1. Donor Story: Avoiding Capital Gains

Situation
Allison Smith, co-founder and large stockholder of a successful company that went public 18 months ago is considering selling some of her shares.  The sale of her shares will generate a sizable capital gains tax this year, as her cost-basis of her stock holdings are extremely low. Allison would like to reduce her tax liability as well as establish a charitable giving plan with the sale proceeds.

Solution
Instead of selling her shares, Allison can donate a portion of her stock to a donor-advised fund.   In return for this irrevocable contribution, she generates a charitable income tax deduction for the full fair market value of the stock, up to 30% of adjusted gross income* and avoids capital gain tax.  A donor-advised fund will provide Allison with the immediate tax relief she needs and a flexible charitable giving vehicle.

* Any unused deduction may be carried forward an additional five years.


2. Donor Story: Building a Philanthropic Legacy

Situation
Mike and Sharon Kelly are in their late 70s.  They have worked hard all of their lives and have enough savings to comfortably see them through retirement.  They're currently very involved in their community's after-school program and want to ensure the successful future of this program by donating money to the program over a long period of time.  They are looking to establish a giving plan that allows them to donate money to the program now and will continue to benefit the childcare program for many years.

Solution
Mike and Sharon are able to use some of their mutual fund assets to contribute to a donor-advised fund. With a simple rollover, the couple will establish a charitable giving plan that will enable them to name successors to the account to ensure that their community's childcare program continues to benefit well into the future.  They can also name their children as successors, helping to increase their family's interest in philanthropy and establishing a tradition of giving. 


3. Donor Story: Receiving an Immediate Tax Deduction

Situation
Brian Jones, an insurance executive, just received his year-end cash bonus and is facing significant taxes.  His accountant recommended setting up a private foundation to generate an immediate income tax deduction.

Solution
Since it's already mid-December, a donor-advised fund is a simple charitable alternative providing Brian with an even greater tax deduction than a private foundation.  Donor advised funds also eliminate the need to file articles of incorporation and appoint board of directors, and have no start-up costs.  Also a donor advised fund allows Brian to take time in determining which charitable organizations he'd like to support since there's no need to identify the benefiting organization at the time the account is opened.  He can name the fund after his family and does not have to worry about annual tax filings or an audit that a foundation requires.


4. Donor Story: Grant Making Support

Situation
Janice Mendez, age 55, has had a longtime interest in conservation programs and is very committed to the local zoo in the major city in which she lives.  In particular, Ms. Mendez has taken a leadership role in such conservation programs and is a very widely known philanthropist in her community.  She wanted the zoo to reaffirm and continue their commitment to conservation for many years to come.  She also felt that the zoo was in a unique role to educate children.  She has no children or heirs and so she wants to leave her legacy through her philanthropy.

Ms. Mendez had a donor advised fund managed in another charity, but she wanted more substantial grant making support to encourage the local to conduct a zoo conservation program.  She felt the other donor advised fund program could not provide that support.  

Solution
Her advisor suggested that she find work with NPT -- that would provide the kind of service and had knowledge about grantmaking that would help her meet her goals.  NPT full-time grant professionals and board distribution committee approved a sophisticated grant agreement that would help Ms. Mendez meet all of her goals. Ms. Mendez created a $25 million donor advised fund at NPT, which was a transferred from another national donor advised fund program.

Since that time, Ms. Mendez started to use her donor advised fund for other programs and has added nearly $5 million in new assets to her donor advised fund. The zoo continues to reach their designated benchmarks and Ms. Mendez has enjoyed seeing their progress. NPT has watched the zoo program and releases funds based on approved goals.


5. Donor Story: Complementing a Private Foundation

Situation
Paul Jackson is the second generation in his family to run their private foundation, which has been in existence for many years. The foundation's interests are geographically diverse and Mr. Jackson takes great pride in his involvement with the recipient charitable organizations. He often keeps in contact with the projects that he funds for years.  He has been involved in the foundation's administration and grants management; however, he was reaching retirement and realized his children didn't have time or interest to oversee the foundation's administration.

Solution
His advisor suggested that he keep his foundation open, but also try using a donor advised fund (DAF) to see if he could reach the same charitable goals. The advisor said a DAF would allow him to focus on supporting his favorite charitable causes, and that he would not have to do the grant administration, tax filing or other monthly duties.

Due to the appreciation in the stock market, Mr. Jackson realized that his foundation had to grant additional funds to meet its 5% payout requirement. By making a grant into a DAF, he could meet the 5% payout. He decided to grant $15 million into his new DAF to meet his 5% payout requirement.  Since that time, he has been making many of his grants from his family's new DAF and fewer from the family's private foundation.

Part of Mr. Jackson's grant making approach is to release grant funds when the charity reaches certain benchmarks.  He was pleased to learn that NPT staff could assist him with monitoring the charities and the progressof their work.  Mr. Jackson has been so pleased with his grantmaking and assistance from NPT that he recently added another $5 million to his DAF.

While his private foundation still continues to operate, he has found that working with NPT and his DAF makes his philanthropy easier.  In the future, he has talked about terminating his private foundation into his DAF.  Because NPT is over 5 years old, such a termination could easily take place.


6. Donor Story: Tax Advantages
Steven Manklow wanted to establish his donor advised (DAF) and contribute 30% of the closely held shares in his family's business to his donor advised fund.  Because the National Philanthropic Trust is a public charity, Steven can 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 limits on deductions as a percentage of adjusted gross income, Steven is taking his income tax deduction more quickly than if he had created a private foundation.

When the stock was sold inside his DAF by there was no capital gains tax liability to the Fund or to Steven personally.

Assets in his Fund are not subject to estate taxes.  Since assets of the donor advised fund continue grow tax-free, more funds will be available to support his favorite charities in the future.

7. Donor Story: An Alternative to a Private Foundation or a Supporting Organization
Linda sees her donor advised fund as simpler and more cost effective to establish and operate than a private foundation. National Philanthropic Trust provides record keeping, tax reporting, and fiduciary accountability. This allows Linda and her husband to concentrate on working with their children to make their community a better place in which to live through philanthropy.

8. Donor Story: Grantmaking on a Personal Timetable
Phil and Lisa simplified their year-end decisions.  How?  They separated the two-step decision of obtaining a year-end tax deduction and selecting charities to support.  Because they started a donor advised fund, they now can take tax deductions when they make contributions to their donor advised fund.  Later, they can decide what charities they want to support.  They say that this flexible grantmaking feature helps reduce the typical year-end stress.

9. Donor Story: A Legacy of Family Philanthropy
Tom and Jennifer Smith want their Smith Family Foundation to become a vehicle of family philanthropy over successive generations.  The Smith's specified their four children as successors after they are gone so their donor advised fund can encourage family involvement in the future.  From time to time, other family members and friends contribute to the Smith Family Foundation and obtain tax deductions by doing so.  The Smiths like the fact that National Philanthropic Trust handles all the administration, and recordkeeping, providing quarterly statements of their fund's activity.  An additional benefit is that they can access their account online at their convenience.

10. Donor Story: A Wide Variety of Grants
Tom Macauley is interested in supporting religious youth programs around the country, and missions in Latin America. He selected National Philanthropic Trust's program because it allows him the flexibility to recommend grants to institutions both domestically and abroad.

11. Donor Story: The Donor Advised Fund Complements a Private Foundation
Recently, the Rockford family decided to establish a donor advised fund as a companion to their existing private foundation. This arrangement gives them the following benefits:

  • The donor advised fund can receive distributions from their private foundation allowing them to satisfy their foundation's 5% payout requirement.

  • The Rockford's grants from their donor advised fund can be made anonymously, allowing them to support charities with the utmost discretion.

  • Their donor advised fund also can help their teenage children support charitable organizations outside of the private foundation's narrow mission, and provide them a valuable introduction to philanthropy.

12. Donor Story: Anonymity
Laura Hudson and her husband, Mark, own a family pharmacy in a small southwestern ranching community.  Laura recently received a $1.1 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 donor advised fund was for $10,000 to benefit a small church school in their community.  They requested that their grant be made anonymously, and the National Philanthropic Trust grant letter instructed the school to send any acknowledgement back to National Philanthropic Trust.  With the acknowledgement came thank-you notes handwritten in crayon by each of the 28 children, including their daughter.  The Hudsons prefer that their daughter will never know that her parents are the benefactors.  National Philanthropic Trust will maintain their anonymity.

13. Donor Story: A Parenting Tool
Davis and Tammy Winwood 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 9, 12 and 14, can participate in recommending grants.  The children research causes that interest them and then meet with their parents to present their recommendations.  The Winwoods then help their children decide which charities their Fund will support.  In this way, Davis and Tammy are using their donor advised fund as a parenting tool to assure that the children will be prepared to undertake responsibility for the family foundation after they are gone.  Their involvement in the family Fund will benefit them as eventual stewards of their family's wealth.

14. Donor Story: Continuing Involvement
Kirk Stein was head of the Art Department of Kennedy High School.  Teaching art to children was his life's passion.  When he retired, he established a charitable remainder trust and named his donor advised fund as its charitable beneficiary.  He and his wife will receive income from the trust as long as they live.  With this arrangement, Kirk stays involved in those dollars while living.  When he dies the trust will be terminated and the remaining dollars will be transferred to his donor advised fund.  His son, as successor advisor, will ensure that the school board continues the art program as Kirk had originally intended.

15. Donor Story: Maximum Tax Benefits
Jordan Rosen is currently the President of his deceased father's private foundation. His father funded the foundation with $30 million of real estate at his death. Jordan currently holds a $6 million parcel of real estate he inherited from his father (with an adjusted cost basis of $60,000). He would like to contribute the real estate into the private foundation to receive a charitable income tax deduction for this year. His adjusted gross income is $3.5 million and he expects it to remain level for the next six years. Jordan's accountant points out the following:

  • First, he would receive a basis deduction only and, even if he received the full fair market value deduction, he could not use it within the six year period.
  • Second, if he transferred the asset into the private foundation he would have to pay approximately $118,800 in excise taxes at two percent or $59,400 at one percent.

By contributing the real estate to a donor advised fund, Jordan would eliminate the excise tax, receive a fair market value income tax deduction, and be able to use the entire deduction within the six-year carry forward period.

16. Donor Story: International Grantmaking

International Grant Story - Prague

17. Donor Story: From Real Estate to Lasting Legacy

Citrus Grove Donor Story