Host: Welcome back to the Truist Nonprofit Insights Podcast Series! As families or corporations look to establish a lasting philanthropic legacy, many come to a critical decision point. They may opt to give directly to a public charity, form a private foundation to maintain full control of the endowment's investments, or establish a donor-advised fund with a sponsoring public charity, which offers a lesser degree of donor autonomy. Meghan Pietrantonio, vice president and director of strategic initiatives at Truist Foundation, is with us today to share the pros and cons of these alternatives.
Meghan Pietrantonio: When a client considers formalizing their philanthropy, the greatest question they’re going to see is about control and flexibility. Private foundations will provide the donor the greatest control and flexibility, donor-advised funds will provide the client a middle range of control and flexibility, and then finally, direct gifts will only allow the client to make that decision once, and they relinquish all control and flexibility.
Host: Advisors should be an integral part of this decision process, and they will come prepared with questions related to your circumstances.
Pietrantonio: The four most common questions that advisors should be asking their clients are: what tax deduction limits against the adjusted gross income are needed for that individual or that couple? How much control does the donor want to maintain over investment decisions? How much time does the donor have to commit to administrative responsibilities? And then finally, and probably most importantly, what is the long-term legacy that the donor wishes to leave behind?
Host: Based on your expectations and priorities, an advisor can recommend an appropriate solution that addresses the balance between administrative oversight and financial considerations.
Pietrantonio: When a client is certain about which charitable organization he or she wishes to give to, a direct gift really makes the most sense. However, when the client makes the gift directly to an organization, he or she will relinquish all control at the time, and the control will then reside with the charitable organization.
Host: If you want to make decisions beyond a single gift, you can look at two other options for formalized philanthropy—a private foundation or a donor-advised fund.
Pietrantonio: The advantages of establishing a private foundation is the client maintains control of investments, grant making, governance and administrative decisions such as whether or not to hire staff. Private foundations can elect a board of directors, and establish succession plans, and overall, private foundations offer the client the greatest flexibility compared to other charitable vehicles. Some of the disadvantages are that private foundations are closely monitored by the IRS, and they’re required to annually report activities on the 990TS tax return.
The greatest advantage of a donor-advised fund is that a donor may open the account with a smaller dollar amount than a private foundation. We would recommend that donors making gifts of under $1,000,000 consider opening a donor-advised fund. The sponsoring public charity for the donor-advised fund can provide support to the donor as they continue to maintain some control over grant decisions. In addition, there are not as many IRS regulations on donor-advised funds. Some of the disadvantages of donor-advised funds are that the donor has less control and flexibility, so at the time of the gift, the donor relinquishes governance and control over investment decisions.
Host: Donating a large gift at one time may make a difference in the moment, but typically won't have a lasting impact. If you are thoughtful and strategic about formalizing your philanthropy, you can feel confident that your efforts will pay off over future generations.
Pietrantonio: One of our clients established a foundation in 1952 with $100. Today, the foundation has made grant distributions of over $7,000,000, and the market value of the foundation is now greater than $9,000,000.
Families that invest their money in a foundation and allow that compounding interest to grow over time will have a very long-lasting legacy of philanthropy in the community. Clients choosing to formalize their philanthropy can look back over the generations and be very proud.
Host: Thank you for the great insight, Meghan! We hope our listeners have a better understanding of charitable giving alternatives, and what to consider when deciding which option works best for their future. For more information, please speak with your Truist relationship manager or advisor, or visit us online at Truist.com and search for charitable giving.
This podcast was brought to you by the Truist Foundations and Endowments Specialty Practice, which has more than a century of experience working with not-for-profit organizations delivering comprehensive investment advisory, administration, planned giving, and trust and fiduciary services to over 700 not-for-profit organizations.
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