Give to Bethel University
Foundational Knowledge
By Angella Hjelle, Executive Director of and Corporate Counsel for the Bethel Foundation
Q: I have seen a lot of information about donor advised funds offered by large brokerage institutions. What is a donor advised fund?
A: A donor advised fund is a charitable giving vehicle that helps an individual set aside funds for charity, avoid capital gains taxes on appreciated assets, receive a current year income tax deduction, and encourage charitable giving across generations.
Q: Tell me some of the advantages of establishing a donor advised fund.
A: A donor advised fund allows a person with charitable intent to make a sizable contribution to charity while allowing that individual considerable time to determine the particular organizations to receive the benefit. The Bethel Foundation received approval from the IRS in 1995 to establish a donor advised fund.
The contribution to a donor advised fund is fully deductible in the tax year it is made. An individual can donate appreciated securities directly to the fund and realize their full value as a deduction without incurring any capital gains tax. This is a wonderful alternative to a private foundation in that it eliminates the complexities, costs, and administrative burden of a private foundation.
There is also great flexibility in recommending the charitable recipients. A donor may recommend grants to charitable organizations of their choice for the life of their fund.
Q: What would be the advantages of establishing a donor advised fund through the Foundation rather than another institution?
A: Perhaps the largest benefit is that the Foundation does not charge an administrative fee for this service. Other institutions that have donor advised fund programs charge an administrative fee of around one percent annually for this service.
Q: How does the Foundation invest the donor advised funds?
A: All of the donor advised funds are invested as one account, while accounting is maintained separately for each individual fund. The Bethel Foundation Investment Committee provides investment policy and oversight of these funds.
Q: If I were interested in establishing a donor advised fund with the Foundation, what are the requirements?
A: The Foundation requires a minimum initial contribution of $50,000 to establish a donor advised fund. Each year the fund is required to distribute income to qualified charities. The Foundation requires that 25 percent of this income distribution be directed to Bethel. Additionally, the donor may direct corpus distributions from the fund, and the Foundation requires that 25 percent of these distributions be directed to Bethel. The 75 percent of income and corpus distributions may be directed by the donor to other qualified 501(c)(3) charities.