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.

A Field of Interest Fund at the Community Foundation of Anne Arundel County (CFAAC) is established by your client for a charitable purpose described by your client. For example, a Field of Interest Fund can be created to support research for rare diseases, to support organizations that assist homeless families, or to enable art museums to acquire works that celebrate the community’s diversity. The knowledgeable team at CFAAC 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, maintain anonymity, or something else altogether (e.g., Environment Anne Arundel). For more information on Field of Interest Funds visit http://cfaac.org/field-interest.html-0.

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 that 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 name the fund. For more information on Designated Funds, visit http://cfaac.org/designated.html-0. 

Perhaps one of the most compelling reasons to encourage a retirement-age client to consider establishing a Field of Interest Fund or a Designated 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, Designated Funds and Field of Interest Funds at CFAAC are eligible.