Information on donor advised funds

Sean sent me an email last week suggesting we put our mission, vision, etc. on this site so we can send people here to learn more about us. I think that's a great idea. In the meantime, I'll continue to use this as a way to communicate with you so I don't inundate you with emails.

I have received emails from the Minneapolis Foundation, the Saint Paul Foundation and the Headwaters Foundation. It sounds like Mpls and Headwaters are the only real options, and both require a $10k minimum to start a fund. Here are the responses I received:

Minneapolis Foundation
Thanks for considering the Foundation as an option for setting up a Donor Advised Fund.

I will send you a packet of information about Donor Advised Funds (DAF) and The Minneapolis Foundation. The packet should provide you some background information as well as details that should respond to your questions. A DAF is a great way to optimize your giving because we provide administrative services, freeing you and your giving circle to focus on the charities to which you want to provide gifts. We also invest the gifts and the income is untaxed. Our investment pool, the Master Fund, has returned approximately a 10% yield per year on average during the last 10 years.

However, I want to answer your questions specifically, and I’ve done so below:

1.You don’t need to be a legal entity to set up a DAF (DAFs are typically established by individuals or families). You could set up a DAF and designate an advisory committee as a core group of advisors for the fund. The committee would designate one person to serve as the fund’s contact person. The fund agreement would declare the contact person as the designated liaison who alone would represent the gift decisions of your giving circle by making grant recommendations from the fund. The agreement would also stipulate that any gifts to the DAF would become the Foundation’s assets (as do gifts to any DAF) and that only the contact person would have the right to make grant recommendations. This latter provision helps to avoid the potential problem of a member who decides to withdraw from the giving circle and wants to regain control of his/her share of the assets. This person would have no ownership claim over the assets. (I’m aware this description could be a little confusing. So please feel free to call me and I can explain it in more depth.)

2.The Foundation requires a minimum gift of $10,000 to establish a fund. However, we allow the latitude for your fund to remain active if it drops below the minimum if you plan to add more funds that will carry it above the minimum in the not-to-distant future (we don’t have specific guidelines about this and arrange it, usually, on a case-by-case basis).

3.Your tax deduction for contributing to a DAF depends on the type of contribution, but the full amount is generally deductible given the following limits: The full amount of a cash gift is deductible. But you can only deduct up to 50% of your adjusted gross income (AGI) for the year. You can, however, carry any portion of the deduction that exceeds 50% of your AGI for up to five years. The full fair market value of a gift of publicly traded securities is deductible. But you can only deduct up to 30% of your AGI for the year. Again, however, you can carry over any unused portion that exceeds 30%of your AGI for up to five years. We also accept other contribution types, such as privately held securities and real estate. However, our Gift Acceptance Committee must approve these gifts. The full cash amount gifted to a fund is deductible, given several limitations similar to those listed above.

Tracy, I hope this responds sufficiently to your questions. If you have any more questions or comments, please feel free to reach me. My contact information is below.

As I mentioned I’ll be sending you a packet of information. I would like to have an opportunity to talk to you before you choose to set up a fund (if you should decide to do so). Establishing one for a giving circle adds some complexity to the arrangement, and I’d like to be clear we have a full understanding of your group and that your group has a full understanding of our fund policy.

Saint Paul Foundation
I will send some materials explaining donor advised funds to you in the mail. However, our donor advised fund model does not adapt well when there are a 'community' of donors such as in a giving circle. I'd love to talk further with you about your goals, and how we might be able to help. We try to be as flexible as possible within the confines of what is legally appropriate. Once you have had a chance to review the materials, please give me a call and we can talk further.

Headwaters Foundation for Justice
Tracy, we’ve done this a couple of times, though we don’t have any written or formal policies about this. I think its time for us to create more formal policies, and your inquiry puts it back on my “plate” for this summer...

For our Partnership Funds (donor advised funds) our minimum to start a fund is $10,000. The only real limitations on grants from the fund is that it can’t go to something that is contradictory to the Headwaters mission. I’ve attached a copy of our Partnership Fund policies and agreement, fyi. Please let me know if you have questions. If you’d like to explore this further, let me know. We could get together to talk, or talk via phone.

I’d love to hear more about your giving circle, whether or not you want to explore doing it through Headwaters. They are a great way to do thoughtful giving!