To serve or not to serve: Making the most of your nonprofit board experience
Serving on the board of directors of a favorite nonprofit organization is a great way to celebrate a cause you love and share the gift of your leadership. But is a stint on a board of directors the right move for you? It depends.
Here are three factors to help make the decision easier when you are weighing whether to accept an invitation to join a charity's board of directors:
--Be honest with yourself about what you think the nonprofit organization wants from you. Is your perspective valuable because you’ve been personally served by the organization? Is your name well-recognized in the community, making you a magnet for the charity’s positive public relations? Does the charity want your money—or want you to ask your friends for money? If in doubt, ask. Having an open conversation with the charity’s executive director will help you get clarity about what’s expected of you.
--Consider what you want for yourself. Are you interested in getting to know the other people on the board? Do you want to help improve the charity’s financial situation and governance? Are you devoted to this charity and want to give back? There are no wrong answers, but knowing what you want is a key part of ensuring a mutually-beneficial experience.
--Remember that the most important part of serving on a board is showing up. The charity is counting on your smart, objective voice in the board meetings, asking constructive questions, and ensuring that the public’s trust in the charity is maintained. Before saying yes, be sure to find out when the meetings are scheduled. Most boards of directors meet at a pre-set date and time several times throughout the year. If you can’t make the meetings, you and the charity are both better served if you graciously decline the invitation to serve.
Of course, the team at the community foundation is happy to discuss these factors (and more!) anytime to help you make this important decision.
Planning your estate: Capturing your wishes in legal documents
Half of Americans don’t have a will. Why does this matter? If you die without an estate plan, the laws of the state where you live will dictate where your assets are distributed under legal proceedings supervised by the probate court. This prevents you from leaving bequests of your money and property to family members and other loved ones according to the terms you prefer. Plus, you’ll miss out on the opportunity to give money upon your death to the charities you’ve supported during your lifetime.
Even if you don’t have a will, though, chances are, you do have an “estate plan” of sorts. Whether you know it or not, you’ve created a plan through beneficiary designations on your life insurance policies and retirement plans, joint ownership designations on bank accounts, and transfer-on-death designations on stock or deeds to real estate. These beneficiary and ownership designations supersede both state laws and a written will. Many people don’t realize this.
To ensure that your wishes are followed after you die, including making bequests to charities, you should seek the help of an experienced estate planning attorney. An attorney can develop a full estate plan for you that includes not only a will, but also a revocable “living” trust if avoiding probate is a priority for you. You can also sign durable powers of attorney so that a loved one can manage your affairs if you become incapacitated, as well as a living will if you don’t want to be kept alive on life support under certain circumstances. Finally, if you have minor children, an estate plan allows you to name a guardian for the children in the event of your death, instead of the court appointing someone.
Because you are philanthropic, creating or updating your estate plan is a great way to implement your charitable giving plans. The team at the community foundation is happy to work with you and your legal counsel to navigate how your fund at the community foundation figures into your estate plans and goals to leave a legacy.
Due diligence basics: Infusing accountability into your approach to charitable giving
American households enthusiastically give money to charity, volunteer for a favorite cause, or participate in social impact activities in some way. Chances are, you are doing it yourself, maybe even two or three times a year. But how do you know the charity you choose is a good one? That's a good question.
First and foremost, the community foundation is here to help! Our team is closely connected to nonprofit organizations in the community. It's our job, and it's our mission. Please reach out to discuss the organizations and causes you care about.
Second, do your own research. Well-respected national resources, such as Candid's GuideStar, can give you a good sense of a particular organization's financials, governance, and how the charity is measuring the impact of its programs.
Third, check out the charity's website. Does it make sense? Does it look well organized? Can you find the information you're looking for in five minutes or less? You'll be able to get an excellent feel for the way an organization is run, just by looking at how it presents itself online. Check out the organization's website, too, to learn how the organization describes the work it's doing and also to see lists of its staff members and board of directors. These are the people responsible for making sure the organization is fulfilling its mission in a financially sound manner.
Fourth, as you browse the website and look at other materials provided by the charity, see how quickly you can identify the actual people that the charity helps. Not names, of course, but the group of people who are benefiting directly from the charity's activities. So, for example, at a children's hospital, you will want to know that children are being well cared for. If it's a homeless shelter you're supporting, scan the website quickly to look for stories and information about specific activities the charity is doing to help those in need, beyond broad generalizations.
Finally, and most importantly, ask yourself if you truly love this cause. If it feels good to support a cause, that counts for a lot. Giving works best when it's self-defined, and that means defined by you. The results of your giving will be that much better if you support the causes you love, in the ways you choose to support them. Sure, every once in a while, it's okay to support a friend's cause because you care about that friend, but try to stick with your own personal favorite causes as much as you can. Doing good should feel great--to you.
From private foundation to donor-advised fund: What's involved in making a move?
With the total number of private foundations in the United States topping 140,000, with combined assets over $1 trillion, it’s no wonder so many individuals and families immediately think about establishing a private foundation when they begin to explore structuring their charitable giving activities. The growth in donor-advised funds (from $31.1 billion in 2006 to $141.95 billion in 2019!) as a popular tool for organizing charitable giving, however, has caused many philanthropists to consider the benefits of using both a donor-advised fund and a private foundation.
Some private foundations are even considering transferring their assets to a donor-advised fund to carry on the foundation’s mission. How do you know whether this might be a smart move for you? Here are a few factors to consider:
–Whether 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.
–Whether 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.
–Whether the accounting, legal fees, and investment management have become more cumbersome and expensive than anticipated, especially if family members who handled these functions initially have retired, passed away, or simply become busy with other projects.
If you think one or more of these factors may apply to you, the team at the community foundation can help you evaluate your options, working with your tax and legal advisors to ensure that the i’s are dotted and the t’s are crossed. If it turns out that transferring your private foundation to a donor-advised fund at the community foundation is the right move for you, the steps are straightforward–and the community foundation team will assist you every step of the way. Here’s a snapshot of what’s involved:
–The board of the private foundation will approve the termination and capture that approval in meeting minutes or a consent of directors. (The foundation will need to be sure it pays all of its liabilities and expenses before accounts are closed.)
–You’ll establish a donor-advised fund at the community foundation so that the structure for selection and succession of advisors to the fund (who will handle grantmaking) mirrors the board of directors structure of the private foundation. You can name the donor-advised fund so that it matches as closely as possible the name of the private foundation. This ensures continuity and a smooth transition for both family members and nonprofit grantees.
–The private foundation will distribute (grant) its net assets to the newly-established donor-advised fund.
–As long as the private foundation corporate entity is in good standing according to state laws, the foundation’s termination for tax purposes will be automatic and smooth because the community foundation is an organization in good standing that has been in continuous existence for more than five years. The private foundation will then simply file an informational tax return with the Internal Revenue Service for its final year (even if it is a short tax year).
–The last step is for the private foundation to take any steps required for termination under the laws of any and all states in which it was registered, especially if the private foundation was organized in corporate form.
The team at the community foundation 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 is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.