Other Non-Cash Assets

Life Insurance Example

Marian holds a life insurance policy with a cash surrender value of $400,000. Every year she makes a charitable gift to a local nonprofit environmental conservation group that manages her local park. Marian is worried that after she dies, in the absence of her yearly gifts, the nonprofit will be unable to maintain this piece of land and will end up selling it to developers.

Marian transfers ownership of the life insurance policy to the Community Foundation and creates an endowed designated fund in her name. She continues to make premium payments on the life insurance policy, but because she does this by making yearly gifts to the Community Foundation, who then uses the gift to make the payments themselves, Marian is able to claim an income tax deduction on the payments.

After Marian’s death, the policy pays the Community Foundation as designated beneficiary. The Community Foundation places the proceeds of this payout into Marian’s fund, which is invested in the Community Foundation’s larger investment pool. The fund grows with earnings over time and provides yearly grants to the nonprofit that maintains the park she loved.

Retirement Account Example

Anthony, a retired doctor, is 70 ½ and must start taking the required minimum distribution from his IRA account. He is currently in the 25% tax bracket, but the IRA distribution (counted as income) will push him into the 28% tax bracket and force him to pay more income tax.

Anthony transfers his IRA distribution directly to the Community Foundation. Although he does not receive a charitable income tax deduction, because the distribution was transferred to a nonprofit organization, it is not counted as additional income for Anthony’s tax purposes. He remains in the 25% income tax bracket.

At Anthony’s request, the Community Foundation places the proceeds from the IRA distribution in its endowed Health & Wellness Fund*. The Community Foundation awards yearly grants from that pooled fund to nonprofits working in the area of healthcare. (Note: *The IRS does not allow donors to direct gifts from an IRA distribution to a donor advised fund. All IRA distribution gifts must be directed towards one of the Community Foundation’s community impact funds, designated funds, or our general purpose fund.)