SMART PHILANTHROPY, page 4
SMART PHILANTHROPY
How to convert your private foundation into a donor advised fund
at the Fairfield County Community Foundation
An Easier Way to Manage Your Private Foundation
When you convert your private foundation into a donor
advised fund at the Fairfield County Community Foundation, you can continue your philanthropy yet be freed from
the administrative demands.
You can protect your privacy by giving anonymously. You
will enjoy greater tax advantages. And you gain access to
our philanthropic expertise so your giving becomes more
meaningful, effective—and easy.
Converting your private foundation into a donor advised
fund is straightforward. We’ll help you navigate the process,
which includes these steps:
Federal requirements (Internal Revenue Code section 507)
1. Transfer your private foundation net assets to a public
charity, such as the Fairfield County Community Foundation.
Before asset distribution, pay all foundation invoices, estimated accounting fees and any other administrative costs.
You can distribute all or part of the assets to fund your new
donor advised fund by wire transfer, check or DTC delivery.
We guide you in establishing and naming your donor advised fund at the Fairfield County Community Foundation.
Our straightforward process involves just one document.
2. File final tax returns. Your private foundation is operationally terminated upon final distribution of all net assets;
however, you are required to file a final IRS Form 990-PF
for the taxable year in which the distribution was made.
State of Connecticut requirements (some may overlap
federal requirements)
• If the charitable corporation (private foundation) has no
members entitled to vote, a dissolution of the charitable
corporation must be approved by a majority of the initial
directors or, if those directors have not been appointed,
by two-thirds of the incorporators.
• If the charitable corporation has members entitled to
vote, the charitable corporation’s board of directors may
propose dissolution for submission to those members.
The board of directors must approve the dissolution and
recommend dissolution to the members entitled to vote.
The proposal to dissolve must be approved by either twothirds of the votes cast by members entitled to vote or, if
any class of members is entitled to vote separately as a
class on the proposal, at least two-thirds of the votes cast
by the members of each class (so long as the bylaws do
not require a greater than two-thirds vote).
• After dissolution is approved, the charitable corporation
must file a Certificate of Dissolution with the Secretary
of State, which must include the following:
º The name of the corporation
º The date the dissolution was authorized
º If dissolution was approved by the members, a statement that the proposal to dissolve was duly approved
by members
º If dissolution did not require member approval, a
statement to that effect
• A corporation is dissolved upon the effective date of
its Certificate of Dissolution. A dissolved corporation
continues its corporate existence, but may not carry on
any activities except those appropriate to wind up and
liquidate its activities and affairs. During the dissolution process, a plan should be adopted providing for the
distribution of assets to another corporation or trust
of similar charitable purpose to that of the dissolving
corporation.
• A dissolved corporation may dispose of known claims
against it in writing any time after its effective date. The
dissolved corporation may also publish a notice of its
dissolution and request that persons with claims against
the dissolved corporation present those claims in accordance with the notice.
The information in this document is not intended to provide
specific legal or financial advice and should not be relied upon as a
substitute for legal advice. The Fairfield County Community Foundation encourages you to seek professional legal, estate planning
and financial advice before deciding on a course of action.
383 Main Avenue, Norwalk, CT 06851-1543 • Ph 203.750.3200 • Fax 203.750.3232 • www.fccfoundation.org
3 options for simplifying your philanthropy and
retaining the joy of giving
Option 1: Convert your private foundation into a donor advised
fund at the Fairfield County Community Foundation
How you benefit
• You experience the joy of philanthropy while we handle the administrative responsibilities, including due diligence, record keeping and reporting
• You can name your fund
• You can involve your children and grandchildren, and name them as fund advisors
and successors
• You can give anonymously
• We invest your fund according to our investment policy to protect principal, generate
current income and capital growth
• You can recommend an investment advisor when the fund is $1+ million
• You are freed from the annual 5% payout requirement—there is no such requirement
• You can recommend grants to any qualified public charity in the United States, including those operating overseas—and in your community
• Once you recommend grants from your donor advised fund, we handle all administrative tasks, including due diligence, and make the grants in your fund’s name
• You receive a quarterly donor statement and 24/7 online access detailing all fund activity
• When your fund is $250,000 or more, you are paired with a staff donor relationship
manager who will support your grantmaking
• When you want to make a difference close to home, your relationship manager will
inform you of community philanthropic strategies, introduce you to local nonprofits
working in your priority areas, and alert you to local giving opportunities aligned with
your interests.
How to get started
Contact us so we can meet with you and discuss your philanthropic goals and desires. When
you decide to convert your private foundation into a donor advised fund at the Fairfield
County Community Foundation, we will guide you through the process.
We recommend that you consult your legal, tax or financial advisor. Ultimately, your private
foundation’s assets will be transferred to the donor advised fund you establish and name.
You can continue your philanthropy and experience the joy of giving back—without any of
the drudgery.
Continued on page 2
10 Triggers for
Converting a Private
Foundation into a
Donor Advised Fund
1. The managing and reporting
is too demanding
2. Keeping up with government regulations is a burden
3. It’s too difficult to meet the
annual 5% payout requirement
4. You want the option of anonymity
5. Upkeep is too costly
6. You want to qualify for larger tax deductions in the
future
7. You want access to grantmaking experts
8. Founder is ill or deceased
9. Family members and
trustees are not available to
participate
10.Your advisor is leaving
Solution Details
Please see a comparison chart
on page 3, and “How to convert
your private foundation” on
page 4.
383 Main Avenue, Norwalk, CT 06851-1543 • Ph 203.750.3200 • Fax 203.750.3232 • www.fccfoundation.org
SMART PHILANTHROPY, page 2
SMART PHILANTHROPY, page 3
Three options to simplify your philanthropy, continued
In Their Own Words
“When our father became
ill, we wanted to simplify
my parents’ financial situation. We could continue
the foundation as a family,
disband it, or incorporate
it into the Fairfield County
Community Foundation.
We turned it into a donor
advised fund at the community foundation.
It is so helpful to have
them recommend local
organizations which have
been visited and approved
by staff members in the
know.
It’s hard to assess which
nonprofits have the most
impact, are the most efficient, and likely to be
around for the long haul.
The comparative knowledge is very attractive, and
they take care of the paperwork. It simplifies things.”
—Ginny Keesham
Donor Advised Fundholder
“What was hardest for me
was sitting at my desk. I
never expected the paperwork or the filing. It got to
the point when managing
our foundation was more of
a ‘should’ than a pleasure.”
—Anonymous
Donor Advised Fundholder
Option 2: Donate your annual 5% payout to a donor advised fund
you establish at the Fairfield County Community Foundation
Sometimes it’s a challenge to meet the annual 5% payout requirement. We can help.
Compare a Private Foundation to a Donor Advised Fund at the Fairfield County Community Foundation
Private Foundation*
Donor Advised Fund at the Fairfield
County Community Foundation
Set-Up Considerations
Costs
Approx. set up costs of $5,000 to $10,000, and
$2,000 to $3,000 minimum for ongoing accounting None
and record-keeping
Time Frame
1 to 2 months, IRS approval up to 1 year
Immediate
Recommended Minimum
Contribution
At least $1 million recommended to justify startup
and maintenance costs
$25,000
Cash
Deduction of up to 30% of AGI
Deduction of up to 50% of AGI
Publicly Traded Securities
FMV deduction of up to 20% of AGI
FMV deduction of up to 30% of AGI
Closely Held Stock/
Real Estate
Deduction is limited to the donor’s cost basis or
FMV, whichever is lower, up to 20% of AGI
FMV deduction of up to 30% of AGI
Administrative Services:
Must be performed by board members or officers
(“foundation managers”) or any hired staff
Services covered by an annual fee of 1.0% of FMV
of assets (minimum $25,000); reduced fee structure above $5 million
Investment Management:
Responsibility of foundation managers with assistance from a professional investment manager
Professional investment management provided.
Fundholder can recommend an investment advisor when the fund is $1 million
Tax Status:
Your private foundation can meet all or part of its 5% annual payout with grants to existing
funds at the Fairfield County Community Foundation. Your foundation’s support will make a
difference in your own community by helping to:
501(c)(3) private foundation; not as favorable as
public charity status
501(c)(3) public charity status as a component
fund of FCCF
Tax Return & Audits:
Must be performed by foundation managers or a
professional accountant
Responsibility of FCCF
• Close the achievement gap in local urban schools to give low-income children a better
chance to reach their potential
Private Foundation Excise Taxes:
1% to 2% excise tax on net investments income; substantial excise taxes imposed for failure to meet payout
None
requirements and for engaging in certain prohibited
transactions such as self-dealing
Payout Requirement
Annual payout of at least 5% of foundation assets
regardless of foundation’s income for charitable
purposes
No required payout
Donor Involvement
Donor appoints board, which controls investments
and grantmaking
Donor recommends grants to FCCF for distribution
to qualified 501(c)(3) organizations; FCCF oversees
grant administration and investment
Grantmaking Support
Grantmaking activities must be conducted by
foundation managers or hired staff
FCCF’s staff can help identify and assess grantees,
advise on community needs and verify 501(c)(3)
status of grantees; educational events and consultation available
You can establish and name a donor advised fund at the Fairfield County Community
Foundation, and place all or part of the required payout in the fund. Because your private
foundation’s contribution to the Fairfield County Community Foundation is a “qualifying distribution,” it counts toward the 5% payout. Your private foundation can make just one grant
(and issue just one check).
When you establish a donor advised fund with us, you enjoy these benefits:
• Grants awarded from the donor advised fund can be made anonymously
• You can recommend grants to any qualified public charity in the United States, including
those operating overseas—and in your community. • Once you recommend grants to be made from your donor advised fund, we handle all
administrative tasks, including due diligence, and make the grants in your fund’s name
(or anonymously, if you prefer)
• You receive a quarterly donor statement or have 24/7 online access detailing all fund activity
• When your fund is $250,000 or more, you are paired with a staff donor relationship manager who will support your grantmaking
• We invest your fund according to our investment policy to protect principal, generate current income and capital growth.
Option 3: Make a difference in your community with your annual
5% payout
• Increase affordable housing so young adults, mid-wage employees and seniors can remain
in the county
• Provide low- and moderate-wage, single adults caring for dependents with the education,
training and skills they need to better support their families
• Ensure that hundreds local nonprofits have access to high-quality and affordable professional development that strengthens their leadership and improves their effectiveness
• Address changing needs in Fairfield County by supporting our region’s most outstanding
and effective nonprofit programs through our unrestricted grantmaking.
How to learn more
To explore your options, please contact Fiona Hodgson, Vice President of Development and
Marketing, at [email protected] or 203.750.3200.
Income Tax Deductions
Administration
Tax Considerations
*The Internal Revenue Code imposes a number of requirements and restrictions on private foundations and their managers. Donors frequently serve as foundation managers, which is a significant responsibility.
Definition of Terms: FCCF = The Fairfield County Community Foundation, AGI = Adjusted Gross Income, FMV = Fair Market Value