BY: LANA HOCK

The “FACE Endowment Fund” was established through significant contributions from several generous donors who want to support the mission for years to come. This fund offers the opportunity to set aside donor-designated contributions that can earn investment income used to support FACE beyond the current year’s operating expenses. An endowment gift gives donors the option to perpetuate their annual gifts. For example, when a $100 per year donor makes a $2,000 endowment gift, a single donation can provide the equivalent of an annual $100 gift to the organization that continues indefinitely. This concept is often appealing to the consistent older donor.

From an organization’s perspective, having an endowment fund paves the way for donors to make larger or more frequent donations to the fund that will help sustain ongoing development and future growth. Once fully established, an endowment fund enhances financial stability and can be used to support specific programs, future expansion, or other appropriate expenditures determined by the governing board.

From the donor’s perspective, contributing to an endowment fund promotes long term legacy planning for future generations. The donor may have the opportunity to specifically direct the use of the income earned by the fund, and the principal strengthens the nonprofit organization’s financial situation. While the primary goal in making a charitable gift is to support a worthy cause, there are also tax and financial planning benefits for the donor that should be considered.

Determining the most tax efficient asset to gift during a lifetime or at death requires coordination among a donor’s investment, tax and estate advisors. The simplest form of giving to an endowment fund is to donate cash. For tax purposes, cash gifts can offset up to 60% of Adjusted Gross Income (AGI.) Donors may find it easier and more tax efficient to transfer appreciated property, such as stocks, bonds or mutual fund shares. A tax deduction can be claimed for the fair market value of the item, without having to pay tax on the gain. The charity can then sell the item, also without recognizing the gain. The donated item must qualify as long-term capital gain property for the donor to deduct the full value, and when given to an endowment, these gifts can offset up to 30% of AGI. Upon death, the most tax efficient way to gift to charity is to gift assets that have grown on a tax deferred basis and would be taxable to an individual beneficiary upon distribution. This primarily includes retirement plans or IRAs and are often referred to as “income in respect of the decedent” assets, or IRD. Because most charities are exempt from paying income taxes, IRD assets can pass to the charity – including the endowment fund – without triggering an income tax liability to the decedent, the charity, or any other heirs of the estate.

To learn more about how you can contribute to the FACE Endowment Fund, call FACE Director of Development Annamarie Maricle at (858) 450-3223, Option 3 or email [email protected].

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Lana Hock is a Director/Financial Advisor with the Hock Group at R.W. Baird & Co. and specializes in wealth management and financial planning for individuals and small business owners. Her lifelong love of animals was sparked while growing up on a farm in Nebraska. She has been supporting FACE since 2021 and joined the Board of Directors in 2023. Look for future columns in FACE newsletters covering other popular gifting strategies including in-kind donations, retirement accounts, donor advised funds, private foundations, and charitable trusts.

Donors should consult with their personal tax professionals – this is not considered tax/legal advice.