The Need
Many donors would like to receive additional tax and income benefits but lack the necessary capital to create their own trust fund. Nonprofit organizations could offer the option of donating via a Charitable Mutual Fund as a means of appealing to new markets.
The Details
A Charitable Mutual Fund is a trust that is established and maintained by a public charity. The Charitable Mutual Fund receives contributions from individual donors that are commingled for investment purposes within the fund. Just like a regular mutual fund, each donor is assigned "units of participation" (just like shares) in the fund that are based on 1) when they made the donation, 2) the size of their donation, and 3) the size of the existing fund at the time of the donation.
Each year, the Charitable Mutual Fund’s entire net investment income is distributed to fund participants as cash rewards, according to their units of participation. At lease half of the donor's cash reward is given back to the chosen nonprofit organization(s). Depending on the donor's selection, the other half can be kept by the donor as a personal reward, or, the donor can opt to give 100% of the rewards to the nonprofit.
Income distributions are made to each donor annually for the span of his or her lifetime; after which, the total value of the endowment fund is given to the nonprofit organization for its charitable purposes.
Contributions to Charitable Mutual Funds qualify for charitable income, gift, and estate tax deduction purposes. The donor's deduction is based on the discounted present value of the projected donor lifetime investment income.
Benefits to the Donors and their Favorite Charities
Life Income: the fund pays the donor and his or her designated nonprofit Lifetime Cash Rewards™ on the total fund value as annual income for the lifetime of the donor. Make the donation on behalf of someone special to you and that person will receive the tax deduction and Lifetime Cash Rewards™.
Charitable Deduction: the donor receives a current income tax deduction for the current gift of a future interest.
Building the Nonprofit Endowment: the nonprofits can plan for the future with the security of knowing that the donors’ funds will be there for their needs.
History of Charitable Mutual Funds
The Charitable Mutual Fund was one of the methods created under the 1969 Tax Reform Act whereby a taxpayer may make a tax-deductible endowment gift to a charitable organization.
Numerous financial institutions and major nonprofits such as universities, churches, and community foundations created Charitable Mutual Funds to encourage high net-worth donors to donate.
Their minimum donation requirements range from $5,000 to $20,000
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Organization
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Minimum Investment
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Additional Contribution
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Harvard University
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Fidelity Investments
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US Charitable Gift Trust
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Raymond James
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Silicon Valley Comm. Foundation
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University of Cincinnati
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Cincinnati Museum Center
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Cincinnati Symphony Orchestra
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Shriner's Hospitals
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echoDonations.org™
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(echo Phone Survey - February 2007)
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The aggregation of charitable donations into Charitable Mutual Funds has historically been labor and time intensive for these institutions. They currently rely on costly paper trails, mail, and fax processes, along with a high degree of individual personalized service, to administer and invest donations.
Donors who donate less than $5,000 annually did not have access to the same financial benefits.
How does echoDonations.org™ Charitable Mutual Funds Work?
What was once seen as complex and inaccessible except by the very wealthy is now available to all. Charity Loyalty Rewards™ enables everyone to earn Lifetime Cash Rewards™ on their donations, thus creating a new incentive to give.
Benefiting from an Internet web-based platform, echoDonations.org™ drives inefficiency out of the process as it aggregates millions of charitable donations of virtually any size into an investment fund.
echoDonations.org™ innovates in three ways:
(1) We rely on a fully automated web-based donation collection and administration platform.
(2) Our efficient process accepts donations as modest as $25.
(3) The donor’s designated nonprofit shares in annual investment income and will receive tangible benefit from the donation prior to the donor’s death.
The process is straightforward:
- Tax deductible donations are collected via the web (ecommerce)
- Donations are added to echoDonations.org™’s professionally managed funds (CMF)
- Donor and nonprofit receive income annually (account management)
- Upon death, money in the fund is released to the nonprofit (estate planning)
Still have questions? Visit our [FAQs]
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