Powerful IRA giving and legacy planning tools

Designated funds and field-of-interest funds may not always be top of mind when you are developing philanthropy plans for your clients and their families, but they are extremely valuable tools in certain circumstances, and it’s important to be aware of what the terms mean and how these types of funds are ideally suited for IRA giving and legacy planning.

field of interest fund for research

Field-of-interest funds

A field-of-interest fund at Arlington Community Foundation is established by your client for a charitable purpose described by your client. For example, a field-of-interest fund can be established to support research for rare diseases, to support organizations that assist homeless families in getting back on their feet, to enable art museums to acquire works that celebrate the region’s diversity, and so on. 

The knowledgeable team at the Community Foundation distributes grants from the field-of-interest fund according to the spending policy set by your client to further the client’s wishes. Your client selects the name of the fund, whether they wish to use their own name (e.g., Samuels Family Fund or Samuels Family Fund for the Arts), maintain anonymity (e.g., Maryville Fund for the Arts), or something else altogether (e.g., Bettering Our World Fund).  

Designated funds

A designated fund at the Community Foundation is a good choice for a client who knows they want to support a particular charity or charities for multiple years. 

This is useful so the distributions can be spread out over time to help with the charity or charities’ cash flow planning, enable your client to benefit from a larger charitable tax deduction in the current year when the client’s tax rates are high rather than spreading it out over future years when tax rate projections are lower, or both. The client specifies the charities to receive distributions according to a spending policy they select, and the client can choose a name for the fund.

Scholarship funds

Scholarship funds at the Community Foundation provide student support paid to a post-secondary educational institution. Donors may choose to establish a named scholarship that honors a loved one or community member. The donor establishes the criteria for the scholarship and the Community Foundation’s Scholarship Committee manages the selection process.

Qualified Charitable Distribution

Perhaps one of the most compelling reasons to encourage a retirement-age client to consider establishing a field-of-interest fund, designated fund, or scholarship fund is to take advantage of the Qualified Charitable Distribution planning tool. As an advisor, you are well aware that clients who own Individual Retirement Accounts (IRAs) are required to take “Required Minimum Distributions” each year beginning at age 72, whether or not they need or want the income. These distributions often cause an increase in the client’s income taxes. 

A Qualified Charitable Distribution permits a client to transfer up to $100,000 from an IRA to a qualified charity instead of taking a Required Minimum Distribution, thereby avoiding the income tax hit. 

Although the IRS does not permit Qualified Charitable Distributions to donor-advised funds, charities eligible to receive a client’s Qualified Charitable Distribution do include designated funds and field-of-interest funds at the Community Foundation.

Designated, field-of-interest, and scholarship funds can also be easily incorporated into your client’s legacy plans. The estate plan need only reference a legacy plan at the Community Foundation that includes specific instructions regarding the purpose, spending policy, and other details related to the fund(s) they wish to establish.

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