-making fund within the Community Foundation. An Acorn Fund can be established with an initial gift of as little as $1,000.
An endowment fund created in the name of a person who passed away becomes a permanent living memorial, meaningful for years to come. The purpose of the fund can be established to support a field of interest, which would have pleased the deceased. Friends and corporations who knew the deceased person may contribute to the fund.
You may wish to establish a Community Grants Fund named for your family, business, a special person, etc. Knowledgeable and involved members of the community decide each year how grants from these funds are awarded and grants are awarded in the name of the endowment fund.
Do you wish to see every child have the hope and the means, and the encouragement to obtain higher education? The Western Indiana Community Foundation has over 60 scholarship funds that provide financial support to a variety of individuals. You may contribute to one of these or start your own scholarship endowment fund.
DONOR ADVISED FUNDS
Donor advised funds can help to promote “family philanthropy,” and can serve the charitable interests of family members for multiple generations. Donor advised funds may be established as endowed or pass-through funds, and are an inexpensive and convenient alternative to establishing a private family foundation with its costs and demands.
AWARD PROGRAM FUNDS
Do you wish to see people encouraged and rewarded for outstanding achievement in a particular area? A fund supporting an award and recognition program can be very meaningful to recipients and to the community at large, especially when thoughtfully planned and conducted.
FIELD OF INTEREST FUNDS
Field of Interest Funds support a particular area of charitable activity such as the arts, education, the elderly, the environment, etc. You choose the area of interest and the name of the endowment. Knowledgeable and involved members of the community decide each year how grants from these funds are awarded. Grants are then awarded in the name of the endowment fund.
AGENCY ENDOWMENT FUNDS
The Community Foundation is simply the best resource for individuals or groups who wish to support a particular charity or activity for future generations. For example, a donor who currently supports two charities with annual gifts of $500, could perpetuate her annual gifts by establishing a Designated Endowed Fund with about $20,000.
CORPORATE GIVING FUNDS
For companies that make community support a priority and receive numerous requests for donations each year, the Community Foundation offers services that relieve company executives and employees of the stress and burden of processing and awarding the many charitable requests received.
Fulfilling donor intentions is the number one purpose of the Community Foundation. There are no competing interests. Agencies, organizations, and churches that establish funds with the Community Foundation may realize many of the following benefits: decreased administrative burden, increased promotion of their name and missions; protection of the asset; superior investment results; income in perpetuity, and access to development information and support.
ADMINISTRATIVE ENDOWMENT FUNDS
If you believe that supporting the Community Foundation is one of the most important gifts you can make to the community, a fund named for your family or business within the Administrative Endowment Fund will address your goals.
WAYS TO GIVE
CURRENT Giving Methods
The Community Foundation can help you put your assets to work for good -- forever.
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By using charitable tax deductions, the net cost to a donor can frequently be less than the actual amount of the gift. For example, the net cost of a $1,000 cash gift to donors in the marginal 28% tax bracket is just $720 after $280 tax savings.
If you are the beneficiary of royalty income, income taxes are assessed on the full amount. Giving gifts to charity each year does not reduce these taxes very much. However, you may choose to assign all or a portion of the income to a fund at the Community Foundation. With this strategy, you pay no further tax on this income and may take an income tax deduction for the value of the assignment at the time of the assignment.
SECURITIES Making a gift of appreciated securities will save income tax and eliminate the capital gains tax incurred by selling the securities yourself. For instance, assume you purchased 100 shares of stock for $2,000 several years ago and now the stock is worth $7,000. You can deduct the full $7,000 rather than just your basis in your stock (usually what you originally paid). If you were to sell the stock, you would owe $750 in taxes. However, if you give the stock to a charity, you owe no capital gains taxes! For most donors, the full fair-market value of publicly-traded stocks and bonds may be deducted for income tax purposes up to 30% of adjusted gross income with a five-year carryover. The actual impact of such a gift on your personal taxes should be reviewed with your tax advisor. Note: A donor considering a gift of securities that has declined in value would be better off selling them to realize a deductible loss and then contributing the proceeds to charity.
If you are the beneficiary of a trust, which pays you a regular income, income tax is assessed on the full amount. Giving gifts to charity each year does not reduce the tax very much. However, you may choose to assign all or a portion of the income to a fund at the Community Foundation. In this scenario, you pay no further tax on this income and may take an income tax deduction for the value of the assignment at the time of the assignment.
There are a variety of ways to give with life insurance. An increasingly popular means of charitable giving allows you to make relatively small, yearly, tax-deductible contributions to leverage a substantial fund that will pass to the Foundation on your death. The procedure is simple: you take out an insurance policy on yourself, vesting all ownership rights in the policy in the Foundation and irrevocably naming the Foundation as the beneficiary of the proceeds. Each year, you pay the annual premium, which is fully deductible as a charitable contribution. On your death, the proceeds of the policy pass to the Foundation, free of estate taxes. The donor may also name a charity as a full or part beneficiary on a life insurance policy.
Paradoxically, the most important plan made by the owner of a closely held business may be for the disposition of the business interest. The business owner’s interest in a business and his or her personal financial and estate plan are highly interdependent. A valuable business places a considerable estate-tax burden on the business owner’s estate. Without thoughtful planning, retaining the business in the family can be jeopardized. Including charitable giving in the estate planning process may provide many benefits to the business owner(s), the family, and to charity. An entrepreneur who has built up a business to a nice size should seek legal and financial advice to address the tax issues involved in the transfer of the business to heirs. If the business is publicly traded, a block of shares could be transferred to establish an endowment. If the business is not publicly traded, it may still be possible to establish an endowment with the business assets.
RETIREMENT PLAN ASSETS If a retirement account fund (IRA, 401(k), 403(b)) has grown beyond a donor’s needs or there is concern about taxation of heirs, directing all or a portion of these assets into a charitable gift fund can provide the donor with considerable tax savings while benefiting a charitable interest. Careful planning can prevent heirs from being assessed up to 80% of the value of the retirement plan.
NON-PROFIT ENDOWMENT TRANSFER A governmental entity, non-profit or faith-based organization may wish to transfer endowment monies to the Community Foundation. Such transfers offer superior investment management, administrative savings and most important of all, protection of the assets for the organization.
PRIVATE FOUNDATION TRANSFERS
A private foundation may transfer all or some assets to the Community Foundation, yet retain the private foundation’s name and purpose. Such transfers offer tax advantages, flexibility, and administrative savings.
REAL ESTATE and TANGIBLE PROPERTY Giving appreciated property to charity generates a double tax benefit. In addition to receiving an income tax deduction for the full fair-market of the property, the donor escapes any potential tax on the capital-gain element in the gifted property. Note: A donor considering a gift of property that has declined in value would be better off selling the property to realize a deductible loss and then contributing the proceeds to charity.
CORPORATE MATCHING GIFT PROGRMAS
Many employers match the gifts of employees and retired employees. Ask your employer if there is a company matching gift program.
DEFERRED Giving Methods
Many people wish to give back to the community, but they want to be sure they will remain financially secure. Here are several examples of tax-wise giving (often called “planned” or “deferred” giving) that can ensure your future.
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CHARITABLE LEAD TRUST
The charitable lead trust pays an annual income to a charity or charities for a specified period of years. At the end of the designated time period, the principal of the trust reverts to the grantor or passes to non-charitable beneficiaries (often, descendants of the grantor) upon termination of the trust term. For donors with larger estates, lead trusts offer an attractive way to make immediate charitable gifts in combination with transfers of assets to beneficiaries at substantially reduced gift and estate tax costs. These gifts may also be ideal for persons still in the work force, whose income from assets is not needed and puts them in a higher tax bracket.
DEFERRED CHARITABLE GIFT ANNUITIES These simple, inexpensive contracts are very attractive to 40 to 60 year old donors with high current income, who could benefit from a current tax deduction and are interested in augmenting retirement income on a tax-favored basis. There is no cost to establish a gift annuity with the Community Foundation.
IMMEDIATE CHARITABLE GIFT ANNUITIES Popular with older adults, these simple, inexpensive contracts provide guaranteed income for life (a portion of which is tax free) and an income tax deduction during the year of the gift. The payout of the annuity is based upon actuarial data and depends upon the age of the donor, interest rates, and the number of beneficiaries. There is no cost to establish a gift annuity with the Community Foundation.
GIFTS UNDER A WILL OR TRUST
After you have assigned sentimental possessions and provided for relatives, you may decide that you wish to help make the world a better place. Gifts under wills have become an important part of American philanthropic tradition because they enable individuals to make significant gifts they may not have been able to make during life. Gifts to charities designated in a will may significantly reduce the tax burden of the estate. There are various ways to makes gifts by will or trust, listed below are a few:
Specific bequests direct a specific piece of property be given to a designated charity.
General bequests direct a specified dollar amount be given to a designated charity.
Residual bequests designate all or a portion of the remainder of an estate to a charity, after all debts, taxes, and other bequests have been paid.
Contingent bequests identify a charity as an alternate beneficiary only if the primary intention cannot be met. This ensures the estate will pass to charity rather than unintended beneficiaries – including the courts and government.
Sample Wording for Gifts By Bequest “I give and bequeath the sum of $____ [or] the following described property (description of assets given) to the Western Indiana Community Foundation (name of the affiliate – Attica, Covington or Southeast Fountain Community Foundation) with the request, as consistent with the Articles of Incorporation of the Foundation, that the funds transferred be used to establish the (Name of Fund). Grants for the following charitable purposes shall be made from available proceeds, in keeping with the spending policy which may from time to time be in effect, subject to the schedule of fees adopted by the Foundation for investing and administering the Fund."
IRREVOCABLE CHARITABLE REMAINDER UNITRUSTS
These trusts enable donors to support worthwhile causes while augmenting current income. They provide variable payments to the beneficiary(ies) of at least 5% of the assets, valued annually. The amount varies according to the value of the trust. Regulations allow additional contributions to the unitrust.
GIFTS OF REAL ESTATE WITH A RETAINED LIFE INTEREST
These gifts provide the donor with a charitable deduction for the present value of the remainder interest and permit the donor to escape any potential capital gain tax on built-in appreciation. Most importantly the donor may continue to occupy the residence or operate the farm without disruption, if they wish.
IRREVOCABLE CHARITABLE REMAINDER ANNUITY TRUSTS These trusts enable donors to support worthwhile causes while augmenting current income. They provide fixed payments to the beneficiary(ies) of at least 5% of the initial fair market value of the assets. Payments do not vary with the value of the trust. IRS regulations prohibit additional contributions to an annuity trust.