Giving Matters
Below are Endowment Case Studies, real-life examples of how collaborating with The Erie Community Foundation works for your clients and their favorite nonprofits.
The Music Man
As he discussed year-end planning with his financial advisor, a retired local music teacher realized that creating a personal philanthropic legacy was extremely important, especially since he was not married and had no children. The music teacher had accumulated a portfolio valued in excess of $1 million. At his advisor’s suggestion, the music teacher met with Susannah Weis Frigon, vice president of Investor Relations at The Erie Community Foundation. After reviewing alternatives, he decided to establish an endowment, in his name, to support four specific arts organizations. However, he wanted to keep the ability to promote other nonprofits as well. To meet these needs, Susannah helped the donor establish a Donor Advised Fund that would convert to a Donor Designated Fund upon his passing. This gave the donor flexibility during his lifetime to support nonprofits of his choice. Eventually, the fund will support the four pre-determined arts organizations in perpetuity. Working with the financial advisor, Susannah coordinated the transfer and sale of securities, resulting in zero capital gains for the donor and a potential charitable deduction of $193,000 – the securities’ fair market value. Initial yearly grants will be nearly $8,000. Over time, the music teacher's fund will become a growing source of hope and support for the chosen charities. Now that is something to sing about!
Family Ties
In the early 1970s, a local attorney, who specializes in trusts and estates, helped two clients, a husband and wife, establish a private foundation. By 2013, the founders had died. Their heirs, the couple’s grown children, had neither the time nor the inclination to manage mandatory distributions, 990 tax filings, audit requirements and overall administration. In consultation with their attorney, they decided to dissolve the private foundation and establish an endowed fund at The Erie Community Foundation. While the attorney completed the dissolution process, Susannah Weis Frigon worked closely with the heirs to ensure that the final fund agreement and setup was consistent with their needs.Ultimately, a Donor Advised Fund valued at $85,000 was established, with three of the children named as advisors. In this way, family members maintain control over the fund’s charitable giving, while turning over all administration and tax reporting to the Foundation (saving time and money!). Most importantly, their parents’ legacy of charitable good works lives on.
The Gift that Keeps On Giving
A charitably-inclined business owner and his wife decided to help support a widowed relative who had been very good to their family over the years. Initially, the entrepreneur wished to provide an income stream for “Aunt Jane,” so he contacted his financial advisor. His advisor immediately recognized $50,000 in highly appreciated securities that could be used, and contacted The Erie Community Foundation. Considering the desire for income as well as a charitable deduction, Susannah Weis Frigon ran Charitable Gift Annuity proposals under several different scenarios. The most favorable option generated a $20,000 deduction for the donor/clients, and provided Aunt Jane with $2,550 in additional yearly income (most of which would be taxed as capital gains). After consideration, the advisor and clients decided that the income was not sufficiently beneficial, and completely changed direction. Since her retirement, Aunt Jane had become involved as a volunteer for several local charities about which she cared deeply. What if she were able to support their missions not only with her time, but with her treasure? She was thrilled with the idea! Working with Susannah and the advisor, the clients used their stock position to create a Donor Advised Fund, for which Aunt Jane is the sole donor advisor. At her discretion, she can grant $2,000+ per year to her favorite nonprofits. The stock that funded the gift was donated to the Foundation, which eliminated the capital gain for the donors and created a deduction potentially worth $50,000. The clients were very pleased their advisor provided a creative solution, and entrusted him with additional assets to manage.
Nonprofit in Need of Structure and Guidance
A local CPA was guiding one of her smaller nonprofit clients through a period of organizational transition. The former board chair and executive director had both stepped down unexpectedly, and the acting director was overwhelmed by the ensuing administrative issues. One of these was a $25,000 investment account the agency had established several years previously, with the help of a generous bequest. The account was held by an out-of-town manager, and communication with the nonprofit was vague and inconsistent. The CPA encouraged the former director to take some sort of action with the account for years, knowing it was underutilized. With the change in leadership, the CPA recognized an opportunity for action, and contacted Susannah Weis Frigon directly. Susannah, in turn, reached out to the acting director and suggested a meeting with the director and the board chair. Their discussion focused on the benefits of establishing an agency endowment at The Erie Community Foundation which included enhanced visibility and flexibility for donors, a broadly diversified investment portfolio with a lower cost structure, significant administrative efficiencies (especially important for an agency with no staff), and the opportunity to support the Erie region above and beyond the nonprofit’s mission. Best of all, they were delighted to learn that the endowment would be carried on the nonprofit’s books as an asset. The proposal was brought to the full board later that month, and the endowment was established shortly thereafter. Truly, a great way to help a nonprofit!