Establishing a Fund

ESTABLISHING CHARITABLE FUNDS
WITHIN THE MARSHFIELD AREA COMMUNITY FOUNDATION

The links at the bottom of this page lead to sample fund agreements that can be used to design any of the various types of permanent charitable funds within the Marshfield Area Community Foundation. To use these samples most effectively, please keep the following points in mind:

Donors determine how their fund is used.

The samples show how to establish the four types of funds described below. The wishes stated by you, the donor, will guide the Foundation forever in its use of funds. The Board will alter the purposes and restrictions placed on a fund only when they become unnecessary, incapable of fulfillment, or inconsistent with the charitable needs of the greater Marshfield community. This “variance power” is required by Treasury Department regu­lations for all funds managed by the Foundation.

Each charitable fund is permanent unless the donor specifies otherwise.

A fund’s assets are invested to produce appreciation of principal as well as proceeds for annual grant making. In that way, inflation does not diminish the fund’s significance in years to come. Modest administrative fees established by the Board of Trustees are charged against all funds.

There are four basic types of funds.

• Unrestricted Funds provide the Foundation’s sixteen-member, volunteer Board of Trustees the discretion to respond in a timely fashion to worthwhile but possibly unanticipated community needs. Grant requests are solicited in an annual competitive application process. Proceeds from the Unrestricted Funds also may be used to offset administrative costs of the Foundation. The Marshfield Area Community Foundation urges all donors to designate at least a portion of each fund for unrestricted purposes to help assure resources for special projects.

• Field of Interest Funds support a particular area of interest such as education, child welfare, the arts, women’s issues, or the elderly. Grants are made to support projects outlined by you at the establishment of these funds.

• Designated Funds allow donorsto name up to three specific charitable agencies to receive income from your gift. For example, you may choose to provide support for your church, a school, Big Brothers/Big Sisters, Salvation Army, or 4-H. You may name any nonprofit organization as the beneficiary.

• Donor Advised Funds provide donors an advisory role in the distribution of grants. Although the Board of Trustees has legal control of Donor Advised Funds, your suggestions will be given full and serious consideration.

The attached documents also contain sample language for certain kinds of funds that are really subsets of the four basic fund types. Because of certain unique characteristics, they are treated separately.

The following are examples of special funds:

• Acorn Funds. The minimum amount normally required to establish a fund is $5000.The purpose of the Acorn Fund is to allow donors to establish a fund in the Foundation with a lesser amount and pledge to make annual contributions to the fund until it reaches a minimum of $5000 within five years. Once an Acorn Fund reaches the $5000 level, donors can choose to make it a permanent fund of any of the four basic types.

• Project Specific Funds . This is a type of Designated Fund but of a limited duration. These funds are established to support a specific project conducted by a non-profit organization. Earnings from this fund are transferred to unrestricted funds and principal is reserved for the project. Balances remaining in this fund at the termination of the project may be rolled over to a perpetual fund by mutual agreement of the makers and the Community Foundation.

• Scholarship funds. Although they might be considered a type of Designated Fund or a Donor Advised Fund, Scholarship Funds require unique eligibility and criteria language.

Most of our agreements contain a paragraph similar to the one following. This language is intended to encourage donors to consider giving a portion of the annual distribution of the fund to our Forever Fund. The Forever Fund supports the administrative costs of the Foundation. It also supports our Community Grants program, our annual discretionary grants program that offers modest grants to a variety of applicants on a competitive basis. Our Community Grants program is the most flexible tool the Foundation has with which to respond to new or changing charitable needs in the community.

"It is my/our request that ___ % of the distributions from the Fund be allocated to the Forever Fund, a fund that supports the Marshfield Area Community Foundation’s administrative costs and Community Grants program.”

What does this mean in dollars and cents? Our annual fund distribution is now set at 5% of fund assets. If your fund had a balance of $50,000, the total annual distribution would be $2500 (5% x $50,000). If you entered 10% in the blank in the preceding paragraph, $250 would go to the Forever Fund (10% x $2500). The remaining $2250 would be available for any purpose determined by the donors or written into the fund agreement. You may choose to put any figure including zero in the blank. Some donors have chosen to indicate zero in the blank but have provided a one-time donation to the Forever Fund. Either choice is entirely up to you.

Other information available from the Foundation office includes:

• Historic investment returns for the investment managers used by the Foundation.
• Fees charged by investment managers and fund management fees.
• Sample agreement, policies and guidelines for establishing an “affiliate foundation.” (An affiliate foundation is a foundation serving a community near Marshfield. It has its own Board of Advisors, establishes its own policies and procedures, and encourages asset development within the affiliated community. As a subordinate unit of the Marshfield Area Community Foundation, it benefits from inclusion within the MACF annual audit and IRS report and by utilizing the administrative services of MACF.)

Each prospective donor is encouraged to have the terms of all proposed agreements reviewed by the donor’s own legal and/or financial advisors. All agreements with donors and all information con­cerning donors and prospective donors shall be held in strict confidence by the Foundation, subject to legally authorized and enforceable requests for information by government agencies and courts. All other requests for or releases of information concerning a donor will be honored or allowed only if permission is obtained from the donor.

Fund Agreement Templates

Links to PDF copies of each fund agreement template appear below. In addition, a link is provided for a Microsoft Word (DOC) version of each fund template. If you have Microsoft Word on your computer, the Word document will allow you to complete the form electronically.