Cryptocurrency: Likely a “no” for endowment investing, but a big “yes” for gifts
Growing your endowment fund at the community foundation is no doubt a top priority. Through your endowment fund, your donors have a meaningful opportunity to ensure that your mission stays strong for generations to come.
As always, the team at the community foundation is happy to be a sounding board on tricky issues like cryptocurrency so you don’t find yourself scrambling to answer donor questions.
Here’s what you and your board of directors need to know:
The high volatility of cryptocurrencies, coupled with regulatory uncertainty and cybersecurity risks, generally makes them an unsuitable investment for charities’ endowments, and that is certainly the case for your endowment fund at the community foundation. Indeed, the community foundation and its board of directors takes seriously the fiduciary responsibility to manage funds prudently, and the speculative nature of crypto investments could jeopardize your organization's financial stability.
At the same time, your fundraising team may wish to actively encourage cryptocurrency donations to your endowment fund at the community foundation. Notably:
–Even across the globe, the average crypto donation is significantly larger than traditional gifts, sometimes up to five times the size.
–Accepting crypto donations allows nonprofits to tap into a new demographic of donors who are typically younger, forward-thinking, and tech-savvy individuals–who are often quite affluent.
–Don’t overlook the potentially compelling tax benefits for crypto donors. Because the IRS treats cryptocurrency as property, donors may be able to avoid capital gains tax and benefit from a favorable income tax deduction when they donate appreciated crypto assets.
The community foundation can help you work through the sometimes tricky process of accepting cryptocurrency gifts into your endowment fund, including what types of gifts the fund will accept, how long the fund will hold the asset, and completing all the technical steps required for a cryptocurrency transfer by leveraging the services of a qualified intermediary. Please reach out anytime to learn how your organization’s endowment can grow by appropriately embracing cryptocurrency donations.
Show me the money: When does your endowment fund actually receive a bequest?
For decades, bequests have been a small but relatively steady component of total charitable giving in the United States. You certainly understand the importance of bequests to growing your endowment fund at the community foundation. To that end, your fundraising materials likely include language to encourage donors to include endowment bequests in their wills or trusts. A donor can leave a particular dollar amount through a “specific” bequest, or leave a portion of the estate or trust remaining after taxes, expenses, and distributions to family and other beneficiaries (known as a “residuary” bequest). A donor can also name your organization’s endowment fund as the beneficiary of an IRA or other retirement plan.
So, after a donor passes away, when does your endowment fund actually receive the money? It depends on the type of bequest, and the money rarely arrives quickly. But, the community foundation can help. For example:
–If a donor names your endowment fund at the community foundation as the beneficiary of an IRA, the community foundation will pursue a transfer of the proceeds from the IRA administrator as quickly as possible.
–In the case of a donor who names your endowment fund as the recipient of a bequest in the donor’s will, which is subject to probate, full distribution of a residuary charitable bequest will typically occur after the probate process is completed. A specific bequest of a certain dollar amount may be released in a “partial distribution” earlier in the probate process. A complete probate process can take several months or even more than a year, depending on the complexity of the estate
–If a donor has left a charitable bequest in a trust rather than a will, and therefore the estate is not subject to probate, distribution of the bequest may happen faster, but still, especially in the case of a residuary bequest, the trustees will want to ensure that all expenses, taxes, and other liabilities of the deceased donor can be covered before the trustee makes any distributions to beneficiaries, including to your endowment fund at the community foundation.
One of the benefits of working with the community foundation is that the community foundation team will take the lead on pursuing distributions from donors’ bequests to your organization’s endowment fund. Please reach out anytime with questions and to learn more!
Charitable children: Inspiring donor engagement to grow your endowment
Year-end gifts are a crucial component of every nonprofit organization’s operating budget, and December is a wildly busy time! Even with so many transactions flying around, it’s still important not to lose sight of the relationship side of fundraising, especially so that you and your team can continue to intentionally and methodically cultivate gifts to your endowment fund at the community foundation.
More than half of nonprofit organizations say they don’t have donor engagement plans. That’s a lot of missed opportunities! Enhancing donor engagement by creating entry points for their children is a strategy that can deliver a lot of good throughout the year, year after year.
Here are three ways to plant seeds with donors about how leaving a legacy to your organization’s endowment creates meaningful opportunities for family engagement:
Help donors celebrate their legacies. Encourage donors to talk with their children about why they’ve chosen to support your organization over the years, and why they are particularly interested in ensuring that your mission stays strong for generations to come. Offer your donors tangible examples of how your mission could help their children–and their children’s children and grandchildren–at critical junctures many years in the future. This helps reinforce the power of endowment giving across generations.
Offer site visits, with a twist. Naturally, you and your colleagues regularly encourage donors to see your work up close. But have you considered encouraging donors to bring their teenage or adult children along to a site visit? And have you made sure that during the site visit, you are pointing out longstanding programs that are made possible only because of gifts to your endowment fund over the years? Wrapping these two elements into your site visit strategies can give your endowment fundraising an instant boost.
Make it easy for young donors to donate to your endowment. It’s never too early to start talking about endowment gifts! If your fundraising strategy includes outreach to children of current donors, or emerging philanthropists in general, be sure your communications and marketing materials include at least basic language about supporting your endowment. You want all of your donors to see that giving to your endowment fund at the community foundation is always an option, at every stage of a donor’s philanthropic journey.
Please reach out to the team at the community foundation to explore these and other ideas for engaging young givers in your endowment-building efforts. We are here to help!
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.