What is a community foundation?
A community foundation is a tax-exempt public charity made up of funds that have been established by individuals, families, and businesses. The community foundation invests the assets to generate income and then distributes the income to bona fide charities according to donors' suggestions, areas of interest, or through competitive grants made by the foundation. One special appeal of a community foundation is its ability to respond quickly, effectively, and flexibly to both the donor's interests and the community's needs, now and in the future. Another is the maximum tax advantage afforded to donors. Although a major goal of the Long Island Community Foundation is to provide a permanent source of private funding for Long Island's charities, a donor can use the Foundation to achieve virtually any charitable objective anywhere in the United States.
What is a fund?
A fund is the basic building block of a community foundation; it acts as a foundation within a foundation. Funds are named for their donors, for their purposes, to afford anonymity in giving by using a name unaffiliated with an individual donor or family, or as memorials. Most funds operate as permanent endowments, distributing only their net income and a portion of principal; some allow for distribution of income and principal over a period of five years or more. Funds may have broad charitable purposes, providing unrestricted income to address community needs identified by the Foundation, or allow donors the privilege of suggesting grants when they wish to support particular organizations. Funds may support specific nonprofit organizations designated by the donor, or offer scholarship support through local high schools. Funds may even allow for a combination of these purposes.
How do the funds work?
Establishing a fund can satisfy a number of financial and estate planning concerns. Any of a variety of assets, including cash, securities, life insurance, IRAs, real estate, rights in intellectual property, and limited partnership interests, can be used to establish a fund in the LICF. Additional contributions may be made to the fund at any time. A donor can establish a fund at any point during his or her lifetime and enjoy the pleasure of watching your good intentions turn into steady support for charitable organizations. You can establish a fund through a bequest in your Will, or even arrange, through a trust, for income to be provided to someone for a length of years before the fund is established. Contributions to the LICF receive an immediate tax deduction, the maximum allowed by law, and can yield significant income and estate tax savings.
Why do people give through a Community Foundation?
Giving money away can be a complicated, if rewarding, task. In a recent survey by The Chronicle of Philanthropy of more than 500 donors to community foundations, over 80% of the donors preferred giving through funds they had established in their community foundations to giving direct charitable contributions, because the funds allowed more than FLEXIBILITY IN GIVING. A similar percentage felt that the community foundation gave them a way to ensure the FULFILLMENT OF THEIR INTENTIONS even after the charitable gift was made. The donors said they valued being part of improving the quality of life in their communities. They found community foundations VERY RESPONSIVE to the changing needs of the community.
How large a contribution is required to establish a named fund?
With a charitable donation of $ 5,000 or more you can start a fund in your name at the Foundation - or name it for the fund's purpose, or as a memorial.
Is opening a fund difficult to do?
No, it's fast, and it's easy. The entire process can take less than half a day. We recommend that you speak with your lawyer, accountant, or financial advisor. We can explain the procedures and provide sample wording, along with information about how to determine the appropriate type of fund and timing on the charitable gift.
How are the Long Island Community Foundation and The New York Community Trust related?
The Long Island Community Foundation is an operating division of The New York Community Trust, the largest community foundation in the country. Established in 1978, the LICF - guided by a BOARD OF ADVISORS composed of community leaders - provides donors with maximum tax savings, professional staff support, in-depth knowledge of Long Island, and permanence within the community. LICF donors benefit from the investment and financial management services of The New York Community Trust, a 75-year-old institution with assets exceeding $1.5 Billion.
How are the funds invested?
The size and purpose of the fund determine how it is invested. For example, funds that do not contemplate principal withdrawals may be placed with one of the Trust's investment managers. Other funds are invested in mutual funds we've selected. If we expect periodic invasions of principal for grant payments, we invest a portion of the charitable fund in a money market vehicle. Longer-term funds are invested in a balance option. The Finance Committee of The New York Community Trust approves all of the investment vehicles.
How are you, the donor, involved in the investment decision?
When you establish a fund, we learn as much as possible about your charitable objectives and grant plans in order to determine an appropriate investment vehicle. When donors express interest in how the fund will be invested, we review our investment options with them and work out an investment program that will suit the grant needs of the fund.
Is there a difference in managing charitable funds, as opposed to other portfolios?
In terms of emphasis, yes. The New York Community Trust and the Long Island Community Foundation are charitable organizations, not investment firms. We deliver responsible and competitive performance, but we do not urge the Trust's investment managers to take high risk positions. Rather, we strive for performance that is competitive with other balanced options over the long term. Every fund receives individual attention. As a donor, you receive accounting statements quarterly, detailing the activity in your fund.
Can you, as a donor, involve family members in your philanthropy?
Yes. You may name children, grandchildren, or others to continue to advise the fund you established. Just as the fund can continue your charitable deeds beyond your lifetime, so can it make your descendants heir to a tradition of giving.
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