What is a Donor-Advised Fund?
A Donor-Advised Fund (the “Fund”), as defined by federal legislation, possesses three characteristics:
- The Fund is owned and controlled by a sponsoring organization, for example YouthBridge Community Foundation (“YouthBridge”).
- The Fund is separately identified with reference to the contributions of a donor or donors, for example the Smith Family Fund (established by the Smith family).
- The donor or persons appointed by the donor expect to have the privilege of providing advice with respect to the Fund’s distributions (the “Advisors”).
A Donor-Advised Fund is created with a gift agreement between a donor and YouthBridge. Donors may be individuals, families, foundations or businesses. A Donor-Advised Fund is activated once YouthBridge receives the Fund Agreement and an initial gift of any size. Donor-Advised Funds are not typically permanently endowed, allowing the original donor(s) to suggest grants made from principal. The Advisor(s) named in the agreement may recommend grants from the Fund to qualified charitable organizations. Once all Advisors, or successor Advisors (if any), are deceased or incapacitated, the Fund becomes part of YouthBridge’s unrestricted funds, a Field of Interest Fund or a Designated Fund depending on the donor’s intent at the time the Fund is established. The donor may name the Fund, subject to approval by YouthBridge. Unless the donor requests that a Fund be anonymous, it may be disclosed by YouthBridge. The Fund will be identified to grant recipients unless the Advisor requests anonymity, on a case-by-case basis.
Contributing to a Fund
Gifts to a Fund are irrevocable. The assets of a Donor-Advised Fund are owned and controlled by the YouthBridge. Contributions to a Fund may be made in any amount and may be made using cash, publicly traded securities or other property, including closely held stock, partnership interests, real estate, personal property, trusts and life insurance. Contributions may be added at any time and in any amount, subject to the Gift Acceptance Policy of YouthBridge. Contributions should be clearly designated by Fund name: “The XYZ Fund of YouthBridge Community Foundation.” Many Donors make contributions using appreciated publicly traded stock that has been held for longer than a year, to enjoy maximum tax benefits. Contributions of property that may not have immediate liquidity are accepted at the discretion of YouthBridge and subject to completion of our due diligence procedures. Donors considering a gift in any form other than cash should contact YouthBridge to discuss its appropriateness and to obtain delivery instructions.
Once a Donor-Advised Fund has been activated, the Advisor(s) named in the agreement may recommend grant distributions to qualified charitable organizations. Unless otherwise restricted in the agreement, grants may be recommended out of the original principal, as well as accumulated investment earnings, if any. Grant recommendations can be made at any time during the year. Distributions from a Donor-Advised Fund have no tax impact for the donor because the tax-deductible gift was made at the time of the donor’s gift to the Fund.
Recommendations for grant distributions should be submitted online by accessing your account at www.YouthBridge.org. Although we prefer online grant requests, YouthBridge will accept written grant recommendations. YouthBridge encourages Advisors to distribute at least 5% of the Fund balance annually.
Qualified charities generally include those described in section 501(c)(3) of the Internal Revenue Code that are not also private foundations, and certain governmental organizations. These include charitable, religious, and educational organizations, as well as school districts, public libraries and other units of government. Examples of organizations NOT eligible for distributions from a Donor-Advised Fund include fraternal orders, organizations whose primary purpose is lobbying, cemetery associations, and funds set up to provide emergency relief to specific individuals or families. If an Advisor is concerned about a particular recommendation, YouthBridge can pre-screen an organization for eligibility.
Once a recommendation is received, YouthBridge will perform due diligence to verify that the organization is a qualified charity. For most organizations this process can be completed in a few days. YouthBridge may require an affirmative response from the organization before awarding a grant, which may increase the processing time. Our practice is normally to follow the Advisor’s recommendation; however, the final decision about all grant payments is vested with YouthBridge as required by law. Once YouthBridge approves the grant, a check will normally be issued within 7-10 business days.
Grant Restrictions and Prohibitions (IRS regulations)
Grants from a Donor-Advised Fund cannot result in the donor, Advisors, or any related parties receiving an exchange of goods or services or any personal or material benefit that is not provided to the general public. Prohibited benefits include tickets, memberships, meals, preferred parking, preferred seating, discounted merchandise or other preferential treatment from a recipient organization.
Donor-Advised Fund grants also cannot be used to satisfy all or a portion of a pre-existing personal pledge or other financial obligation of the donor, Advisors, or any related parties. Advisors may, however, recommend that a grant be paid out over multiple years, subject to grant approval and annual due diligence.
Provisions of the Pension Protection Act of 2006 prohibit Donor-Advised Funds from making any grants to individuals such as scholarships, emergency hardship grants or disaster relief grants. This includes checks written directly to an individual or checks written to an entity for the benefit of a specified individual. For example, a grant to a university for the benefit of a designated student is prohibited.
Donors, Advisors, or any related parties may not receive grants, loans, compensation or similar payments (including expense reimbursements) from Donor-Advised Funds.
Unless requested otherwise, the grant letter will indicate that the contribution is from “The XYZ Fund”. Additional language in the grant letter confirms that no benefits have been offered or provided to YouthBridge or the Advisor in exchange for the accompanying grant. If the recipient organization publishes a news release or a list of donors, it is asked to indicate the contribution as a grant from “The XYZ Fund of YouthBridge Community Foundation.”
Partners in Philanthropy: Voluntary Support for Community Programs
YouthBridge provides community programs that support children, promotes philanthropy and helps nonprofit organizations become more sustainable. Donors are invited to partner with us and support the work we are doing in the community.
Successor Gift Advisors and Ultimate Use (applies to individual and family donors)
The original donor—who is often the original Advisor—may name successor gift Advisors at the time the Fund is established. Frequently these are the children of the original Advisor. The donor and the Successor Advisors are encouraged to take advantage of the knowledge and expertise of the YouthBridge grant making staff.
Following the death or incapacity of the last Advisor, Fund assets will be transferred to the unrestricted endowment pool of YouthBridge in support of the YouthBridge mission. The original donor has the option, however, at the time the Fund is created, to name a field of interest, designate organizations that should benefit from the Fund, or establish a permanently endowed Fund, all subject to the YouthBridge’s variance power. YouthBridge may establish minimum account sizes for designated or permanently endowed Funds.
If a Fund is dormant for three years, YouthBridge will make a good faith effort to contact the Advisor(s) and encourage them to recommend a gift. If YouthBridge is unable to establish contact with the Advisor(s) or Successor Advisor(s), YouthBridge will use the Fund balance at its own discretion.
Assets of Donor-Advised Funds are normally commingled with the investment assets of other Funds for investment purposes. YouthBridge offers a variety of pooled investment funds permitting the donor to select one pre-set asset allocation strategy or to create a customized asset allocation strategy. These investment pools are all managed by professional money managers and monitored by an investment committee. More detailed information about each investment pool is available as a separate exhibit.
A donor may request a segregated account and recommend a financial advisor to work with the YouthBridge Financial Advisor Program. As a participant in the Financial Advisor Program, the selected financial advisor will be responsible for the management of the assets of the Fund, and he/she will do so in accordance with the most current financial policies and standards of YouthBridge.
In accordance with Internal Revenue Code regulations, YouthBridge has the final authority regarding the investment of assets and the selection of financial advisors.
Summary of Administrative Services
Standard services include:
- Dedicated Client Service Representative
- Annual Client Service Review – planning for upcoming year, review of prior year, discuss goals & objectives
- Level I Grant Support – upon request create “short-list” of grantees, research nonprofit grant eligibility, issue grant payments
- Fund Account Administration – fund accounting with monthly statements and online access
- Investment of Fund Assets – access to low cost, institutional quality investment solutions
- Financial Advisor Program – work with external investment advisors upon client recommendation
- Standard Gift Processing – cash and publicly traded securities
The following additional services are available and quoted upon request:
- Level II Grant Support – proactively provide grant recommendations, conduct and coordinate site visits
- Grant Management – competitive grant process; soliciting applications, due diligence, recommendations and impact reporting
- Family Retreat / Additional Meetings – organize, plan, facilitate and document family meetings
- Holistic Grant Support – coordination and reporting of grants and gifts made from external charitable funds and trusts
- Complex Gift Processing
Fees & Expenses
An annual administrative service fee applies to all Funds at YouthBridge. This fee is assessed on the Fund’s market value as follows:
0.50% on the first $2 million
0.35% on the next $3 million
0.25% on the next $5 million
0.15% on the balance over $10 million
Administrative fees are pro-rated and charged monthly. The minimum administrative fee is $250 per year.
When invested in pooled investment funds available through YouthBridge, each Fund bears its proportionate share of any investment related expense charged to the pooled investment fund(s). More detailed information about each investment pool is available as a separate exhibit.
Segregated accounts managed by a designated financial advisor through the Financial Advisor Program incur investment expenses charged by the financial advisor and expenses incurred by the underlying investments held within the account such as mutual funds, ETF’s, investment managers etc. It is the responsibility of the designated financial advisor to fully disclose all investment expenses.
Any extraordinary expenses incurred by YouthBridge for performing services beyond our usual and customary services or special processing required by a Fund shall be passed through to the Fund. These include expenses involved in special grant processing, credit card processing, and review and processing of non-standard assets such closely held stock, partnership interests, real estate, personal property, trusts and life insurance.
YouthBridge policies and fees are subject to change.