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Trust in nonprofits, donor-advised funds vs. private foundations, and a Churchill Downs invitation | Advisor Newsletter (April ’25)
The Community Foundation of Southern Indiana team is honored to work with attorneys, CPAs, and financial advisors as you help your clients achieve their charitable giving goals. Put us on speed dial – we want to be your first call when the agenda turns to philanthropy!
As part of our service to you and other advisors, we are committed to letting you know about trends and developments that may impact your clients’ charitable giving strategies. To that end, here is a collection of topics that are popping up frequently in our conversations with both donors and advisors:
- TRUST MATTERS: Trust is at the foundation of your client relationships, and the team at the community foundation feels the same way about our relationship with you, your clients, our region’s nonprofits, and the community we serve. Learn more about why the community foundation is such a trusted source for all things charitable giving.
- WEIGHING THE OPTIONS: Deciding whether a private foundation or a donor-advised fund is the best vehicle for your client can be challenging, especially if the client walks in the door with preconceived notions. A donor-advised fund at the community foundation may be more flexible and effective than you assume and often is the ideal tool to achieve clients’ tax and charitable giving goals.
- A QCD’S IMPACT: If you’re at least 70 1/2 years old, a great way to support our $2-for-$1 matching grant, which is available through Dec. 31, 2025, is by making a Qualified Charitable Distribution, or QCD. Now, your clients can triple their charitable impact for any gift made to our unrestricted Community Impact Fund, which supports the greatest needs and highest priorities of Clark & Floyd counties.
We have also compiled a list of upcoming events you are encouraged to take advantage of:
- APRIL SIEPC EVENT: You’re invited to join the Southern Indiana Estate Planning Council and the Charitable Gift Planners of Kentuckiana on Tuesday, April 8 as the Honorable J. Terrence Cody speaks on “2025 Probate Estate, and Trust Legislation”. Visitors can attend their first meeting free of charge with an RSVP.
- ‘WINSDAY’ AT THE TRACK: On Wednesday, April 30, we are participating in Winsday: Great Thrills for the Greater Good, a new Derby Week event that celebrates philanthropy. By purchasing tickets through CFSI, you and your guests will enjoy a day at the races while contributing directly to local causes. See you at the track!
Please reach out anytime you’re dealing with a client matter related to charitable giving. We can almost always provide a solution, and if we can’t, we will recommend the best next steps for you and your client.
Trust matters: Your clients’ go-to resource for community impact
by Linda Speed, President & CEO
As attorneys, CPAs, and financial advisors, you know very well that trust is at the foundation of your relationships with clients. Your clients are seeking a similar level of trust with the people and organizations that are helping carry out their philanthropic wishes.
Fortunately, trust in charities has shown an increase after a recent dip. According to the 2024 Edelman Trust Barometer and the Independent Sector’s “Trust in Nonprofits and Philanthropy” report, trust in nonprofits rebounded by 5 points to 57% in 2024, following a four-year decline. This increase positions nonprofits as the most trusted sector compared to government, business, and media. Still, nonprofits face challenges and concerns about maintaining this trust, including general skepticism about institutions, as well as increasing expectations that charities demonstrate transparency and accountability.
As you work with your charitable clients, keep in mind that the Community Foundation of Southern Indiana can help bolster clients’ trust in their favorite charities. Here’s how:
Trustworthy information about particular charities
The community foundation is a valuable source for objective, timely information about specific charities and the impact of particular programs. By working with us, your clients can leverage a transparent and trustworthy avenue for learning about how best to make a difference for their favorite causes.
Wide-ranging expertise about community needs
At its core, the community foundation is committed to achieving impact. This means that our team keeps a finger on the pulse of local needs, whether related to social services, health care, education, the environment, the arts, community development, or any other community priority. With a deep understanding about community needs, we can be an excellent sounding board for your clients who want to learn which charities are addressing each need and how those charities are measuring results.
Broad set of tools for structuring charitable gifts
The community foundation can help establish a tax-efficient structure to achieve each client’s goals for community impact. Available vehicles include not only donor-advised funds, but also other types of funds such as designated funds to support specific charities and field-of-interest funds to address particular causes, as well as multi-generational funds to involve clients’ children and grandchildren. CFSI offers your clients a flexible and effective way to manage charitable giving by simplifying their giving processes and maximizing potential tax benefits.
As always, we want to be your first call! Please reach out anytime the topic of charitable giving comes up during a client conversation.
Weighing the options: Private foundation or donor-advised fund?
by Linda Speed, President & CEO
When you’re working on the charitable components of a client’s estate or financial plan, one of the first areas you’ll likely explore is the structure. Certainly you are familiar with both private foundations and donor-advised funds as useful charitable giving tools. Before you jump into one or the other for a particular client, though, it’s important to review the similarities and differences between the two so that you can best achieve your client’s goals.
To help you evaluate a client’s options, here are three common myths about the differences between private foundations and donor-advised funds.
Myth #1: Donor-advised funds are all the same and only private foundations can be customized
Private foundations will always differ from donor-advised funds in important ways, not only because of their status as separate legal entities and the deductibility rules for gifts to these entities, but also because of the opportunities to customize governance. But it is a mistake to assume that a donor-advised fund is a cookie-cutter vehicle. Indeed, “donor-advised fund” is simply a term used to describe the structure of a fund and its relationship with a sponsoring organization such as a community foundation. The donor-advised fund vehicle itself is extremely flexible. Here’s why:
- Donor-advised funds are popular because they allow your client to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, your client can recommend gifts to favorite charities from the fund when the time is right.
- A donor-advised fund at CFSI is frequently a more effective choice than a donor-advised fund offered through a financial institution. That’s because at a community foundation, your client is part of a community of giving and has opportunities to collaborate with other donors who share similar interests. Plus, the community foundation is itself local and is deeply knowledgeable about the needs of our region and the nonprofits meeting those needs.
- We can work with you and your client to build a charitable giving plan that extends for multiple future generations. That is because our team supports your clients in strategic grant making, family philanthropy, and opportunities to learn about local issues and nonprofits making a difference.
Myth #2: Deciding whether to establish a donor-advised fund or a private foundation mostly depends on size
The size of a donor-advised fund, like the size of a private foundation, is unlimited. The United States’ largest private foundations are valued well into the billions of dollars. Information about private foundations, ironically, is not so private. The Internal Revenue Service provides public access to private foundations’ Form 990 tax returns. That is not the case for individual donor-advised funds.
Similarly, donor-advised funds are not subject to an upper limit. Although information on the asset size of individual donor-advised funds is not publicly available, anecdotal information indicates that some donor-advised funds’ assets may total in the billions of dollars.
Indeed, a donor-advised fund of any size can be an effective alternative to a private foundation, thanks to fewer expenses to establish and maintain, maximum tax benefits (higher deductibility limitations and fair market valuation for contributing hard-to-value assets), no excise taxes, and confidentiality (including the ability to grant anonymously to charities).
The net-net here is that the decision of whether to establish a donor-advised fund or a private foundation – or both – is much less a function of size than it is other factors that are tied more closely to the objectives a client is trying to achieve.
Myth #3: Donor-advised funds and private foundations are mutually exclusive
Make sure you’re aware of the benefits of using both a donor-advised fund and a private foundation to accomplish clients’ charitable goals. For example:
- Donor-advised funds can help meet the need for anonymity in certain grants, which is typically difficult using a private foundation on its own.
- A donor-advised fund can receive a client’s gifts of highly-appreciated, nonmarketable assets such as closely-held stock and real estate, and benefit from favorable tax deduction rules not available for gifts to a private foundation.
- An integrated donor-advised fund and private foundation approach can help a client balance and diversify investment and distribution strategies to ensure that giving to important causes remains steady even in market downturns.
Some private foundations are even considering transferring their assets to a donor-advised fund at the community foundation to carry on the foundation’s mission. Terminating a private foundation and consolidating giving through a donor-advised fund is sometimes the best alternative for a client when the day-to-day management and administration of the private foundation has become more time-consuming than expected and is taking time and focus away from nonprofits, the community, and making grants.
Along these lines, some families find that the tax rules related to investments, distributions, and “self-dealing” have become harder to navigate and are perhaps even preventing the family from maximizing tax benefits of charitable giving. Finally, the administrative load of managing a private foundation sometimes becomes overwhelming, especially if the family members who handled these functions initially have retired, passed away, or simply become busy with other projects.
The bottom line here is that we encourage you to reach out to our team anytime you are evaluating how to structure a charitable giving plan to achieve both your client’s charitable goals and financial goals. Our team is here to help. In many cases, our tools and services are a great fit for your client’s needs. If not, we will point you in the right direction.
Three Times the Impact with a QCD
The Community Foundation of Southern Indiana currently has a $2-for-$1 match available – through Dec. 31, 2025 – for gifts to our Community Impact Fund, which is used to make grants that address the greatest needs and highest priorities of our community. If you’re at least 70 1/2 years old, a great way to support this is by making a Qualified Charitable Distribution, or QCD.
Although you can make a QCD beginning at 70 1/2, when you turn 73 or older, you get “required minimum distributions” (RMDs) paid to you from your IRA account each year. You can’t avoid these distributions, and they increase your taxable income, sometimes in ways that may negatively impact certain tax credits or deductions, including Social Security and Medicare.
The QCD amount can be counted toward satisfying your RMDs for the year, and excludes the amount donated from your taxable income (unlike a regular withdrawal from your IRA).
Honorable J. Terrence Cody Leads April’s SIEPC Meeting
You’re invited to join the Southern Indiana Estate Planning Council and the Charitable Gift Planners of Kentuckiana on Tuesday, April 8 as the Honorable J. Terrence Cody speaks on “2025 Probate Estate, and Trust Legislation”. Visitors can attend their first meeting free of charge with an RSVP.
Join CFSI for a Day at the Downs!
The Community Foundation of Southern Indiana is excited to announce that it will be participating in Winsday: Great Thrills for the Greater Good, a new Derby Week event that celebrates community spirit and philanthropy.
The event will be held on Wednesday, April 30 at Churchill Downs in Louisville, KY. Thanks to a partnership between the Community Foundation of Louisville and Churchill Downs, Winsday will be devoted to uplifting local nonprofit organizations and spotlighting the crucial work they perform in our community.
By purchasing tickets through a participating nonprofit like CFSI, guests will enjoy a day at the races during Derby week and contribute directly to local causes. A portion of each ticket sale will support the organization’s impactful work around the Kentuckiana community.
Disclaimer: The Community Foundation of Southern Indiana is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter