Community Foundation of St. Joseph County

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Community Foundation Offers New Donor-Advised Pass-Through Funds

New Funds Feature Flexibility, Tax Benefits

Rose Meissner, president of the Community Foundation

The Community Foundation of St. Joseph County now offers a new fund option that can help maximize your tax benefits.

In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). Among its many changes to U.S. tax law, the TCJA nearly doubled the standard deduction amount. For 2018, the standard deduction is $12,000 for individual taxpayers and $24,000 for married couples filing jointly. It’s likely that this change will significantly reduce the number of taxpayers who itemize their deductions.

To help donors maximize the benefit of the higher standard deduction and continue to save taxes on charitable contributions, the Community Foundation has launched a new Donor-Advised Pass-Through Fund option.  

Here’s an example of how a Community Foundation Donor-Advised Pass-Through Fund could help:
 
Each year, John and Jane give $15,000 to their favorite charities. In addition to the satisfaction they get from helping these organizations, they’ve enjoyed the $15,000 charitable income tax deduction they received each year. While meeting with their tax advisor regarding this year’s tax situation, however, they were disappointed to discover that even with this generous amount of charitable giving, they will be just below the threshold for itemizing.  Instead, they’ll take the standard deduction for a married couple and receive no additional benefit as a result of their charitable giving.

One potential solution to this problem is giving through a Donor-Advised Pass-Through Fund.

Taxpayers may find that they can continue to itemize by bundling two or more years’ worth of charitable gifts into one year, exceeding the standard deduction threshold in those years. In alternate years, they can skip charitable donations and support their favorite charities with gifts previously made to their Donor-Advised Pass-Through Fund.
John and Jane’s tax advisor suggests that they set up a Donor Advised Pass-Through Fund at the Community Foundation. They can use this vehicle to double up their annual giving in 2017 with a gift of $30,000 that can then be distributed to their favorite charities over two years. Their 2017 gift of $30,000 will place them above the threshold to deduct their charitable gifts (and other deductible items).  In 2018, they can skip making new charitable contributions and take the standard deduction instead. Their favorite charities will continue to receive their support in 2018 through grants from their Donor Advised Pass-Through Fund.  

Their tax advisor gave them an additional tip. Instead of writing a check for $30,000 to set up their new fund, John and Jane will make a gift of appreciated stock. In addition to their charitable income tax deduction, they now avoid capital gains taxes, too. Best of all, their favorite charities continue to benefit from their steady, generous support.

The basic elements of Donor-Advised Pass-Through Funds include:
 
  • Unlike Donor-Advised Endowed Funds, which are permanently invested and generate earnings that can then be granted to charities, some or all of the balance of Donor-Advised Pass-Through Funds may be granted to qualified charities.
  • The minimum gift to establish a fund is $10,000.
  • The minimum grant that can be made from a fund is $250.
  • The Community Foundation assesses an administrative fee of 1% (1/12% monthly) on all Donor-Advised Pass-Through Funds.
  • Donors may elect to invest fund balances over $10,000.
  • A minimum of 50% of dollars granted from Donor-Advised Pass-Through Fund Funds must benefit charities serving St. Joseph County, IN.
If you think a Donor-Advised Pass-Through Fund might be right for you, contact Rose Meissner at (574) 232-0041 or by email.