Let WYCF Be Your First Call: Trends and New Developments in Philanthropy

Tips You Can Trust: Unique Ways to Help Your Clients Give Back

Myth Busting: Private Foundation vs. Donor Advised Funds, Charitable Remainder Trusts, and Donating Business Interests

Updates from Rachel Bailey, Director of Philanthropy, for June 2025 

Hello from the WYCF Development Team!  

The Wyoming Community Foundation team is honored to work with attorneys, CPAs, and financial advisors as you help your clients achieve their charitable giving goals. Put us on speed dial–we want to be your first call when the agenda turns to philanthropy!  

As part of our service to you and other advisors, our expert team is committed to letting you know about trends and developments that may impact your clients’ charitable giving strategies. This summer, we’re diving into three unique giving vehicles that are popping up frequently in our conversations with both donors and advisors: 

1. Deciding whether a private foundation or a donor-advised fund is the best vehicle for your client can be challenging, especially if the client walks in the door with preconceived notions. A donor-advised fund at the Wyoming Community Foundation may be more flexible and effective than you assume and often is the ideal tool to achieve clients’ tax and charitable giving goals.
2. A charitable remainder trust (CRT) is a popular planning vehicle because your client is eligible for an up-front income tax deduction, a go-forward income stream, and deferral of capital gains taxes. The community foundation is happy to share a rundown of the what, where, who, why, when, and how of CRTs.
3. Many of your clients likely own their own businesses, and most of those clients are likely supporting charities in the community. That’s why it’s really important to know the benefits of giving closely-held business interests to a fund at the community foundation, as well as understand how to avoid pitfalls and mistaken assumptions that using a private foundation is the best move. 

As always, we’re honored to be your first call whenever the topic of charitable giving arises. Our goal is to help your clients make a difference, especially during these uncertain times. The community foundation is here for you, for your clients, and for our community. 

–Your friends in philanthropy, WYCF 

Weighing the Options: Private Foundation or Donor Advised Fund? 

When you’re working on the charitable components of a client’s estate or financial plan, one of the first areas you’ll likely explore is the structure. Certainly you are familiar with both private foundations and donor-advised funds as useful charitable giving tools. Before you jump into one or the other for a particular client, though, it’s important to review the similarities and differences between the two so that you can best achieve your client’s goals.  

To help you evaluate a client’s options, here are three common myths about the differences between private foundations and donor-advised funds. 

Myth #1: Donor-advised funds are all the same and only private foundations can be customized 

Private foundations will always differ from donor-advised funds in important ways, not only because of their status as separate legal entities and the deductibility rules for gifts to these entities, but also because of the opportunities to customize governance. But it is a mistake to assume that a donor-advised fund is a cookie-cutter vehicle. Indeed, “donor-advised fund” is simply a term used to describe the structure of a fund and its relationship with a sponsoring organization such as a community foundation. The donor-advised fund vehicle itself is extremely flexible. Here’s why: 

• • Donor-advised funds are popular because they allow your client to make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, your client can recommend gifts to favorite charities from the fund when the time is right. 
  • A donor-advised fund at the Wyoming Community Foundation is frequently a more effective choice than a donor-advised fund offered through a financial institution. That’s because at WYCF, your client is part of a community of giving and has opportunities to collaborate with other donors who share similar interests. Plus, WYCF is itself local and is deeply knowledgeable about the needs of our region and the nonprofits meeting those needs. 
  • The Wyoming Community Foundation can work with you and your client to build a charitable giving plan that extends for multiple future generations. That is because our team at WYCF supports your clients in strategic grant making, family philanthropy, and opportunities to learn about local issues and nonprofits making a difference.  

Myth #2: Deciding whether to establish a donor-advised fund or a private foundation mostly depends on size 

The size of a donor-advised fund, like the size of a private foundation, is unlimited. The United States’ largest private foundations are valued well into the billions of dollars. Information about private foundations, ironically, is not so private. The Internal Revenue Service provides public access to private foundations’ Form 990 tax returns. That is not the case for individual donor-advised funds. 

Similarly, donor-advised funds are not subject to an upper limit. Although information on the asset size of individual donor-advised funds is not publicly available, anecdotal information indicates that some donor-advised funds’ assets may total in the billions of dollars. 

Indeed, a donor-advised fund of any size can be an effective alternative to a private foundation, thanks to fewer expenses to establish and maintain, maximum tax benefits (higher deductibility limitations and fair market valuation for contributing hard-to-value assets), no excise taxes, and confidentiality (including the ability to grant anonymously to charities). 

At the end of the day, the decision of whether to establish a donor-advised fund or a private foundation–or both–is much less a function of size than it is other factors that are tied more closely to the objectives a client is trying to achieve.  

Myth #3: Donor-advised funds and private foundations are mutually exclusive 

Make sure you’re aware of the benefits of using both a donor-advised fund and a private foundation to accomplish clients’ charitable goals. For example: 

• • Donor-advised funds can help meet the need for anonymity in certain grants, which is typically difficult using a private foundation on its own.
  • A donor-advised fund can receive a client’s gifts of highly-appreciated, nonmarketable assets such as closely-held stock and real estate, and benefit from favorable tax deduction rules not available for gifts to a private foundation.
  • An integrated donor-advised fund and private foundation approach can help a client balance and diversify investment and distribution strategies to ensure that giving to important causes remains steady even in market downturns. 

Some private foundations are even considering transferring their assets to a donor-advised fund at WYCF to carry on the foundation’s mission. Terminating a private foundation and consolidating giving through a donor-advised fund is sometimes the best alternative for a client when the day-to-day management and administration of the private foundation has become more time-consuming than expected and is taking time and focus away from nonprofits, the community, and making grants.  

Along these lines, some families find that the tax rules related to investments, distributions, and “self-dealing” have become harder to navigate and are perhaps even preventing the family from maximizing tax benefits of charitable giving. Finally, the administrative load of managing a private foundation sometimes becomes overwhelming, especially if the family members who handled these functions initially have retired, passed away, or simply become busy with other projects. 

The bottom line here is that we encourage you to reach out to the WYCF team anytime you are evaluating how to structure a charitable giving plan to achieve both your client’s charitable goals and financial goals. Our team is here to help. In many cases, the Wyoming Community Foundation’s tools and services are a great fit for your client’s needs. If not, we will point you in the right direction. 

Charitable Remainder Trusts: What, where, who, why, when, and how? 

If you’ve represented charitable families over the years, you’ve certainly heard the term “charitable remainder trust,” sometimes called a “CRT.” You might have even helped clients set them up.  

For most attorneys, CPAs, and financial advisors, CRTs don’t come along every day. Because a CRT can be such an effective planning tool in certain situations, it’s useful to have at least a basic level of knowledge about how they work.  

Here are six important points to keep in mind. 

What is it? Your client establishes a CRT as a standalone trust. The trust pays an income stream to the client (and potentially other beneficiaries such as a spouse or children) for life or for a period of years. According to the trust’s terms, whatever assets are left when the income stream ends will pass to a charity, such as your client’s fund at the community foundation. 

Where does the charitable deduction figure in? Because the transfer of assets to the CRT is irrevocable, your client is eligible for an up-front charitable income tax deduction in the amount of the present value of the charity’s future interest, calculated according to IRS-prescribed rules and interest rates. Remember also that assets held in a CRT are excluded from your client’s estate for estate tax purposes.  

Who is it for? The ideal client to establish a CRT is typically someone who owns highly appreciated assets, including marketable securities, real estate, or closely-held business interests. That’s because a CRT allows these assets to be sold within the trust without triggering immediate capital gains taxes, enabling the proceeds to be reinvested.  

Why are some trusts called CRATs and CRUTs? A “charitable remainder annuity trust” (“CRAT”) is a type of CRT that distributes a fixed dollar amount each year to the income beneficiary. Your client cannot make additional contributions to a CRAT. A “charitable remainder unitrust” (“CRUT”), on the other hand, is a type of CRT that distributes a fixed percentage (at least 5%) annually based on the balance of the trust assets (revalued every year). Your client can make additional contributions to a CRUT during lifetime. 

When is a CGA a better fit? The tax laws permit a client over the age of 70 ½ to make a once-per-lifetime transfer from an IRA of up to $54,000 (2025 limit) to a CRT or other split-interest vehicle, such as a charitable gift annuity (CGA). This is sometimes called a “Legacy IRA.” Because the cost of setting up a CRT usually means that a $54,000 CRT is impractical, a client who wants to leverage the Legacy IRA opportunity may lean toward a CGA instead.   

How can I learn more? As is the case with any question you encounter from a client about charitable giving techniques, the community foundation is honored to be your first call. We can help you navigate the options and identify strategies that are likely to best meet a client’s needs. 

We look forward to working with you! 

Donating Business Interests: Why a fund at the community foundation is the ideal recipient 

If your client base includes business owners, you probably weren’t surprised by this observation in a recent Wall Street Journal article about the “stealthy wealthy”: “Behind a paycheck, the largest source of income for the 1% highest earners in the U.S. isn’t being a partner at an investment bank or launching a one-in-a-million tech startup. It is owning a medium-size regional business.” 

What’s more, the chances are very good that most of your business-owner clients are charitably-inclined. Indeed, more than 90% of small business owners have supported charities and community activities in the last year. 

This means that you and other tax and estate planning advisors ought to have at least a basic level of knowledge about the benefits and mechanics of giving closely-held business interests to charity. When properly executed, this technique can be extremely effective to achieve the client’s financial and philanthropic goals. 

Here are three very important components of this strategy: 

Stop before you use a private foundation. 

Some of your business owner clients probably have established a private foundation. But the private foundation is not the ideal recipient of private business interests. Donating closely-held stock to a fund at the community foundation is generally more tax effective than giving it to a private foundation due to several key differences in how the IRS treats these gifts. When your client donates closely-held stock to the community foundation, your client can typically deduct the full fair market value of the stock, up to 30% of adjusted gross income and also avoid paying capital gains tax on any appreciation. By contrast, if your client donates the same stock to a private foundation, the deduction is limited to cost basis up to only 20% of AGI, which is a significantly less favorable tax outcome. 

Mind the timing.  

Encourage a business owner client to start planning for a gift of closely-held stock before putting out feelers to potential acquirers and absolutely before any part of a deal is inked. This is crucial because a gift to charity will avoid substantial unrealized capital gains that have accrued in the business over the years only if the gift and the sale are genuinely separate events, avoiding the step transaction doctrine. Careful planning will help ensure that the client’s fund at the community foundation will receive 100 cents on the dollar for the portion of the stock it owns and the deduction won’t be thrown out.  

Respect the rules for valuation.  

Counsel your clients about securing a proper valuation for charitable deduction purposes at the time the business interest is contributed to the fund at the community foundation. Valuation has always been a critical factor in any type of tax or estate planning strategy. Recently, the additional wrinkle presented by the Supreme Court’s decision in Connelly v. United States makes things even more interesting. The Connelly decision impacts the way business interests are valued for estate tax purposes. In Connelly, the Supreme Court held that life insurance proceeds indeed ought to be included in the value of a company without offsetting the redemption obligation. This could translate to higher taxable estates for your business owner clients, creating further incentive to leave a portion of closely-held stock to charity. The decision is also a reminder that careful planning can potentially avoid pitfalls. 

As always, please reach out to the community foundation anytime the topic of charitable giving arises in client conversations. We are honored to be your first call on all matters of philanthropy. Most of the time, we can help. If not, we will absolutely point you in the right direction. 

The team at the Wyoming Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.