Frequently asked questions

1. What tax advantages will I enjoy with a Fund?
2. Why is the community foundation a better way for me to accomplish my charitable giving?
3. What kinds of assets can I use to create a Fund or add to a Fund?
4. I can not afford to part with my assets or income right now. Are there any options open to me?
5. I can afford to give up the income right now, but would really like to reserve the assets for later in life. Is that possible?
6. How are Funds managed?
7. What are your administrative service fees?
8. How much do I need to start a fund?
9. How are grants made?
10. How do you determine the spendable amount for grants?
11. Would establishing a private foundation make sense for me?
12. There are so many ways to give. How can I decide which is best for me?

"Cumberland Community Foundation does not render legal, accounting or tax preparation advice.  Consult your tax and legal advisors about your specific situation."

1. What tax advantages will I enjoy with a Fund?
Cumberland Community Foundation, Inc., with its 501(c)3 public charity status, offers tax advantages to the extent permitted by law. Your contribution to a fund here may receive a higher deduction than the same gift to a private foundation.

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2. Why is the community foundation a better way for me to accomplish my charitable giving?
Consider the following benefits:
Service: Our staff provides personalized attention, working directly with individual donors to meet your philanthropic needs.

Cost-effective administration: Fund fees are generally lower than those charged by financial institutions because our invested pool of assets benefits from an economy of scale and our operating expenses are endowed.

Management assurance and performance: Founded in 1980, the community foundation currently holds assets of almost $40 million. A Fund at the Foundation can be expected to grow to provide for community needs of future generations.

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3. What kinds of assets can I use to create a Fund or add to a Fund?
Several options are available to you, and we would be happy to discuss each and its advantages with you personally:

• Cash
• Securities (stocks, bonds, mutual funds)
• Closely Held Stock
• Real Estate
• Life Estates
• Personal Property
• Life Insurance Policies

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4. I can not afford to part with my assets or income right now. Are there any options open to me?
Absolutely! Through deferred giving vehicles such as charitable remainder unitrusts and annuity trusts or gift annuities, you can plan to create a fund in the future while receiving current-year tax deductions, increasing your current income, helping you diversify your portfolio and avoid capital gains, gift or estates taxes. Of course, you can also make a bequest through your will. Call Mary Holmes at 910-483-4449 for more information.

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5. I can afford to give up the income right now, but would really like to reserve the assets for later in life. Is that possible?
Yes, you can do that through a charitable lead trust. The trust would provide income to your Fund during the term of the trust. At the end of the trust, you or even your heirs can receive the assets, with estate and/or gift avoidance.

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6. How are Funds managed?
Funds are managed by several outside investment firms in a diversified investment portfolio structure. Investment performance and management are regularly reviewed by the Investment Committee of the Foundation and reported to the donor. Policies are frequently updated to reflect the best practices for endowment management. Investment managers must adhere to the Foundation’s Investment Policy.

With a few exceptions, all managers are asked to keep 60% equity and 40% fixed income asset allocation within their respective portfolios. Donor Advised Funds greater than $1,000,000 may request an individual investment policy subject to approval by the Foundation’s Board of Directors.

Click here to view Investment Managers (pdf)

Click here to view the Foundation’s Investment Policy (pdf)

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7. What are your administrative service fees?

The Foundation provides administrative services for every fund. Endowment and special project funds are charged an administrative service fee. The service fee varies according to the type of fund; our service fees range from 1/4% to 1.0% of the fund balance annually and include the audit, investment oversight, gift processing, grant management, fund statements, and other standard administrative services.

Investment fees charged by the investment manager are listed separately on the fund statement.

Please call Mary M. Holmes (910-483-4449)for a copy of our Administrative Service Fee Schedule.

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8. How much do I need to start a fund?
You may begin an endowment fund with as little as $1,000 while building toward a goal of $5,000 in a permanent endowment. Many funds start with smaller gifts and receive large additions from the donor's estate later.

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9. How are grants made?
Those with donor advised funds communicate with us regularly to recommend grants to their favorite charities. Others prefer that we, through an unrestricted fund or a field-of-interest fund, make that decision based on community needs. (Please refer to Information for Grant Seekers for more information.)

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10. How do you determine the spendable amount for grants?

Cumberland Community Foundation follows a total return spending policy for all of its endowed funds. Funds are invested for maximum total return (within acceptable risk parameters), without distinction between income and capital gains.

The market value of the fund is measured over the past 12 quarters, and 5% of the average of those values is made available for grants and expenses. If a fund is too new to have received income for 12 quarters, calculations are made based on the history of the fund.

This method correctly puts the focus on the long-term growth in the grantable amount. This, in turn, encourages the appropriate use of equities in the fund, helping the fund to grow faster than inflation.

The total return spending methodology has additional benefits. For example, it offers a more predictable grant stream than an income-only approach, because of the smoothing effect of using a 12-quarter moving of market values.

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11. Would establishing a private foundation make sense for me?
A private foundation works for some people, but it can involve several months of application to government agencies and on-going administrative burden. A fund at Cumberland Community Foundation can take as little as 10 minutes to establish and there are no separate tax returns or taxes to pay. Private foundations can be expensive to administer, burdensome to successive generations, and require observance of rules and regulations some find limiting. For instance, private foundations must file a separate tax return, pay excise tax and meet a pay-out requirement. With a fund at Cumberland Community Foundation you eliminate these concerns and still achieve your charitable goals. Click here for more information.

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12. There are so many ways to give. How can I decide which is best for me?
We suggest that you consult your tax advisor or attorney to determine which giving opportunity is best for you. The next step may be to open a fund at Cumberland Community Foundation or to complete a deferred gift. Please refer to the "Charitable Funds" and "Charitable Assets" sections of this donor guide.

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