There are several advantages to donating through community foundations, say those who work for them. A donor may want to make a large donation because of tax considerations, but may not know what charities he wants to benefit or how much he wants to give. A lump sum donation can be made to the foundation in one tax year, and then this money can be distributed over time as the donor makes decisions about what to do with it. Appreciated assets can be donated to help offset taxes that would be incurred if they were sold and the money retained by the owner.
In addition, the foundations can set up charitable gift annuities, trusts or other vehicles depending on what the donor needs, McGeehan says, then the money can be distributed in a number of different ways, with the advice of the donor, to local, national or international charities, or it can be used by the foundation for some of its own grants to needy groups or people. Community foundations also often hold and manage the endowment funds for not-for-profits.
"We can do the back-office work for the donor and the charities if they do not want to do it or do not have the expertise," McGeehan says. "For us, 90%-95% of our funds go to organizations or causes right here in Baltimore. We have a staff that knows the nonprofit segment here and knows the needs of the community. But we can also direct giving worldwide.
"We work with one financial advisor with a client who wants to help communities in Ethiopia. The advisor is not going to have the information on how to do that, but we can go through our domestic partners and find out how to make those donations to the segment of the community the client wants to help," McGeehan says.
For instance, those donations can be directed toward impoverished women and children or elsewhere. "We can also facilitate microloans both domestically and internationally that are directed at geographic regions or certain segments of the population," she adds.
Establishing donor-advised funds through a community foundation can give the donor "the same type of name recognition and legacy that establishing a private foundation can achieve, but at a much lower donation level," says McGeehan. The Baltimore Community Foundation requires a minimum of $10,000 to establish a donor-advised fund, far less than it would require to set up a private family foundation.
"The advantage for the financial advisor is that the client is going to be grateful for the assistance, and it gives the advisor a chance to connect with the future generations in the family," McGeehan says.
The Baltimore Community Foundation, like many of the larger community foundations, has an active committee to work with financial advisors. It conducts seminars and educational programs for advisors, explaining its work and the resources it has available for them. It also holds networking events to connect advisors with others in their community, McGeehan says.
There is a lot of room for growth in this space.o Brinton adds, "A lot of wealth has been accumulated by families that you did not have a generation ago, and they want to give back to the community. And because of that, charitable donations are growing at a rapid rate. But a financial advisor may be stymied by not knowing how to help clients. The advisor can establish a relationship with a community foundation that assists the client in selecting and directing their charitable giving to the community."
Barry Glassman, a CFP and the senior vice president of Cassaday & Company Inc. in McLean, Va., works with community foundations and notes that the financial advisor can retain control of the funds until they are actually distributed by the foundation. In working with a community foundation for a client, the advisor will want to determine the foundation's fees, see who in the community is on the foundation's board and evaluate the returns the foundation receives on its investments. Glassman says he has established an effective way of broaching the subject of charitable giving.