As a charitable donor, your client may wish to create a vehicle that allows them to maintain long-term involvement with their charitable assets. The Foundation for MetroWest enables the philanthropically minded to secure maximum tax deductions, involve family members, focus grantmaking, and obtain visibility for their giving.
Many individuals have converted their private foundation to a Donor-Advised Fund. It is a simpler, less expensive alternative to a private foundation.
The advantages of establishing a Donor-Advised Fund (DAF) compared to a private foundation include greater tax benefits, fewer administrative requirements, no minimum annual required payout, and the potential for anonymity. Additionally, fundholders receive grantmaking assistance from staff who have deep knowledge of the more than 600 (this should be 2,000) nonprofits in MetroWest. We handle the administrative, accounting, legal, and reporting requirements, so your clients can focus on the joy of giving. Many individuals have also converted their private foundation to a Donor-Advised Fund. It is a simpler, less expensive alternative to a private foundation and provides a lot of the same benefits.
|Topic||Foundation for Metrowest||Private / Family Foundations|
|Establishing a Fund||A fund at the Foundation for MetroWest can be established quickly and efficiently with a simple document. Administrative fees are 1% to 1.5% of the fund’s annual market value.||Establishing a new foundation requires extensive legal, accounting, and operational expenses on an ongoing basis.|
|Tax Treatment of Cash Gifts||Tax deduction of up to 50% of Adjusted Gross Income (AGI).||Tax deduction of up to 30% of Adjusted Gross Income (AGI).|
|Tax Treatment of Appreciated Publicly Traded Securities||Tax deduction of 100% of fair market value up to 30% of AGI.||Tax deduction limited to fair market value up to 20% of AGI.|
|Tax Treatment of Appreciated Closely Held Stock||Tax deduction of 100% of fair market value up to 30% of AGI.||Tax deduction limited to cost basis up to 20% of AGI.|
|Tax Treatment of Real Estate Gifts||Tax deduction of 100% of fair market value up to 30% of AGI.||Tax deduction limited to cost basis up to 20% of AGI.|
|Tax Exempt Status and Required Payout||The Foundation for MetroWest is a 501(c)(3) public charity and is fully tax exempt.||Private foundations are subject to excise taxes and annual 5% payout requirements.|
|Annual Tax Returns||Individual funds are not required to file. The Foundation for MetroWest prepares and files all tax reports to the IRS and obtains an annual independent audit.||Must file annual Federal 990-PF and supporting schedules, which indicate staff salaries, investment performance, fees, etc. Trustees must perform, contract, or hire staff for these services.|
|Investments||A diversified portfolio and economies of scale offer greater cost-efficiencies and minimize risks. The Foundation for MetroWest works with professional money managers. Our Investment Committee provides experienced oversight and stewardship of the Foundation’s assets.||Selection of investment strategies and professional fund advisors can become a very time consuming responsibility for a private foundation’s Board of Trustees.|
|Expertise||The Foundation for MetroWest provides expertise to donors on a wide range of gift management, finance, and fund administration issues.||Must hire staff or board members or carry out administrative tasks on their own.|
|Grant Administration||Our professional staff are available to assist donors with grant administration, research, and program evaluation to ensure maximum community impact.||Requires extensive time to review proposals, investigate community needs, confirm status of grantees, and evaluate previous distributions.|
|Accountability||The Foundation for MetroWest obtains an independent audit each year. Publication of an annual report, public disclosure of grants, and thoughtful selection of Board members ensures funds are used in the communities’ best interests.||Laws and regulations governing private foundations differ greatly from those of public charities and may require expensive specialized legal and finance expertise.|
|Flexibility||As a public charity, the Foundation for MetroWest’s organizational structure is purposely designed to allow greater flexibility to respond to and meet emerging needs in the community.||Expensive and lengthy legal proceedings may be required to change the purposes of a private foundation.|
|Privacy||Individual donors or grants can be kept private. If the donor wishes, the Foundation for MetroWest can serve as a buffer between the donor and grant-seekers.||Required to file tax returns on donations, grants, investment fees, staff salaries, etc. These are public records and are compiled into grant-seeker directories.|
Resource: Council on Foundations Listserve
If your client is considering terminating a private foundation, the Foundation for MetroWest qualifies as a public charity to receive the assets. Your client can create a permanent named fund at the Foundation for MetroWest and continue charitable giving without the tax and administrative burdens of a private foundation.
Private foundations often find it difficult at the end of the year to make their 5% mandatory grant payout or, at times, prefer to make their grants anonymously. You can help them meet the requirement in a single, immediate transaction through a grant from their foundation to establish a Donor Advised Fund at the Foundation for MetroWest. A Donor Advised Fund provides the flexibility to deliberate on their grant-making recommendations or make those grants anonymously.
Note: Policies and laws governing charitable gifts are subject to change. Examine carefully the policies that apply when you create a fund or foundation. The Foundation for MetroWest does not render legal, accounting, or financial advice. Always discuss your plans with your attorney, accountant, or financial advisor.