How to Create a Fund

Creating a permanent fund at the San Angelo Area Foundation is a simple and flexible means of accomplishing your charitable objectives. Your gift affords the maximum tax deduction, and allows you to make a difference today and always through a lasting legacy for our area. Remember, the Foundation is a Way to Give, not a place to give.

Review the material below to help you "answer some of your questions"

Then contact us and we will work with you or your advisor to craft a fund agreement that carries out your philanthropic desires.



Three simple steps to make a Gift that never stops Giving...

  • Choose a name for the fund
    A fund's name stays with it forever. Whenever a grant is made from a fund, it is recognized by name. Thus, donors should give careful thought to their fund's name.  Possibilities and examples of each include:

    • The name of the person(s) establishing the fund (the Amy & John Mark McLaughlin Donor Advised Fund)
    • A family name (the Stephens Family Fund)
    • A favorite cause (the Tom Enoch's Fund for St. John's Episcopal Church)
    • A memorial (the Travis Scott Armstrong Memorial Scholarship Fund)
    • An anonymous fund (the San Angelo Community Fund)

  • Focus your fund on the impact you want to make

    Donors may designate their funds in one or more of the following ways:

    • Unrestricted: Preferred by donors who want their fund always to address the community's highest priorities. The Foundation urges all donors to designate at least a portion of their fund for unrestricted purposes to help ensure resources for special projects and unanticipated needs in the future.
    • Field of Interest: Used by donors who want to support an area of special interest, such as education, the arts or a particular geographic area.
    • Designated: The choice of donors who want their fund always to support specific charitable cause(s).
    • Agency Endowment: Initiated by agencies and their donors to serve as an endowment supporting the organization's work.
    • Donor Advised: Popular with donors who want to play a significant role in decisions about the use of fund proceeds. Advised fund donors make grant recommendations to the Foundation Board of Directors.  
    • Supporting Organization: An appealing alternative to private foundations. A supporting organization has its own board, letterhead, checkbook and investment manager, but qualifies for the preferential tax treatment afforded community foundations. The purposes of a supporting organization must be compatible with the San Angelo Area Foundation, and a majority of its board (not necessarily its officers) must be appointed by the Foundation. 

  • Choose the best way to make your gift and leave your legacy

    • Bequests: Establish a fund through your will.
    • Charitable remainder trusts: The donor and/or other named beneficiaries retain a life income and earn immediate and long-term tax benefits. Upon termination, assets go to a charitable fund named and designed by the donor. Using assets remaining in IRAs to create charitable unitrusts can offer significant tax advantages to larger estates.
    • Charitable gift annuities: You can establish a gift annuity by transferring cash or appreciated properties, such as stock, as an irrevocable gift to the San Angelo Area Foundation. The Foundation deposits these funds in a professionally managed account. Upon your deaths; the amount remaining in your gift annuity is distributed between the Discretionary Fund of the San Angelo Area Foundation, and endowments to the charities of your choosing, established at the San Angelo Area Foundation. The Foundation distributes a guaranteed, fixed payment to you for as long as you live. The amount you receive each year is determined by your ages; the older a donor is the higher payout he or she receives.
    • Charitable Lead Trusts: Like a charitable remainder trust, lead trusts benefit the donors and the charities of their choice. With a lead trust, the donors establish an irrevocable fund which distributes cash to their favorite charities for a term of years (normally, 5-20 years). When the trust expires, the assets within the trust revert to the donors (or their selected beneficiaries). Donors especially like charitable lead trusts because they have the opportunity to observe how their gifts are being used (as opposed to the charity not receiving funds until the donors have died). Donors can establish a donor advised endowment fund at the San Angelo Area Foundation and advise the board of directors how to grant the earnings. In addition, donors who wish to leave their heirs an asset expected to appreciate significantly can use a charitable lead trust to achieve very favorable tax treatment. The asset's original transfer tax is discounted because a charitable partner receives income from the fund for several years. (The longer the charity receives a distribution, and the higher payout percentage it receives, the higher discount the trust receives.) Furthermore, the assets within the trust can grow without additional transfer tax implications because the tax valuation is determined only at the time the property is placed in a trust
    • Insurance: Name the San Angelo Area Foundation as owner and beneficiary of an insurance policy to be used to establish a future charitable fund. The donor earns an immediate tax deduction and any additional premium payments are deductible, as well.

 

Gifts that go to work immediately:

  • Cash
  • Securities: For both closely held and publicly traded stocks, the charitable deduction is based on full market value. Capital gains taxes on appreciation are also avoided.
  • Real Estate: If held for more than a year, it usually provides the same benefits as gifts of securities.


Additional Factors
Keep these ideas in mind when considering the creation of a fund:

Tax-advantages - Most people know that tax laws provide considerable incentives for individual charitable giving. But the kind of deduction you get depends on 1) the type of organization you contribute to, 2) the type of gift you make, 3) when you make the gift. Public charities, like community foundations, and other 501c3 organizations offer the maximum tax deduction available, including 50% of Adjusted Gross Income for cash contributions, fair market value for gifts of securities, and 30% for gifts of property. Foundations like The San Angelo Area Foundation enable donors to set up a charitable fund that supports the specific causes they care about. Establishing a donor advised fund allows you to give when it's convenient and receive a tax deduction at the time of the gift. You can recommend grants from your fund at any time. Donors can give their fund a name and purpose and can build a fund on an installment plan.

Gift of securities rather than cash - One way to make charitable giving contributions at the lowest after-tax cost is by donating appreciated securities. You can generally get a deduction on the current market value of the stock and avoid paying taxes on the capital gain you would have realized if you had sold the stock and donated the proceeds.

Gifts of tax-deferred assets - IRA's, annuities or retirement plan accounts can benefit a nonprofit beneficiary while protecting your financial position. Special rules can apply for these types of gifts and usually triggers an income tax liability as if you had made a withdrawal. You get some amount of deduction for you gift, but it will not usually protect the entire amount. However, if you name a nonprofit as a beneficiary of a tax-deferred account upon your death you avoid the potential for "double taxation" (income and estate taxes) on the portion you give.

Planned giving tools - Planned giving can help strengthen your charitable giving while benefiting your personal and business financial planning position. A Life Estate Agreement, Charitable Gift Annuities, Charitable Remainder Trust, and Charitable Lead Trust are all possibilities. With a charitable trust, you can receive estate and or income tax deductions by donating either the income or the remainder interest to a nonprofit organization, while keeping the other part for yourself or your heirs.

Seek advice from a tax professional or financial advisor - Tell your attorney or professional advisor about your charitable giving interests. With their help you can structure your giving so that it accomplishes the most for the community, your heirs and yourself. As always, you should consult your tax advisor before you make any tax related investment decisions.

Fund Minimum - The Foundation will accept any amount given towards any fund. However, the minimum amount to create a new named endowment fund is $50,000. The Foundation will work with donors to allow funding to occur over a longer period of time, if needed, in order to create a permenant legacy. Contact us to learn more about creating your legacy.



For information about planned giving, feel free to contact the Foundation office, or download our
Planned Giving Booklet
(PDF format; size - 230kb)