Brief Overview of How it Works
1. Opening your donor-advised fund
Opening a donor-advised fund is simple and straightforward, and there are no set-up or legal fees involved. You can open a fund with a first contribution of any size, for which you may take an immediate and full tax deduction even if you intend to recommend grant distributions at a later date.
To set up your donor-advised fund, we will ask you to sign a letter agreement (available upon request), which will spell out the characteristics of your fund, such as its name, objective, and (if applicable) the investment of its assets.
2. Contributing assets to your fund
KBFUS has the experience and expertise to accept any type of charitable gift – from simple donations of cash by check, money order, credit card or wire transfer, to contributions of stocks, bonds, mutual funds, real estate or other types of property. You can also contribute to your donor-advised fund through a planned gift, such as gifts of life insurance policies or retirement plan assets.
Corporations can contribute to their fund from various sources, such as a corporate giving program or a corporate foundation. Individuals can contribute from an existing giving vehicle such as a private foundation or a fund held at a community foundation or national fund. They can invite friends and relatives to contribute on the occasion of an anniversary or a wedding.
Individual donors may request that at the time of their death, any remaining assets in their donor-advised fund be transferred to a legacy fund to be established at KBFUS, to provide continued support to a favorite cause or organization overseas.
3. Investing fund assets to generate income (optional)
Donors can choose to establish an ‘endowed’ donor-advised fund at KBFUS. Through professional investment, their fund can earn income and grow tax-free over time, thus increasing the amounts available to support charitable purposes.
When establishing an endowed donor-advised fund, you can select one of our four investment pools for the allocation of the assets of your fund. Alternatively, in case of fund balances over $100,000, the donor may recommend that the management of their fund’s assets be entrusted to a designated investment advisor of their choice.
All of our investment portfolios are managed using reasonable and prudent investment practices. Our Investment Committee monitors the performance of the asset managers and reviews their recommendations, paying particular attention to diversification of the investment portfolios. For more information, please see our Investment Policy Statement.
4. Making a grant distribution to support a favorite organization overseas
You can make recommendations for grant distributions from your donor-advised fund at any time. There is a $5,000 minimum for grants to organizations overseas. This minimum amount was set to ensure that our grantmaking process remains cost-effective, considering that the process requires some efforts from the nonprofit organization and that international grants come with higher bank fees.
The due diligence and grants administration process described below usually takes between three and five weeks to complete, depending upon the responsiveness of the suggested grantee.
a. Grant recommendation:
Grant recommendations can be made by e-mail or letter, and should specify the name and country of the suggested grantee, the amount of the grant and the specific project or program to be funded with the grant moneys (if any). If you don’t have a favorite organization in mind, we can help you identify premier nonprofit initiatives in the country, region or field of your interest.
b. Due diligence process:
Upon receipt of your recommendation, we will reach out to the nonprofit organization overseas and request more information on their structure, funding and activities. The information is reviewed by our Executive Director. Through our due diligence process, we make every effort to ensure that your grant moneys will indeed be used for legitimate charitable purposes.
c. Approval of the grant and agreement with the grantee:
The information is then submitted to our Board of Directors. In order for donors to obtain a charitable deduction under U.S. tax law, KBFUS must retain exclusive control as to the use of all contributions. Although we are not bound by donors’ suggestions, we obviously give serious consideration to their recommendations. Following the Board’s approval, a grant agreement is signed with the grantee, specifying the intended use of the grant moneys and requesting a brief report after a one-year period.
d. Transfer of the grant amount:
Upon receipt of the signed agreement, KBFUS proceeds with the payment to the grantee. Most of our grants are made via wire transfer. In some cases we do send a check.
5. Donor recognition
KBFUS encourages direct contacts between donors and grantees, and recognizes the name of the donor-advised fund in all its communications with the fund’s grantees. With grants from corporate donor-advised funds, we can either transfer the grant amount to the nonprofit organization, or forward a check (made payable to the grantee) to the corporation’s local management, for remittance to the grantee.
6. Monthly statements
Each month, we will send you a statement for your donor-advised fund, providing you with an updated report on contributions received, grant distributions made, and available balance (including overview of investment gains, in case of donor-advised funds with invested assets). You can also obtain an interim statement at any time, upon simple request.
7. Management and investment fees
There are no set-up or legal fees associated with establishing a donor-advised fund at KBFUS, nor do we charge annual maintenance fees for donor-advised funds.
To help us cover our operational expenses, KBFUS charges a management fee for each grant made from a donor-advised fund to a nonprofit organization overseas, as follows:
In addition, KBFUS charges an investment fee of 70 basis points per year (that is, 0.7% of the invested assets of your fund – 0.175% assessed quarterly).
Return to Donor-Advised Funds
Any further questions? Please contact us at [email protected] or (212) 713-7660.
|A donor-advised fund at KBFUS – One-page presentation|
|A donor-advised fund at KBFUS – A flexible tool to make recurring donations overseas|
|The advised gift fund – One-time contribution to a favorite nonprofit overseas|
|KBFUS Investment Policy Statement|