A common question asked by potential donors is “Why donate to the Knox County Foundation instead of directly to a charity of one’s choice, or even the United Way?” The simplest answer is that all of these charitable gifting methods are necessary to ensure the success of the non-profit community. The most common analogy is charitable giving directly to a non-profit organization or the United Way is similar to supporting the organization’s checkbook. These gifts help support the immediate needs and programs being provided to our community today. The Foundation serves as the non-profit community’s savings account, helping grow permanent endowments that will support the financial needs of the charities for generations to come.
Most funds established at Knox County Foundation are intended to become permanent endowments. An endowment fund is intended to last in perpetuity, distributing a portion of the earnings generated by the fund. Based upon the annual review by the Board of Directors, the current spending policy allocates 4.5% of an endowed fund’s average balance to be available for charitable distribution each year. Investment income above these amounts, less allocated expenses, is added to the corpus of the fund to generate future growth.
Contributing to, or creating a fund within, the Foundation assures the donor’s charitable intentions will be carried out in perpetuity. Gifts to the Foundation will be permanently distributed per the fund agreement, the terms of which are usually created by the donor. Should any charitable organization a donor elected to support cease to exist as a qualified charitable entity, the Foundation can employ its variance power to ensure the fund continues to serve its intended purpose. In addition, the Foundation has the investment expertise to properly invest and administer an endowment fund to ensure maximum growth that is not accessible to most charitable organizations. While most non-profit organizations are organized to address a specific charitable purpose such as education or health, the Foundation focuses on investing and managing our donors’ funds prudently.
Supporting a favorite charity through Knox County Foundation may have several other advantages over directly donating to a charitable entity. The Foundation has experience with more complicated donation options that could maximize a donor’s benefit through higher tax savings and other means. Foundations are experienced in working with donors to accept gifts of non-cash items including appreciated stock, real estate, retirement plans such as IRA’s and charitable trusts and annuities. Donations of non-cash items often provide significant tax savings to allow a donor to maximize the benefit of their charitable dollars.
Depending on the fund type selected, a donor may qualify to take a charitable deduction immediately, when it is most tax advantageous, and then distribute the funds over time to beneficiaries which may be determined at a later date. This provides a donor more flexibility to deduct a substantial donation today for tax purposes and then distribute the grants to non-profit organizations over a longer period of time, instead of the charity receiving the entire amount in one lump sum.
The above examples represent only a few benefits of establishing a fund with the Knox County Foundation. If you are considering establishing or supporting an existing fund with the Foundation, we encourage you to meet with us. Together we can discuss your options and whether a fund with the Knox County Foundation can assist you in meeting your philanthropic goals.