Sarah Nevue, vice president of development at the Community Foundation for Southwest Washington, explained a donor-advised fund as a cost-effective charitable-giving vehicle that provides an immediate tax deduction – even if the recipient(s) haven’t been identified yet – and allows donors to closely control where and how their dollars are distributed.
The Community Foundation for Southwest Washington is one of the largest community foundations in the state, and is home to more than 260 separate funds which distribute hundreds of grants annually – $97 million since 1984.
While similar to charitable gift funds established by large financial entities such as Vanguard, Ameriprise and Fidelity, Nevue said donor-advised funds through the Community Foundation offer something you can’t get at these mega-firms: intimate knowledge of the local philanthropic landscape.
“We’re in the business of philanthropy, while larger institutions are in the business of managing assets and just happen to do philanthropy,” Nevue said, adding that donor-advised funds through organizations such as the Community Foundation also let donors choose exactly who they want to donate to. At larger institutions, she said, most donors must choose among a collection of the company’s own funds.
Rick Wollenberg, former president of Longview Fibre Company in Longview, and a Community Foundation board member, is himself in the process of establishing a donor-advised fund through the Community Foundation.
“They really do put a lot of effort into understanding all of the nonprofits in southwest Washington,” said Wollenberg, “and they help their donors understand that, as well.”
Nevue said it’s common for a business to have worked hard to accumulate assets without having developed a “philanthropic passion.” She said the Community Foundation takes donors on site visits to nonprofit organizations and helps the donors develop a giving charitable-giving plan.
Patricia Eby, a CPA with Vancouver-based accounting firm Peterson and Associates, said access to this type of expertise can mean that nonprofits receive donations sooner, because left on their own, many donors put off doing the required due diligence.
Eby said that several of her clients had opted for a donor-advised fund over a private foundation.
“Private foundations have a nightmare of rules and restrictions, and it takes millions,” said Eby. In contrast, she said, a donor-advised fund “takes very little money,” comparatively. The Community Foundation website (www.cfsww.org) indicates a minimum contribution of $10,000 to open a donor-advised fund.
Nevue said that the Community Foundation’s administrative fees for donor-advised funds averaged about one percent, although the larger the fund, the lower the fees. Nevue also said that donors are not limited to merely donating cash through the fund.
“We have the expertise to deal with complex assets, including real estate, appreciated stock, life insurance and retirement plans,” she added.
Nevue also said that the Community Foundation works not only with donors, but also with local organizations on their capital campaigns. For example, a donor might establish a fund, and designate a grant to a particular nonprofit – but funds are to be released only when that nonprofit reaches specific objectives.
Eby said that her clients liked the flexibility of donor-advised funds. First, she said, clients appreciated being able to take the tax deduction immediately, without being pressured to instantly decide where the funds would go. Also, she said, clients can sit down with Community Foundation staff to discuss the fund.
“They’re not locked into a single direction,” said Eby. So, for example, if two organizations merge and the donor is not happy with the result, he or she can choose a different grantee for the next distribution.
Donor-advised funds, said Eby, are a “safe, worry-free way to give.”
Charitable-giving options according to Nevue, businesses and families have four main options when choosing how to distribute assets to nonprofits:
- Private foundation. Typically has high administrative fees and lots of rules and regulations. Also, anonymous donations are not possible with this option. “Private foundations are not private,” said Nevue. Foundations must distribute at least five percent of their assets each year.
- Charitable gift fund. Features lower administrative fees, but are less involved with the local community. Nevue said that many large financial institutions only check to see if the target organization is truly a nonprofit – no other research is provided.
- Donor-advised fund. Enables donors to leverage a community foundation’s detailed knowledge of the region’s pressing needs, ability to manage complex assets, and grant funds anonymously if desired. These funds receive a more favorable tax treatment than private foundations, and there is no annual distribution minimum.
- Direct giving. Provides a lot of flexibility in choosing grantees, but can be time-consuming. Also, many organizations are not set up to accept anything except cash donations.
Popular Southwest Washington charities
The following organizations are among the most popular southwest Washington recipients of grants from donor-advised funds, according to the Community Foundation:
- Boys & Girls Club for Southwest Washington
- Humane Society for Southwest Washington
- Clark County Food Bank
- New Vancouver Library project in downtown Vancouver
- Peacehealth Southwest Washington Medical Center
- Vancouver Symphony
- Lower Columbia Community Action Program (CAP)