What is a Community Foundation?

When people hear the word philanthropist, most think of someone with self-sustaining wealth. Billionaires and millionaires are seen on social media and in the news granting money to non-profit organizations, schools and emergency relief for natural disasters. You do not have to be a billionaire or millionaire to be a philanthropist. Philanthropy is the desire to promote the welfare of others; it is the expression of generosity in great ways and small ways. Every day, our friends and neighbors are making decisions to give back to our community. The best donor is the one that is giving $10 a month to their favorite organization. The reason, organizations know they can count on that donor’s monthly gift to help with their day-to-day operations.

You might know community foundations as grantmakers supporting local causes, but the annual grantmaking is an intended outcome of community foundation work. The work itself is mobilizing enduring philanthropy to strengthen the community. It is, in other words, building an endowment for the perpetual benefit of one’s community, whether that is a town, county, state or country.

Depending on a donor’s goals and interests, several options are available to them through a variety of fund types. A donor can support their favorite charity, create a scholarship for their high school or alma mater, or create a fund that helps many organizations through an annual competitive grant process, to name just a few. The benefit is having a direct say in how either current or future giving will happen.

When you hear the word “endowment,” you might think of the endowments held by universities, churches or hospitals. These are the “forever funds” where supporters direct donations to ensure the work that matters to them can go on past their lifetimes. These are also referred to as legacy gifts.

Endowments are not a simple type of math, such as 1 + 1 = 2. Endowment math is more like 1 + 1 = 3. Wise investing and healthy annual distributions help increase the principal of each endowed fund. This means that the annual distributions go up each year, not by leaps and bounds, but slow steady growth. For a donor, it means their favorite charities receive annual distributions in perpetuity that they can place into their annual operational budgets. It also means leaving a lasting impact on the community.

A Community Foundation can be a solution for charitable giving, whether during your lifetime or, more often, after your lifetime. Endowment funds can be created from various assets such as stock, your home or business, and cryptocurrency, to name a few. It is always recommended that any donor talk with their tax preparer or estate planning attorney, if needed, on which assets are the best option to give. QCBN

By Lisa Sahady

Lisa Sahady is the regional director for the Arizona Community Foundation of Yavapai County. Since 2016, she has helped increase ACF of Yavapai County’s asset base by building relationships with professional advisors, individual donors and non-profit organizations. She received her Certified Gift Planning Professional designation through Crescendo’s Gift College for complex estate planning. She can be reached at lsahady@azfoundation.org.