Nancy M. Brown, President/CEO of the Winona Community Foundation, shares her wisdom on fundraising topics through the Winona Post’s Professional Forum. Click on the subjects below to learn more about them.

Brown’s past experience includes Senior Director of Development at Saint Mary’s University; Vice President/Consultant at Thompson & Associates, an independent consultant, Executive Director of Development at Winona Health, and Director of Major Gifts and Advancement Services at Winona State University. She is also an adjunct faculty member in the Master’s in Philanthropy and Development program at LaGrange College in LaGrange, GA.

She received her Bachelor of Arts degree from University of Wisconsin-Madison, and a Master of Science in Administration Degree from University of Notre Dame. She is also a Certified Fundraising Executive.

Community foundations work to encourage and grow charitable giving in a community. They do this with the goal of ensuring the community it serves is vibrant and thriving in many areas including health, safety, education, arts, environment and more.

Unlike most charities, a community foundation does not provide direct services or programming. Instead, they carry out this broad mission by building permanent endowment funds as well as non-endowed funds established by local individuals, families, businesses, or charitable institutions. The funds are invested back into the community’s nonprofits through grants.

They also serve as a resource to donors who may need advice or assistance on how to maximize their charitable giving. This includes answering questions on the best assets to make a gift, how to include charitable giving in estate plans, or how to evaluate a charity. Ultimately, a community foundation is a resource and tool for charitable giving whether directly to or through the foundation.

Well, that depends upon how you define “smart.” Actually, if you have held stock for more than a year, donating it directly to charity is one of the most tax-smart ways to give. Why? Because when you donate stock (or mutual fund shares) directly to charity, you avoid paying capital gains taxes. In effect, you are giving up to 20 percent more than if you sold the stock first and then made a cash donation.

In addition to the tax advantage of giving stock to charity, today’s tax environment makes contributing to a donor advised fund (DAF) extremely attractive. With a higher standard deduction, fewer people are itemizing. By funding a DAF, you can bundle multiple years of charitable giving in one year and direct those gifts over time. If you use an appreciated asset, you benefit from both avoiding capital gains and the ability to take the charitable deduction.

Everyone’s situation is unique, and I am happy to answer questions and provide options on how to maximize your charitable giving, but since I am neither an accountant nor attorney, you should always contact your professional advisor for advice specific to your situation.

A donor advised fund (DAF) is a charitable account held and managed by a sponsoring organization, such as the Winona Community Foundation. A donor contributes money to the fund and receives an immediate tax benefit. The funds are invested and grow tax-free, and the donor recommends grants to the charities they love. Basically, you make one gift and get to keep on giving.

A DAF might be right for you if you like the convenience of making one gift and receiving one tax receipt. It might be because you had a taxable event or you are donating an appreciated asset such as stock or mutual fund shares. It also may be a way to “bundle” multiple years of giving into one year, allowing you to itemize. Family or corporate philanthropy may also be a motivator. DAFs work a lot like a private foundation without all the legal costs, tax filings, and IRS regulations.

If you are curious and want to learn more about DAFs, contact me.

First, everyone’s situation is different. It’s important you talk to your accountant or tax advisor about your specific situation. With that, if you are age 70 ½, have a traditional IRA, and make gifts to charity, using your IRA may be a smart way to make gifts to the charities you love.

When you’re ready to make a gift, contact your IRA administrator to request a qualified charitable distribution (QCD) be made directly to your charity. The benefit of a QCD is you do not report the distributed amount as income while your charity receives the full amount to use toward its mission. If you’re age 72 or older, you have the added benefit of counting the QCD toward your required minimum distribution (RMD).

You can make as many QCDs as you want in a year, as long as the cumulative amount doesn’t exceed $100,000. Because you do not recognize the distribution as income, you cannot use the gift as a tax deduction. Which, if you claim the standard deduction, you would not be able to do anyway.

If you would like to learn more or wonder if your charities qualify, I’m here to help.

Donor advised funds are a highly effective way to manage your charitable contributions while receiving maximum tax benefits. You are smart to be exploring your options. And there are many. However, choosing your community foundation has added benefits that a national organization or large investment firm simply cannot offer.

First, the greatest value of a community foundation is its knowledge of the community. The foundation staff and board members live, work, and volunteer in that very community. This gives them a deeper understanding of the issues, needs, and opportunities where your charitable contributions can have the greatest impact.

Beyond that, by choosing your local community foundation, you have the added benefit of contributing to your community’s economy. Regardless of where you set up a fund, there are administrative fees. When you use the local community foundation, those fees stay local. They support the general operations of the foundation and its community grantmaking.

So, the answer is simple, you already support your local community. The advantage of choosing your local community foundation for setting up your donor advised fund makes good community sense.

Fewer than 1% of American estates pay federal estate taxes. Unless your estate is worth more than $11.7 million for an individual, you will not need to worry about the federal estate tax. Minnesota has a tax on estates valued at $3 million or more.

Even if you are not subject to state or federal estate taxes, if you hold any assets that have “income in respect of decedent” (IRD) such as a traditional IRA, you should be thinking about taxes. Current regulations and how your heirs handle this asset may incur significant income tax liabilities.

But what does this have to do with charitable giving?

Including charitable giving in your estate plan is an effective way to reduce taxes and may help you transfer more assets to your heirs. When it comes to IRD assets, gifting them to charity or establishing a charitable remainder trust, can significantly reduce the taxes paid by your heirs. There are easy and more complex ways to use charitable giving to successfully transfer assets and each estate is unique. The Winona Community Foundation does not offer legal or accounting advice, however, we can help answer your questions and prepare you for a visit with your attorney or other advisor.

The first thing you should ask yourself before making a donation is “do I want to help” this cause. You should not feel obligated, coerced, or forced into making a donation. Giving should make you feel good.

If you are concerned a cause is not legitimate, there are different ways to confirm it. You can always ask the charity for a copy of its IRS letter of determination. That may not be the most convenient. An easier option is to check online resource such as irs.gov’s tax-exempt organization search function, GuiddeStar.org, or nonprofit review sites such as charitynavigator.com and give.org.

These sites tend to focus on larger charities. If you are looking at a local cause, contact your community foundation. Staff there are familiar with the various nonprofits in your community and can tell you if the effort is a public charity eligible to receive tax-deductible contributions. They may even be able to connect you to someone at that organization.

If you are not concerned about a tax deduction, whether a cause is a public charity or not doesn’t matter. What matters is that you care about the cause and have confidence in the people working on it. As I said in the beginning, giving should make you feel good.

An endowment is a fund where contributed dollars are never spent. Instead, the dollars are invested to provide a never-ending stream of income to support charitable work. You will usually find endowments at larger institutions such as universities, hospitals, and foundations, but any nonprofit can have an endowment. Among the many benefits of an endowment is it provides a permanent, predictable stream of income. Because the income is permanent, the charity can depend upon those dollars year in and year out, allowing them to focus on mission instead of fund raising.

If you have been donating to one or more charities during your lifetime, making a gift through your will or estate is a wonderful way to ensure that support continues. Or, if you would like to set up a scholarship to honor a friend or loved one, you can work with your community foundation to create an endowment fund that ensures your generosity continues for generations to come.

Nancy M. Brown, CFRE
President/CEO

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