Donating to a Community Foundation
Community foundations have a long history of supporting local and regional philanthropic efforts in the United States. The Cleveland Foundation, established in 1914, holds the distinction of being the first of its kind in the nation. Today, there are over 750 community foundations operating across the U.S., according to the Council on Foundations.
These foundations function as public charities, concentrating their efforts on supporting nonprofits within a particular region or cause. Their financial backing primarily comes from local donors, and they are overseen by a board of directors or trustees.
Community foundations typically accept charitable donations and give out grants for many projects. These include community services, arts, education, environmental causes, healthcare, and disaster relief within their specific geographic area.
Community foundations have program officers and staff with deep local knowledge. This helps them allocate resources effectively for the greatest impact. They frequently play a pivotal role in uniting individuals who wish to dedicate their time and resources to a shared cause within the community.
Program Types and Management
Community foundations provide a range of programs, such as endowments, scholarships, and field of interest funds. By combining your donations with those of other local contributors, you can support regional charities without the need for the administrative and legal responsibilities of creating a private foundation. Many donors value the chance to connect with fellow philanthropists in their community. The foundation manages the investment and administration of the donated funds.
Some community foundations provide donor-advised funds (DAFs). These funds let donors get a tax deduction right away. Donors can also suggest grants to eligible nonprofits whenever they want.
Community foundations generally accept a variety of assets, including appreciated securities, real estate, and privately-held stock. Donors may also be eligible for tax benefits, such as an immediate deduction of up to 60% of adjusted gross income for cash contributions and 30% for long-term appreciated assets.
The Role and Transformation of Community Foundations
Initially, community foundations were created to serve a defined geographic area, such as a city, state, or region. However, with increased mobility and the rise of the Internet, the concept of “community” has expanded for some foundations. Today, the term may refer to a shared cause or interest, without being tied to any specific location. As a result, many community foundations now allow donors to support national or international organizations.
Compared to national donor-advised fund (DAF) programs, community foundation DAFs often require a higher initial contribution and have higher administrative fees, though they typically cost less than setting up a private foundation. Some community foundations may also have state-specific grant regulations or limitations on family giving plans across generations. Community foundations can be a strong choice for donors focused on supporting a particular region, cause, or organization during their lifetime.
A community foundation’s policies are shaped by its mission. For instance, foundations centered on particular causes will often encourage donors to support those areas. This could lead to more restrictive grant-making guidelines or account succession planning compared to national DAF programs, which are more flexible.
If your family aims to make charitable contributions that extend beyond local or regional boundaries, it’s important to check whether your community foundation offers a DAF option and aligns with your philanthropic goals. If not, creating a donor-advised fund with a national organization that allows greater flexibility in cause and geography might be a suitable alternative.
Bottom Line
Community foundations have always been important in boosting local giving. They offer a reliable way for donors to support causes they care about. As these foundations change to meet the needs of the world, they provide flexible giving options. Whether focused on regional or global causes, community foundations remain a valuable resource for directing charitable contributions where they can do the most good.
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Disclosures:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information
