FAQ for Professional Advisors
- Why should my client establish a named fund at The Erie Community Foundation?
- Is The Erie Community Foundation for clients interested in giving now, or through an estate plan?
- How do we create a fund?
- How is a community foundation different from a private foundation?
- How much money is needed to create a named fund within The Erie Community Foundation?
- What if my client just wants to remember charity through a will or other estate plan?
- What is the Elisha H. Mack Society?
- Is The Erie Community Foundation just for donors interested in helping local organizations?
- Can the fund my client establishes benefit individuals?
- What about scholarships?
- What is a donor advised fund?
- Why is this helpful?
- What about fees?
- How does The Erie Community Foundation manage its endowment? Can my client have input?
- How do I know The Erie Community Foundation will do what is says it will do?
- What else do I need to know?
Why should my client establish a named fund at The Erie Community Foundation?
The Erie Community Foundation can help you, and your clients, accomplish personal philanthropic and estate planning objectives in a cost-effective fashion. While our primary mission is charitable endowments, there is virtually no limit to the type of charitable goal that can be accomplished through The Erie Community Foundation.
Is The Erie Community Foundation for clients interested in giving now, or through an estate plan?
Actually, both. There are currently over 500 different named funds operating within The Erie Community Foundation. Most are endowed to provide perpetual support for causes or organizations favored by the original donors. It is also possible to create funds that distribute part, or all, of the original gift over a period of time.
At other times, 100% of a gift immediately passes-through The Erie Community Foundation to a favored charity.
How do we create a fund?
The Erie Community Foundation uses a “Letter of Agreement” format to establish a fund. This simple document outlines the purposes of the fund so that we are clear on the donors intentions. Funds can be created in a matter of minutes with no costs. The Erie Community Foundation annually distributes sample documents to a wide-array of professional advisors.
If you’d like some sample documents for your office, please e-mail Michael Batchelor.
How is a community foundation different from a private foundation?
A community foundation is a collection of named funds all operating under the administrative umbrella of a single, publicly-supported, entity. Community foundations typically operate broad-based grant making programs. They also distribute specific grants as defined by original donor agreements.
Donations to a community foundation generally qualify for higher tax deduction. As many different funds are pooled, administrative costs are typically less. A single audit and a single 990 form cover all funds operating within a community foundation. Community foundations also pay no tax on their earnings. There are no minimum payout requirements and funds can accumulate for some future charitable purposes.
While professional advisors vary on the specific amount, many will agree that private foundations are not cost-effective for donations of $1 million or less.
The end result of this pooling of funds is the saving of administrative costs; making more funds available for deserving charities.
How much money is needed to create a named fund within The Erie Community Foundation?
Generally speaking, named funds are established with gifts of $10,000 or more. We can also work with a client to build-up a fund, over time.
It is also possible to make smaller gifts that simple pass-through The Erie Community Foundation to a cause or organization or your clients choosing. Finally, many of the funds established within The Foundation accept gifts of any size from the general public.
What if my client just wants to remember charity through a will or other estate plan?
The Erie Community Foundation can give you sample language for inclusion in a will or estate plan. We’d like to know that a client has done this so we can include him/her in our The Elisha H. Mack Society.
What is the Elisha H. Mack Society?
This is a donor recognition society specifically for those individuals who are using The Erie Community Foundation to assist charity through a bequest, trust, life insurance, charitable gift annuity, or other planned giving vehicle. We do not need to know amounts. We are just trying to build a large list to encourage others to take similar steps.
For current membership list, click here.
Is The Erie Community Foundation just for donors interested in helping local organizations?
Our unrestricted endowments are limited to organizations serving Erie County. Income from these named funds is distributed to a wide variety or local organizations through a time-tested competitive grants process.
Many donors also create funds dedicated to a specific local nonprofit organization(s) or cause. Donors can also create, in their lifetimes or through a planned gift, other funds that benefit favored causes throughout the country.
Can the fund my client establishes benefit individuals?
To be a tax-deductible activity, there must be a broad charitable class. Grants can not be made to a specific person.
What about scholarships?
The Erie Community Foundation has nearly 100 different scholarship funds. These are very popular with donors. Foundation staff can help with language to insure the scholarship is operating legally. There is no need for advance IRS qualification of the scholarship fund.
What is a donor advised fund?
This is one of our more popular options. These funds are created during a donors lifetime. Your client receives a 100% tax deduction for the original, and any subsequent, gifts. The Erie Community Foundation then typically endows the fund. In future years, your client will make recommendations regarding grants from income or, in some cases, principal. The Erie Community Foundation takes care of all due diligence, with recognition from the charity flowing to the donor.
Why is this helpful?
Many of your clients are using the income from investments to fund charitable gifts. A donor advised fund lets this continue, with the added benefit of a 100% tax deduction for the principal transferred to ECF. Many donors appreciate the ability to have ECF handle the check-writing and due diligence. ECF also offers educational services to help your client maximize their philanthropic impact.
What about fees?
There is no fee to establish a fund. Once established funds are assessed a small annual fee to cover administrative and investment management costs. As funds are pooled for investment management purposes, there can be some significant economies of scale.
Typically yearly costs are less than 1%. This helps fund a wide array of educational, administrative, donor service and program work of The Erie Community Foundation staff.
How does The Erie Community Foundation manage its endowment? Can my client have input?
Generally speaking, all endowed funds within The Erie Community Foundation are pooled and operate under a single investment management policy. Our primary investment objective is to preserve, and enhance, the charitable “purchasing power” of endowed funds over time.
To accomplish this, we work with an independent investment consultant to create strategies designed to surpass a hurdle rate of 9%. Endowed funds typically return 5% to charities. Inflation will be about 3%. Expenses will be about 1%. If our net investment returns are not surpassing 9% or more, over time, we are not doing our job.
The Erie Community Foundation finance committee closely monitors investment performance. Individual managers are all held accountable to specific benchmarks. When necessary, changes are made. We also measure ourselves against our peers. Over time, we are confident our endowment management policy is working.
There are times when clients can have some input into investment management. Generally speaking, these are limited to funds of $1million or more.
How do I know The Erie Community Foundation will do what is says it will do?
We have been helping donors and professional advisors since the founding of our predecessor organization, The Erie Endowment, in 1935.
You, and your client, should also take comfort in knowing that a wide-array of business and professional organizations help select our board of trustees. We are accountable to you, and to the public. Our bylaws give the Erie County Bar Association, The United Way of Erie County, The Orphan’s Court, The Erie Regional Chamber and Growth Partnership and The Erie County Medical Society the opportunity to select a representative from their organizations to sit on our Board of Trustees. This creates diversity and good representation of our community.
This is your guarantee that there will always be good civic leadership watching over The Erie Community Foundation.
What else do I need to know?
We are here to help you and your client. We understand decisions are made on the client’s timetable. There is never any specific time pressures related to a charitable gift to The Erie Community Foundation. Consequently, we are always happy to meet with you, or your clients, to discuss their plans.
Our goal is to help you, and your client, accomplish your objectives. Please view us as a resource and do not hesitate to contact Mike Batchelor, president with any questions.