Family Directed

Donor advised funds (DAFs) are becoming a popular way of supporting charities while exercising more control and input than is available with an outright gift. Like a Support Organization, a donor advised fund is regarded as a public charity. It tends to be more flexible than a Private Foundation. The Church's donor advised fund allows you to give your cash or marketable securities at a time that is advantageous for tax purposes, allowing you later to decide which charities you would like to support. You may give all of the proceeds from the fund to the Church and its institutions, or you may choose to give up to 60 percent to other charities of your choice.

The typical donor:

• Has a larger than average estate.
• Wants to time the gift to his or her tax situation.
• Desires to involve the family in gift-making decisions.
• Wants to give now, but not sure which charity he or she wants to benefit.

Gift features and benefits:

• Gift tax deduction based on full market value
• Separates timing of gift with delivery to charity
• Creates philanthropic training ground for the family
• Allows family involvement after your death

How Do I Make a Gift Using a Donor Advised Fund?
A donor advised fund for the Church and its institutions is administered by the Deseret Trust Company. You sign appropriate documents and then transfer cash or marketable securities to Deseret Trust Company. Each year, you and those family members you select advise Deseret Trust Company as to those charitable causes that you wish to receive income and any principal you desire to give. Your decisions may differ from year to year. You should be sure your financial and legal advisors are part of your gift strategy team. Use of a donor advised fund is only effective as a part of an overall financial and estate plan. The professional staff at LDS Philanthropies can assist you and your advisors in participating in the donor advised fund.



Other Facts You Should Know about a Donor Advised Fund
There are many advantages of a donor advised fund:

• Flexibility in timing and where you give: you can make a gift to the Deseret Trust Company donor advised fund and take an immediate charitable income tax deduction; you can choose later those charities that should receive gift distributions and how much they will receive.
• Tax benefits: tax benefits are more favorable than those available by using a private foundation.
• Less complex: you are not required to file separate tax returns or accountings; donor advised funds are not subject to private foundation rules.

There are also some disadvantages of a donor advised fund:

• Limited control: you do not enjoy the same control as you would with a private foundation.
• Reduced charitable emphasis: some for-profit institutions that offer donor advised funds may care more about management of the assets than the gifts created.

A support organization offers both the operational advantages of a Private Foundation and the tax advantages of the public charities they support. A support organization is subject to fewer restrictions than a private foundation but offers you less control over administration and distribution. It is a unique type of charitable organization because of its special relationship to a public charity. It is classified as a public charity, as opposed to a private foundation, which is a private charity. Essentially, by establishing a support organization, you choose either one or several charitable organizations to benefit from the support organization. The support organization will manage the funds. The support organization may support more than one charity, but all charities must be named at the time the support organization is established.



The typical donor:

• Has a larger than average estate.
• Wants to time the gift to his or her tax situation.
• Desires to involve the family in giving decisions.
• Wants to give now to eventually benefit one or more charities.

Gift features and benefits:

• Gift tax deduction based on full fair market value
• Separates timing of the gift with delivery to the charity
• Creates a philanthropic training ground for a family
• Allows family involvement after your death

How Do I Make a Gift Using a Support Organization?
If you choose to create a support organization that supports the Church and its institutions, LDS Philanthropies' professional staff can help you understand the benefits and options. A support organization is created by a formal document that describes the involvement of the Church and those it appoints to join you and your family members in choosing gift income recipients from among the charities named in the document.

Support organizations should only be considered with the help of your financial and legal advisors. They should be part of a well thought-out financial and estate plan. Once created, a support organization is an effective setting for implementing your family values and perpetuating those values after your death.



Other Facts You Should Know about a Support Organization
A support organization must be structured to meet three tests:

1. Organizational test: the support organization must be organized and operated exclusively for the benefit of, perform the functions of, or carry out the purposes of one or more specified public charities.
2. Disqualified persons test: certain disqualified persons cannot control the support organization, directly or indirectly.
3. Relationship test: requires that the support organization be operated, supervised, or controlled by or in connection with the charity.

There are many advantages of a support organization:

• No minimum distribution requirements.
• No annual payments, no minimum amount of money in the support organization must be paid out annually, unlike a private foundation, which must pay out 5 percent of asset value for annual distribution though the support organizations must pay out substantially all its net income.
• Higher income tax deduction than a private foundation—50 percent for cash and 30 percent for appreciated property contributions.
• No excise tax.
• No self-dealing limitations.
• No limit on holdings in business corporations and enterprises.
• Allows a variety of investments, such as real estate, restricted stock, closely held stock, and risky investments.
• Can support more than one organization.
• Donor can be involved with board members of the charities, allowing you to work closely with and get to know more about the charitable organization.

There are also some disadvantages of a support organization:

• Less control than a private foundation.
• Less spontaneity and less freedom to choose charities; must be structured to support specific charities.

Private foundations have been a popular and effective method for wealthy families to create a family legacy of philanthropy. Much good has resulted in communities at large by the creation and use of private foundations. Billions of dollars have been given over the last century and beyond to benefit society. Congress has greatly limited the tax benefits of private foundations, but they may still be a suitable giving vehicle if control is the major objective in giving.



The typical donor:

• Has a larger than average estate.
• Wants to time the gift to his or her tax situation.
• Desires to involve family and heirs in gift-making decisions.
• Wants to give now, but not sure which charity he or she wants to benefit.

Gift features and benefits:

• Must distribute a minimum of 5 percent of the fair market value annually
• An annual excise tax of 2 percent on net investment income
• Gives you more control than a Donor Advised Fund or Support Organization
• Creates philanthropic training ground for family
• Allows family involvement after your death

How Do I Make a Gift Using a Private Foundation?
Your legal and financial professionals can assist you in drafting the necessary documents to create a private foundation. Specific provisions in these documents will be tailored to meet your individual and family desires. LDS Philanthropies' professional advisors will be happy to consult with you and your professionals.



Care must be used in choosing giving options associated with a private foundation. Once the foundation is created, prohibited transactions must be avoided, such as self-dealing, failure to meet distribution rules, excess business holdings, speculative investments, and lobbying efforts or other noncharitable distributions.



Other Facts You Should Know about Private Foundations

There are many advantages of a private foundation:

Personal advantage: creating a private foundation is in essence creating one's own personal charity; a private board is hand selected for the foundation.

Family advantage: a donor and his or her children frequently constitute the entire board of a private foundation; a private foundation can provide a structure for a family's charitable activities; family members can be involved in making grants and helping future generations understand the meaning of philanthropy.

Control advantage: private foundations provide great freedom and spontaneity in gift giving. The donor and the foundation's board have absolute control and can hire their own staff; they can choose which charities to benefit.

There are also some disadvantages of a private foundation:
Expense: legal counsel must be obtained to create a private foundation; the start-up and administrative costs for creating a private foundation are high; the 2 percent excise tax on net investment income and other financial disadvantages can affect your ultimate giving ability.

Detailed administration: you are responsible for record keeping and tax return preparation for the foundation; detailed reporting and allocation of expenditures are required; this adds to the expense of creating a private foundation and also adds to its complicated nature.