Success Stories
The following
stories illustrate how others benefit from their Donor Advised Funds:
1. Simple
Set-up
2. Tax Advantages
3. Grant making on a Personal Timetable
4. An Alternative to a Private Foundation or a
Supporting Organization
5. A Legacy of Family Philanthropy
6. A Parenting Tool
7. The Fund Integrates Well With Other Planning
Strategies
8. Anonymity
9. Continuing Involvement
1. Simple Set-up
To set-up her Donor Advised Fund, Mary Ulster completed AEF’s simple,
four-page application. AEF made the arrangements with her financial advisor
to establish an investment account for the benefit of Mary’s Fund.
The account was established in a matter of hours and the electronic transfer
of funds from Mary’s investment account to her Fund account was
accomplished shortly thereafter. The mechanics of opening, funding and
utilizing the Fund are straightforward and similar to establishing a retail
investment account. Mary did not have to learn about new products or services.
And she did not have to incur any expense for the set-up.
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2. Tax Advantages
Bob Carpenter wanted to establish his Fund as a family foundation and
contribute half of the closely held shares in his family’s business
to his Fund. Also, he preferred to have these shares held by his Fund
for an indefinite period. He chose AEF's program because of its willingness
to accept and hold the stock. Because of AEF’s status as a public
charity, Bob could take an immediate income tax deduction on the fair
market value of the shares contributed. Had he elected to establish a
private foundation, his tax deduction would have been limited to his cost
basis on the shares contributed. Also, because of annual limits on deductions
as a percentage of adjusted gross income, Bob is taking his income tax
deduction more quickly than if he had selected the private foundation
alternative.
On Bob’s
recommendation at a later date, the stock was sold by AEF with no capital
gains tax liability to the Fund or to Bob personally.
Assets in
his Fund are not subject to estate taxes. Since invested assets of the
Fund continue to appreciate tax-free, more funds will be available to
support his favorite charities in the future.
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3.
Grantmaking on a Personal Timetable
Ray and Martha Hildebrand have reduced their year-end pressures by separating
the typical two-step decision-making process of obtaining a tax deduction
and selecting charities to support into its individual parts. They now
can take tax deductions when they make contributions to their Fund without
having to decide at that time what charities they want to support. They
say that this flexible grant making feature helps reduce the typical year-end
stress.
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4. An Alternative to a Private Foundation or a Supporting Organization
Steve Kraft
sees his Donor Advised Fund as simpler and more cost effective to establish
and operate than a private foundation or a supporting organization. AEF
provides record keeping, tax reporting, and fiduciary accountability.
This allows Steve and his wife to concentrate on working with their children
to make their community a better place in which to live through philanthropy.
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5.
A Legacy of Family Philanthropy
John and
Lucile Lund want their Lund Family Foundation to become a vehicle of family
philanthropy over successive generations. The Lunds specified their three
children as successor advisors after they are gone so the Fund can go
on with family involvement in the future. From time to time, other family
members and friends contribute to the Lund Family Foundation and obtain
tax deductions by doing so. The Lunds like the fact that AEF customizes
special letterhead bearing the name of the Lund Family Foundation for
use in distributing grant checks to the charities.
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6.
A Parenting Tool
Jim and Laura
Martin want to distribute five percent of their Fund’s value each
year to charities. Of that amount, they allocate $1,000 so that each of
their children, age 8, 11 and 13, can participate in recommending grants.
The children research causes that interest them and then meet with the
parents to present their recommendations. The Martins then help their
children decide which charities their Fund will support. In this way Jim
and Laura are using their Fund as a parenting tool to assure that the
children will be prepared to undertake responsibility for the family foundation
as successor advisors after they are gone. Their involvement in the family
Fund will benefit them as eventual stewards of their family’s wealth.
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7.
The Donor Advised Fund Integrates Well With Other Planning Strategies
Recently,
the Khrone family decided to establish a Fund as a companion to their
existing charitable remainder trust. This arrangement gives them the following
benefits:
- the Fund
allows the Khrones to organize and simplify regular charitable giving
which previously had been made out of their checkbook. AEF becomes their
charitable record-keeper.
- the Khrones
intend eventually to contribute certain life insurance policies to their
Fund. These policies were originally set in place to insure against
the loss of a parent during the college-funding years. When the children
graduate, these policies will no longer be needed
- because
of substantial tax liability on IRA distributions at the time of death,
the Khrones specified their Fund as beneficiary of their IRA programs.
Distributions to the Fund at death are not subject to tax.
The Khrones
have the option of making distributions to their Fund, from time to time,
from income of their charitable remainder trust, thus giving them more
control over their year-end tax planning activities. When the Khrones
die, the charitable remainder trust will be liquidated and the remainder
proceeds will be transferred into their Fund. Their children can stay
involved in the Fund as successor advisors.
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8.
Anonymity
Joan Brennan
and her husband, Ben, own a family hardware store in a small Midwestern
farming community. Joan recently received a $1.3 million inheritance from
her mother. They saw this as an opportunity to benefit their community
in significant ways, but they were concerned about being overwhelmed with
charitable solicitations from fellow townspeople who learned about the
inheritance. Their first grant recommendation from their Fund was for
$30,000 to benefit a small church school in their community. Because the
grant was made anonymously, AEF’s transmittal letter instructed
the school to acknowledge the grant back to AEF. With the acknowledgement
came thank-you notes handwritten in crayon by each of the 34 children,
including their daughter. The Brennans prefer that their daughter will
never know that her parents are the benefactors. AEF will maintain their
anonymity.
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9.
Continuing Involvement
Don
Barrett was head of the Music Department of Jennings High School. Teaching
music to children was his life’s passion. When he retired, he established
a charitable remainder trust and named his Fund as charitable beneficiary.
He and his wife receive income from the trust as long as they live. With
this arrangement, Don stays involved in those dollars while living. When
he dies the trust will be terminated and the remainder dollars will be
transferred to his Fund. His son, as successor advisor, will ensure that
the school board continues the music program as Don had originally intended.
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