Don't Overlook These Powerful Charitable Planning Tools
Designated funds and field-of-interest funds may not always be top of mind when you are developing philanthropy plans for your clients and their families, but they are extremely valuable tools in certain circumstances and it’s important to be aware of what the terms mean.
A field-of-interest fund at the community foundation allows your client to permanently support a cause they care deeply about. For example, a field-of-interest fund can be established to support research for rare diseases, to support organizations that assist homeless families in getting back on their feet, to enable art museums to acquire works that celebrate the region’s diversity, and more. The knowledgeable team at Akron Community Foundation distributes grants from the field-of-interest fund according to your client’s wishes. When selecting the name of the fund, your client can choose to use their own name (e.g. Samuels Family Fund), maintain anonymity (e.g. North Star Fund for the Arts), or something else altogether (e.g. Bettering Our World Fund).
A designated fund at the community foundation is a good choice for a client who knows they want to support a particular charity or charities. Distributions are spread out over time, which helps with the charity or charities’ cash flow planning. Your client also benefits from a larger charitable tax deduction in the current year when the client’s tax rates may be high, rather than spreading it out over future years when tax rate projections are lower. The client specifies the charities to receive distributions and chooses a name for the fund.
Perhaps one of the most compelling reasons to encourage a retirement-age client to consider establishing a field-of-interest fund or a designated fund is to take advantage of the qualified charitable distribution planning tool. As an advisor, you are well aware that clients who own IRAs must take required minimum distributions each year beginning at age 72*, regardless of whether they need or want the income. These distributions often cause an increase in the client’s income taxes.
A qualified charitable distribution permits a client to transfer up to $100,000** (or $200,000 for married couples) from an IRA to a qualified charity instead of taking a required minimum distribution, thereby avoiding the income tax hit. Although the IRS does not permit qualified charitable distributions to donor-advised funds, charities eligible to receive a client’s qualified charitable distribution do include designated funds and field-of-interest funds at the community foundation.
To learn more about your clients' charitable fund options, contact Laura Lederer, senior director of development and advisor relations, at 330-436-5611 or email@example.com. We’re always available to answer your questions about philanthropy or to schedule a personal consultation with you and your clients – all at no cost.
*The required minimum distribution age increased to 73 as of Jan. 1, 2023.
**Beginning in 2024, the annual limit for QCDs will be indexed for inflation.
This content is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.