Posts Tagged ‘trust fund’

When you want to do something good by setting up a trust fund but you know this is not your field of expertise, you may feel hesitant taking that first step.  You don’t want to talk to someone at the community foundation until you know for sure what you want to do.  You are smart to hold back because what you need is some preparation time and idea development.  I have divided the whole process into six stops which should work for you whether you are going to Clarion County Community Foundation or another community foundation.

Stop One – Set Up  Since you are going to be thinking about this whole process over many weeks if not months, you need to keep notes on all your ideas and questions.  You cann’t know when you will want to reach back and retrieve an idea you thought should be discarded.  Start with a set of notes from half-sheets of paper or a pocket size notebook which you can keep with you on a regular basis.

Your progress is nonlineal and you can keep two or three promising ideas going at the same time as no decision is final until you make it final.  Above all you need to give yourself time to live with each idea until you know how you feel about it.

Stop Two – Purpose  Can you, in one simple sentence, state what is the purpose of your fund?  Do you want to make the purpose sentence as open as possible?  For example, the purpose of this fund is to support children’s recreation in Clarion County.  Do you want to place some restriction on the purpose?  For example, the purpose of this fund is to support children’s recreational facilities in Clarion County.  Do you want to pin the purpose down to one area of children’s recreation.  For example, the purpose of this fund is to support children’s recreational programs held at the Clarion County Park off Deer Run Road.  You may want to go a step further and identify how the grant committee will be composed or the nonprofit to benefit from the grants.

A general admonition to consider is that the less details included will make the fund easier to administer and more flexible in meeting future needs.  Society is always changing and you want your fund to flow with those changes.  If there are a restrictive clauses to meet, there may be years when it is not possible to award a grant.

Stop Three – Name  There are four ways to go with the fund name.  You can name it in memory of someone whom you loved or admired.  You can honor a living person whom you love or admire.  You can name it in honor of your family or with your own name.  Or you can go with a name that identifies the nonprofit organization you have selected as sole recipient of the fund grants.  Lastly you can identify only the field of interest in which your fund is to work.  Most of all, the name should please your fancy.

Stop Four – Types  For the individual donor or family, there are five types of trust funds you may select to use.  The first type is field of interest funds which allows the donor to identify an area of concern such as education, the family, county veterans, or the visual arts without naming a specific nonprofit as recipient.  This provides flexibility in the present and future as changes occur within the area of interest and the nonprofits active in the area also change.

The second type is donor advised funds for donors who want to participate by providing periodic advice to the foundation board concerning grant recipients.  With this kind of fund multiple generations of a family are united in a continuing commitment to their community.  Recipients of grants must be nonprofit organizations recognized by the Internal Revenue Service.

The third type is scholarship funds for students at a specific high school or university, or students resident in Clarion County persuing a specific area of study.  Usually a set of criteria for qualifying for the scholarship are set out by the donor.  This is a very satisfying type for a memorial as it can be set in the school or interest known to the person being remembered.

The fourth type is restricted funds which indentify one or more nonprofits as the specific recepients of the grants.  The nonprofit may also be included in the name of the fund but does not have to be included.

The fifth type is temporary funds.  These are not endowment funds designed to last in perpetuity, but rather they are set up for the principal and earnings to go to the benefit of a specific project such as purchasing a building, or putting on a new roof which a named nonprofit hopes to achieve sometime in the future.  For this unknown or limited period of time the principal is invested.  When it is needed the principal and earnings are redeemed by the nonprofit.  The fund is then closed.

Stop Five – Sunset  Unless you have used the broadest, most open statement of purpose there is a serious need for a sunset provision.  If for example, you have stated the purpose of the fund is to support Unrestricted Grants, or the purpose of the fund is to support education, then you don’t need a sunset provision.  If you have included details that may change in fifty or a hundred years, your sunet provision needs to allow for those outdated details to be lifted to create a new efficacy.  No one knows, for example, how education will be structured or persued in one hundred years.  School districts may not exist.

A sunset provision may state that if Clarion High School or its successor ceases to exist or reside in Clarion County the fund shall continue to support education in Clarion County.  Or a sunset provision may state that if the United Family Services or its successor ceases to exist or reside in Clarion County the fund shall become a fund serving family and children.

Stop Six – Funding  When deciding how much you want to donate or the kinds of assets you want to use for the donation, you should work those details out with your financial and tax consultants.  If you decide to start small you should set a schedule of donation goals that reach into the future.  If your fund remains small then it can do little to achieve the purpose you have set out.  You do not want the fund waiting for a hundred years before it has grown large enough to matter.

Our initial down payment is $1,000 and when the fund reaches $5,000 it can be activated.  This is alright as a starter but it does not make for a healthy mature fund.  I have named four levels of giving a donor should strive for.  The first is the Cooper Level at $50,000.  At this level the fund may make small grants.  The second is the Silver Level at $250,000.  At this level your fund will affect a measureable change in the area of your concern.  The third is the Gold Level at $500,000.  Grants from your fund will make a substantial contribution to your area of interest and your community.  The fourth is the Platinum Level at $1,000,000 and above.  If you have that much to give then you know the kind of changes your fund will have in the near future and in perpetuity.  The effect will be very large.

Settle in your mind how you feel about the details you have worked out, then give the foundation office a call at (814) 677-5085.  You are ready to sit down and explain what you want.  You are prepared.  Charles Marlin

Read Full Post »