Probate Section topic: Charitable foundations part of estate planning

By Roberta M. Gubbins

Legal News

For clients who have difficulty even thinking about writing a will or making end of life decisions, the added question of leaving a charitable gift may be the furthest thing from their minds. And noted Dennis Fliehman, President and CEO of Capital Region Community Foundation (CRCF), some lawyers are hesitant to bring up the subject, concerned about offending the client.

While most Americans support their favorite charity, there are some who say, "my children are my charity" said Marlaine Teahan.

But for those who wish to leave money to others, the CACF may be the vehicle to use. The Foundation, which holds 65 million in assets, builds a better community by helping individuals or organizations establish permanent, charitable endowment funds.

The Foundation's mission, said Fliehman, "is to improve the lives of folks who live and work in our communities," which includes, "Eaton, Clinton and Ingham Counties."

"The income from the funds, he said, "is spun out into the community in the form of grants to a wide variety of organizations depending on upon the wishes of the donors."

Donor's funds are placed in endowment funds where the income is spent while preserving the principal. The variety of funds reflects the interests of the donors. They include:

* Agency funds are those established by non-profits to benefit themselves. We have about 100 funds for such charities as the Lansing Symphony, the Humane society, Boy Scouts, St. Vincent's home, Children organizations and so forth."

* Designated Funds allow donors to give to a specific charity.

* Field of Interest Funds are for donors who want to support a general area of interest such as youth or the arts. They don't designate a particular organization. The funds are distributed according to the needs of particular charity within that interest area.

* Scholarship Funds: "We have a number of those and work with the schools to find recipients."

* Undesignated Funds are attractive to organizations since the funds can go where there is the greatest need.

*Donor Advised Funds: They are popular with donors who put money into the fund and then designate how the income from the fund is spent. "The nice thing about these funds is that "it separates the charitable deduction from the distribution of the money," he said. "The donor gets the deduction the year it is given to the fund regardless of when it is given to the charities."

Advised funds, he noted, can be an alternative to private foundation. "By putting the money in an advised fund," he said, "they get all the fun of giving the money away" without the hassle of setting up a foundation and complying with complicated tax laws.

Donating to a community foundation holds benefits to donors. In addition to tax benefits, the funds are "flexible, representing all philanthropic interests, there is privacy so the donor won't be hounded for more gifts, the funds are professionally managed and the foundation takes care of details. Community foundations are permanent, stable and guard against lost of principal," said Fliehman.

Providing information and advice on charitable giving to clients is important, Fliehman noted, because it gives the client more planning options as well as helps to build a better community. Fliehman recommends that lawyers raise the issue through the questionnaire their clients complete before the conference.

"While most clients will have a specific charity in mind," he said, "many don't." Asking questions about their interests or providing them with information about a variety of charities can help start the discussion.

When working with charitable beneficiaries it is important to avoid conflicts of interest, he commented. "It's really important that if you recommend a particular charity in which you are involved, you disclose that information to your client and document your file."

Fliehman stressed the necessity of contacting the charity before the gift is "sewn up."

First of all, insure it is the right charity and the right office of that charity. Then insure the charity can use the gift for the intended purpose. His example was a client who wanted to plant a tree on Michigan State campus in honor of his father. When the school was contacted, they agreed to accept the tree but needed $5000.00 endowment to cover the costs of maintaining the tree over the years.

Other considerations are placing overly restrictive conditions on the gift, the endowment investments or spending policies. Those conditions can place "a burden on the organization."

"Informing the charity allows them to do some future planning and is helpful," he said.

In answer to questions, he said.

Is there a minimum for investing in funds? "Ten thousand dollars is usually the limit to establish your own named fund. For scholarships, which require more work, we ask for $25,000. A lot of donors give money to existing funds."

Are there certain gifts in this economy that are better than others? "I leave the expert technical work to the attorneys who know what is in the client's best interests. I can help with information about the charity and what it is doing."

Asked about charities benefiting particular individuals, he said, "The IRS doesn't allow a charitable deduction" under those conditions. For example, giving ten dollars to a homeless person is a charitable act but not a (deductible) charitable donation. Giving the money to the Salvation Army, for instance, that then gives it to the individual is deductible.

Dennis Fliehman can be reached at (517) 664-9857 or

Published: Mon, May 21, 2012

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