Where should I start if I am considering a Donor Fund?
Congratulations! If you are considering establishing a donor fund with the Knox County Foundation, you have started at the right place. Our website provides a wealth of information about the Foundation, the types of donor funds we support, and available donor programs. Once you have become familiar with this information, please feel free to call our office and meet with our knowledgeable staff. We can provide more in-depth information tailored to your specific needs and goals. Often donors find it beneficial to include their tax advisor, attorney, or estate planner in these meetings. This way we can be positive that your philanthropic intentions are addressed in the most effective manner for both you and the charitable cause you wish to support.
What is involved in creating a Donor Fund?
Establishing a fund with the Knox County Foundation is easy. Our staff will help guide you through the process. When considering a donor fund, the first step is determining which type of fund works best for your goals. Do you want the flexibility of a donor advised fund? Perhaps a field of interest fund better addresses your needs? Once you know what type of fund you wish to establish, the next step is to determine when, how, and the amount you wish to contribute to your fund. Do you wish to give immediately or as part of your estate planning? Does your individual tax situation support a cash gift or does the gifting of stocks or a charitable IRA distribution make more sense? How much would you like to contribute and what type of income stream does that generate for your charitable cause?
Once these questions have been addressed, we can draft a Fund Agreement that establishes the terms of your fund. This Fund Agreement is the legal document that dictates how your fund will operate.
Do I have to create my own fund to contribute?
Anybody can contribute to the Foundation regardless of whether they have created their own fund. The Foundation’s “Knox County Competitive Grants Fund” receives contributions from a diverse range of donors annually to support our grant programs and initiatives. Many non-profit organizations have funds with Knox County Foundation that allow a donor to donate directly. In addition, there are hundreds of scholarship funds established to benefit selected populations of students including those specific to a particular high school, a specific major, or college. If you have questions about an existing fund that you may wish to support, reach out to us and we can provide further details about that fund and how it operates.
How much do I need to start a new fund with KCF?
The minimum amount to start a new fund is $10,000, aside from Scholarship Funds, which have a minimum of $25,000. Based upon current Spending Policy, for every $10,000 held in an endowed fund, approximately $500 may be distributed annually to the charitable entity or scholarship recipient. Under certain conditions, qualifying donations may be eligible for the Foundation Forward match. The Foundation Forward Program is a fantastic option for donors looking to maximize their charitable giving potential.
Can I contribute or establish a fund anonymously?
Whether it is a gift to the Foundation or a fund held within the Foundation, a donor can always request to remain anonymous. An anonymous gift will be reported in all published documents as received from an anonymous donor. Those who have funds with the Foundation but prefer not to have their charitable activity publicly known can name the fund in a fashion that does not reveal their identity. For example, a donor could establish a fund named “The Knox County Youth Support Fund” and contribute to the fund anonymously. The donor can still dictate the terms of how the fund is to operate and how charitable distributions will occur, however, there will be no indication to grantees of the donor associated with the fund.
Can I only distribute to charitable purposes from my Donor Fund?
Yes, any contribution to a Knox County Foundation fund is considered a completed charitable gift for I.R.S. purposes. Assets held in a donor fund become assets of the Foundation and must be distributed only for qualifying charitable purposes consistent with the terms of the Fund Agreement. Once a donor makes a gift to the Foundation, the funds may not be spent for any personal use of the donor or anything that benefits the individual directly. Any assets in a donor fund may never be returned to the donor.
Is my Donor Fund maintained in a separate investment account?
No, all funds established with the Foundation are pooled into consolidated investment accounts with other funds that have similar investment philosophies. This allows for proper diversification of assets and lowers related investment fees. On a monthly basis, investment earnings and overhead expenses are allocated to each fund based upon a weighted average percentage of the fund compared to the consolidated pooled investment account. Although investment income and expenses are allocated on a weighted basis, all gifts to and grants from a donor account are allocated specifically to the related donor fund. Each quarter a report is distributed to donors detailing all allocated investment activity and expenses along with gifts and grants specific to their donor fund.
How are assets in my fund invested?
Our investment committee, composed of individuals with decades of investment experience, along with input from our investment advisors, has created an investment policy that balances investment returns for long-term sustainability while minimizing risk from fluctuating and uncertain markets. Our primarily investment pool is targeted to invest approximately 70% of its assets in equity securities (dividend generating) and 30% in fixed income holdings (interest earning). To provide diversification of the overall portfolio, investments include U.S. domestic and international holdings, index funds and ETFs, corporate and governmental bonds, publicly held and private capital funds, real estate, and cash equivalents including certificates of deposit and money market funds.
Can I keep funds with my current investment advisor?
While we appreciate a donor’s relationship with their existing advisor, establishing an investment agreement between the Foundation and another advisor that we currently do not maintain a relationship with can be complicated. Two potential hurdles must be cleared before the Foundation will accept a new investment advisor. The first issue is related to the current and projected market value of the potential donor fund. Due to our requirements regarding diversification and the administrative burden of incorporating additional investment advisors and accounts, we are only able to work with advisors who will manage investment assets above a certain dollar threshold. This threshold can vary based on several factors as determined by the investment committee. Also, any investment advisor must agree to invest all assets in a matter consistent with our investment policy. Before a new investment advisor is approved, the Foundation’s investment committee must complete a thorough review to verify the advisor’s investment experience and core strategies, in addition to their historical and expected investment performance.
What fees are charged to my Donor Fund?
The Foundation does not charge any initial start-up fees to create a donor fund. However, it is important to remember the Foundation does incur internal costs for staffing and office operations in addition to fees assessed by our investment advisors. To cover these expenses, all funds held by the Foundation are subject to an administrative and investment fee to provide an income stream to cover operational and investment manager costs. The approved inclusive fee to be charged for all funds, except for Scholarship Funds, is 1%. (Scholarship funds with a fund balance below $50,000 are assessed a 1.5% fee, those with a fund balance between $50,000 and $250,000 are assessed a 1.25% fee, and those with a fund balance above $250,000 are assessed a 1% fee. The minimum annual fee for any scholarship fund is $100.) All fees are calculated and paid quarterly (0.25% per quarter). The quarterly fee is calculated using the fair market value of the most recently completed quarter, not the 12-quarter rolling quarter calculation used for charitable payout. For example, a donor advised fund that has a fair market value average of $10,000 will be assessed a $25 fee quarterly, for a total of $100 annually. Our fees are all-inclusive and there are no separate assessed fees for investment services.