Triangle Community Foundation truly appreciates our partnerships with the many accountants, attorneys, and financial advisors who recommend the Foundation as a philanthropic partner for their clients. Many referrals we receive from professional advisors are from clients interested in opening a donor-advised fund (DAF), known for its tax benefits as well as flexibility in managing charitable giving, and gaining access to the Foundation’s knowledge of the local nonprofit community. A DAF is a perfect vehicle for almost all types of donations, from appreciated stock to cash to real estate or other in-kind assets.
Except….
DAFs are prohibited in Internal Revenue Code (IRC) §408(d)8 from receiving a Qualified Charitable Distribution (QCD) or Required Minimum Distribution (RMD) from an IRA account. Why, you ask? The code states that a QCD §408(d)8(B)(i) must go to a public charity, and also specifies it cannot go to a “supporting organization” [§509(a)(3)] or a DAF [§4966(d)(2)]. The IRS has ruled that a DAF does not qualify under its guidelines for QCD or RMD donations because a donor to a DAF retains “advisory privileges.”
So what can you do with your QCD or RMD?
Donors who wish to use their QCD or RMD can always make a direct donation to a nonprofit organization that meets the IRS criteria, and there are several fund options at the Foundation that qualify for QCD or RMD donations under the IRS guidelines:
Designated funds are established by the donor to support one or more specific nonprofit organizations or programs to which they are dedicated and can impact long term. The donor can set a grant amount that is automatically distributed each year, providing a reliable source of income to nonprofits, and peace of mind to the donor through automatic, annual grantmaking. If a designated organization ceases to exist, the Foundation works with the donor or advisor to identify a similar program that maintains the spirit of the original charitable intent.
Field-of-interest funds are established to support unspecified programs or organizations in a general field of interest (such as the arts or the environment) important to the donor. This type of fund serves as a permanent endowment, and the Foundation will carry out the purpose the donor chooses, today and for generations to come.
Scholarship funds are established by donors who want to support a student’s growth through educational opportunities or by recognition of success in a particular discipline. Donors may recommend an academic focus for their scholarship fund, eligibility criteria, and often work in committees to choose recipients.
Unrestricted funds are distributed through our Fund for the Triangle at the discretion of the Foundation’s staff and Board of Directors. Fund for the Triangle is set up to directly benefit our four impact areas (Capacity Building, Cultural Arts, Education & Youth, and Sustainable Communities) in perpetuity. We are dedicated to enhancing the lives of everyone in the Triangle, and one of the ways we do that is by focusing direct funding, research, and convenings in these areas.
Our development team is here to assist you or your client in identifying the right vehicle to achieve philanthropic goals. To learn more about the Foundation or to further discuss giving options, please email development@trianglecf.org.
NOTE: This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.