Comparison Of Planned Gifts

To facilitate your client discussions, we’ve prepared a summary of the advantages and disadvantages of bequests, annuities and trusts. Starting a gift takes as little as $5,000, and there are a wide variety of tax benefits to giving through a Foundation.

Bequest Charitable Gift Annuity Charitable Remainder Trust Charitable Lead Trust
Revocable Yes No No No
Appropriate assets that can be used Virtually any Typically cash or marketable assets Virtually any Virtually any
Tax benefits possible Estate Income and estate Income and estate Possibly income and estate (depending on how the trust is structured)
Will this gift create a stream of payments to one or more individuals? No Yes (at a percentage determined by the age of the recipients) Yes (at a pre-negotiated percentage) No (However, this gift does allow for the transfer of property to one or more recipients with possible tax savings.)
Can additional gifts be made? Yes No Yes (only in the unitrust type) Yes (only in the unitrust type)
Age limits to creating None Payment beneficiaries must be at least 60. Payment beneficiaries must be at least 60. Trust may also be based on a term of years. Calculating ages must be at least 60. Trust may also be based on a fixed term of years.
Fees/applicable costs (other than personal legal expenses) None None Up to $1,000 for administrative purposes Up to $1,000 for administrative purposes


How a Named Community Foundation Fund Compares to a Private Foundation

Private foundations have grown in popularity among affluent donors, who receive income tax benefits during their lifetime and estate tax benefits at their death. But as appealing as a private foundation can be, establishing a named fund through The Community Foundation can offer far more. We assure a donor’s privacy, reduce costs and administrative headaches, and deliver significantly greater tax benefits. Take a look at our comparison chart below to learn more.

Community Foundation Fund in Your Client’s Name Private Foundations
IRS charitable status C501(c)(3) & 509(a)(1) (public charity) 501(c)(3) (private foundation)
Tax treatment of cash gifts Deductible, up to 50 percent of adjusted gross income (AGI). Deductible, up to 30 percent of AGI.
Tax treatment of gifts of appreciated publicly-traded securities Full market value deductible, up to 30 percent of AGI. Full market value deductible, up to 20 percent of AGI.
Tax treatment of closely held stock or real estate Full market value deductible, up to 30 percent of AGI or cost basis up to 50 percent of AGI Deduction limited to donor’s cost basis, up to 20 percent of AGI.
Deduction carry-over available Five additional years Five additional years
Ease of establishment, incorporation and tax exemption No corporation or trust required. Automatically covered by the Community Foundation’s tax exempt status Corporation or trust required. Must apply to IRS for tax-exempt status using Form 1023. (May take six months or longer to process)
Excise tax on investment income and net realized capital gains None Generally 2 percent; may be reduced to 1 percent under special circumstances.
Self dealing rules Not Applicable Strict prohibition under Internal Revenue Code (IRC) Section 4941.
Minimum payout requirements None. Can accumulate toward a sizable project or grant or reduce giving in a year when returns are low to protect principal. Yes. Minimum 5% of average asset value each year under IRC Section 4942. Must meet the minimum distribution rules whether or not the foundation’s investments earn that amount in a given year.
Donor and family can choose to be involved in grantmaking Yes Yes
Separate annual IRS tax return required No Yes
Privacy Yes. Individual fund assets size, gifts and grantmaking are kept private and confidential. No public disclosure is required. Donors are generally recognized for grants disbursed, but can remain anonymous with Community Foundation serving as the buffer. No. Private foundations are required to file detailed tax returns on grants issued, investment fees, trustee fees, staff salaries, asset size, etc. and to publish a notice that the return is available for public viewing (IRS Form 990-PF). These public records are often compiled into grant-seeker directories.
Investment, accounting, audit and tax returns The Foundation handles all investments and accounting, files annual tax return and provides annual independent audit. Trustees must perform, contract or hire staff for these services.
General administration Community Foundation handles all financial and administrative management. Trustees must perform, contract or hire staff for these services.
Grant administration If donor wishes, Community Foundation can identify potential recipients, investigate applicants, make grant payments and monitor performance. Trustees must perform, contract or hire staff for these services.
Insurance Advisors to funds are covered by Community Foundation liability and office insurance policies. Only fundraising events and other activities will require insurance. Liability insurance for directors and officers, employee bonding, and office insurance must be purchased.