As of March 31, 2021, according to data collected by the Federal Reserve, Americans in their 70s and older had a total net worth reaching almost $35 trillion. By 2042, an estimated $70 trillion will change hands, including an estimated $9 trillion flowing to charities, according to research conducted by Cerulli Associates.
Determining the best charitable giving vehicles to achieve your community goals is important, particularly evaluating the potential role of a donor-advised fund or private foundation.
Here are key points to keep in mind:
- A donor-advised fund at the Community Foundation of North Central Massachusetts costs nothing to set up, and ongoing fees are minimal.
- A donor-advised fund can be created quickly–within a week or even days. A private foundation, by contrast, requires establishing a legal entity through state and IRS filings.
- Donating hard-to-value assets to a donor-advised fund delivers better tax benefits (deduction of fair market value) than a gift of the same assets to a private foundation (deduction of cost basis).
- You can deduct a greater portion of AGI (e.g., cash deductible up to 60% of AGI) with a gift to a donor-advised fund than with a gift to a private foundation (e.g., cash deductible up to 30% of AGI).
- Ongoing operations of a donor-advised fund through the Community Foundation are very easy, with no tax filings required.
- Sometimes, both a private foundation and a donor-advised fund are useful tools to meet your charitable giving goals. Our team can help you develop a structure that maximizes the benefits of each vehicle within an overall philanthropy strategy.
We regularly work with professional advisors and their clients to establish “shell funds” to receive bequests after the client passes away. A shell fund allows you to describe charitable intentions, including naming advisors and suggesting nonprofits to receive fund distributions, to guide your heirs through your charitable legacy. You can name the fund, and even provide that our board of directors works with advisors to make grants and evaluate impact. A shell fund agreement can be modified any time before your death.
Reach out if you have any questions or if we can help.