Working to Help Your Clients with Community
By Buffy Beaudoin-Schwartz
In the course of doing business, sooner or later you will be called upon
to help clients with their charitable giving.
Your clients may be looking for the most tax-advantaged ways to contribute
to charitable causes that they hold dear. They might have questions about specific
charitable-giving vehicles, such as charitable remainder trusts. And they may
want to know how to capitalize on the potential for contributing retirement
funds to charity.
Wouldn't it be great if there were one place that you could go to get all
the information that you and your clients need about charitable giving? Well,
in Maryland, there isn't just one place – there are ten.
Maryland has ten community foundations, serving citizens in 14 counties and
Baltimore City. Each Maryland community foundation is a nonprofit, community
corporation created by and for the people of Maryland. Their mission is to
help donors make a positive impact on their community. Community foundations
offer a variety of giving tools to help people achieve their charitable goals
and have expertise on issues and trends in charitable giving instruments and
the investments of community foundations? Typically, community foundations
employ a number of local trust companies and investment firms to handle their
investments. A volunteer Investment Committee made up of business and civic
leaders monitors these investment returns carefully and works with the investment
advisors to ensure the continued growth of each permanent fund in the community
tax advantages of a community foundation over a private or family foundation? Community
foundations are public charities under tax laws. This offers some advantages
to donors over private foundations. For example, gifts of cash and ordinary
property to a community foundation are deductible up to 50 percent of adjusted
gross income (AGI). Gifts to private or family foundations are deductible
only to 30 percent of AGI. Similarly, gifts of appreciated property to community
foundations can be credited for 30 percent compared with 20 percent for a
private foundation. There are no excise taxes on community foundations as
there are on private foundations and community foundations are not required
to distribute a certain percentage each year.
kinds of charitable instruments can my clients access through community foundations?
• Outright Gift. Your client
can make a gift of cash, stocks, bonds, real estate or other assets to your
community foundation. Their gift qualifies for maximum charitable benefit under
state and federal law.
• Bequest. Your client
can designate a gift or portion of his/her estate to the local community foundation
and, in some cases, receive a substantial reduction in federal gift and estate
• Gift Annuity. Your client
can make a gift of cash or property to the community foundation now, get immediate
tax benefits and ensure that he/she or a loved one receives fixed quarterly
or annual income payments for life.
• Charitable Remainder Trust. Your
client can place cash or property in a trust that pays annual income to him/her
(or another named beneficiary) for life. After your client's death, the remainder
of the trust transfers to the community foundation and is placed in the charitable
fund the client selected. The client receives income tax benefits the year
he/she established the trust.
• Charitable Lead Trust. Your
client can place cash or property in a trust that pays a fixed amount to the
community foundation for the number of years your client selects to support
the charitable causes of his/her choosing. Once this period ends, the assets
held by the trust are transferred to the beneficiaries named by your client.
In some cases, the client receives a substantial reduction in federal gift
and estate taxes.
ethical for me to refer clients to community foundations? Sometimes attorneys
and advisors question whether it is ethical for them to refer clients to
community foundations. After all, by doing so, aren't you advocating a particular
charitable cause? You are not, because of the fundamental difference between
community foundations and other charities.
Community foundations are set up for people to give through them; they are
not the end-users of charitable dollars, but rather are the go-betweens for
donors and nonprofits. They work with your clients to help them give to charities
and meet their tax-planning goals and do not dictate the type of gifts their
donors can make.
By making a referral to a community foundation, you are not advocating a
client give to organizations outside of the community where the community
foundation is located? Yes. Community foundations can channel donor distributions
anywhere in the country (and even in some cases outside the U.S.) as long
as recipients are nonprofit organizations qualified as 501(c)(3).
can I get more information? For general information or to link to your
local community foundation, go to www.mdcommunityfoundations.org.
Buffy Beaudoin-Schwartz is Director of the Maryland Community Foundations