When thinking about charitable giving, many people picture giving a check to a nonprofit. However, that picture is narrower than reality. Donors in the greater Pottstown region have a range of assets they can give and different ways they can structure their giving. This guide walks you through both. Let’s look at what charitable giving really is and what you can give.
What is charitable giving?
Charitable giving is donating money, property, or other assets to a qualified charitable organization or through a charitable giving structure to support a charitable purpose. This could be a food pantry, a health organization, a school program, or a community foundation. If you give to an organization that qualifies under IRS rules, your donation may be tax-deductible depending on the type of gift and your tax situation.
Many people give through one-time or recurring donations made by check, credit card, or online payment. But that is not the only way to make a charitable gift.
You can also set aside a larger amount of money and arrange for it to support the causes you care about over time. Depending on your goals, that might involve a charitable fund at a community foundation, a charitable trust, a private foundation, or another giving strategy. Some donors choose this approach because they want their giving to continue for years. Others prefer it because it can simplify supporting multiple organizations.
Both approaches are forms of charitable giving. The rest of this article looks at some of the options available and how different giving strategies may fit different goals.
What can you donate to charity?
You can donate more than cash to a charity. Some charitable organizations, including community foundations, are equipped to accept a range of noncash assets in addition to traditional cash gifts. Which option makes sense depends on what you own, what the organization can accept, and what you want the gift to accomplish. Let’s take a look.
Cash Gifts
Cash is the most common and most straightforward charitable gift. This includes one-time donations and recurring monthly or annual gifts, as well as contributions made by check, credit card, or online payment. A cash donation may be tax-deductible if it goes to a qualifying organization, though the treatment depends on your circumstances.
Appreciated Stock
Donating stock to charity is a common approach for people who hold investments that have grown in value since they bought them. When you donate eligible appreciated securities directly to a qualified charitable organization instead of selling them first, you generally do not recognize the capital gain that would have resulted from a sale. You may be able to claim a tax deduction based on the fair market value of the shares, subject to applicable tax rules and limitations.
If you have held the stock for more than one year, you may also be able to claim a charitable deduction based on the shares’ fair market value at the time of the gift, subject to IRS limits and other rules. If you have held the stock for one year or less, the deduction is generally limited to your cost basis rather than the full appreciated value.
The tax treatment also depends on factors such as the type of investment, how long you have held it, and the organization receiving it. This is a situation where it can make sense to talk with a financial or tax advisor before making the gift.
Other Assets
Less common gifts may include real estate, personal property, life insurance policies, and business interests. Retirement assets can also play a role in charitable giving, including through beneficiary designations or, for eligible donors, direct charitable distributions from an IRA. These gifts have their own eligibility and tax rules, so it is important to confirm the details with your financial or tax advisor and the receiving organization.
Gifts in this category are usually reviewed case by case, since not every organization is equipped to accept or manage every kind of asset. It is worth asking before you plan around one. Pottstown Regional Community Foundation publishes the asset types it accepts on its fund types page.
Common Ways to Structure a Charitable Fund
If you decide to give through a fund rather than gift by gift, there are several ways that fund can be structured. Community foundations typically offer a range of them, and the differences can include what the fund supports, how involved you want to remain in recommending grants, and whether the fund is designed for near-term or long-term giving. These features can overlap. For example, a memorial fund may also be designated and endowed, and a donor-advised fund may be endowed or non-endowed.
- Donor-Advised Funds. You contribute to the fund and recommend grants from it over time. The foundation handles administration, compliance, and due diligence, which is why many donors choose this as an alternative to setting up a private foundation.
- Community Impact Funds. Your gift pools with others and supports community needs and opportunities identified by the Foundation, awarded through competitive grant cycles. These are unrestricted, which gives the organization room to respond as conditions change.
- Field of Interest Funds. You name a cause area rather than an organization, such as mental health, outdoor recreation, youth development, or veterans’ services. A fund can also be focused on a specific geographic area rather than an issue.
- Designated Funds. You name a specific nonprofit or charitable beneficiary, and the fund is established to support that organization according to the terms of the fund agreement. It may be endowed for long-term support or structured differently depending on the donor’s goals.
- Organizational Endowment Funds. Also called agency funds, these are established by a nonprofit organization to build long-term financial stability, with the foundation managing investment strategy, investment oversight, administration, and reporting.
- Memorial or Honor Funds. These are created in someone’s name to recognize their life, values, or service, with a fund mission chosen to reflect what they cared about. A memorial or honor fund can be structured in several ways, including as an endowed or non-endowed fund, a donor-advised fund, a field-of-interest fund, or a designated fund.
- Legacy and Planned Gifts. A donor can use a will, trust, beneficiary designation, or other estate-planning arrangement to create or add to a charitable fund in the future. This allows the donor to continue giving after their lifetime.
Pottstown Regional Community Foundation offers a range of charitable fund structures and giving options and can help donors determine which features best fit their goals.
How Giving Through a Community Foundation Works
Giving through a community foundation works in three steps. You contribute cash or assets, the foundation holds and administers the charitable fund according to its terms, and grants are made from your fund to eligible charitable organizations or purposes. Depending on how the fund is set up, it may be endowed, with assets invested to provide charitable support over the long term and distributions made according to the fund agreement and spending policy, or non-endowed, allowing more of the fund’s assets to be available for charitable use sooner.
The foundation handles the work in between. That includes:
- Vetting grant recipients. Confirming an organization qualifies and is in good standing before money moves.
- Administration and compliance. Managing the paperwork, reporting, and regulatory requirements that come with charitable distributions.
- Tracking how funds are used. Requiring grantees, when applicable, to provide updates and reports during the grant term so the foundation can monitor progress, confirm funds are being used for their approved purpose, and understand the results of the work.
- Knowing the local landscape. Through grantmaking, partnerships, and community work, community foundation staff develop firsthand knowledge of local organizations, needs, and opportunities. That knowledge can help donors connect their charitable goals with work happening in the region.
In the greater Pottstown region, that foundation is Pottstown Regional Community Foundation. PRCF works broadly across health, education, and economic, while its Core Grantmaking program follows a more specific framework focused on Developing Youth Potential and Promoting Equitable Health & Wellness. Donor-established funds can support a wider range of charitable purposes within the Foundation’s broader mission, depending on the terms of each fund. Since grantmaking began in 2004, PRCF has awarded more than $59.8 million in grants across the region. PRCF also leads and supports community programs and initiatives, including Pottstown Play Streets, the School Wellness Initiative, and the Thriving Communities Program.
Choosing the Right Way to Give
There is no single right answer, and a conversation can often help clarify which approach fits. Some donors want to remain involved by recommending grants over time. Others prefer to leave grantmaking decisions to people who track local needs full-time. Wanting to support one specific nonprofit leads somewhere different than caring about an issue without a particular group attached. Timing matters too, since giving now is not the same decision as arranging something to happen later.
Tax treatment is where this stops being general and starts being specific to you. How a gift is handled depends on the asset, the structure, and your own financial picture. Financial advisors and foundation staff often end up in the same conversation, and Pottstown Regional Community Foundation works directly with professional advisors whose clients are weighing these questions.
Anyone thinking about scholarship giving should know that there are several ways to support students and education. PRCF does not currently offer scholarships as a giving pathway, but donors can work with the Foundation to explore other charitable structures that may accomplish the goal behind the idea, such as supporting educational programs, career pathways, or other student-focused needs. The structure that fits your goal may not be the one you had in mind at the start. That is another reason to talk it through before committing to a particular form.
Invest in Your Community
At Pottstown Regional Community Foundation, we’re dedicated to improving quality of life across the greater Pottstown region. We help donors give in ways that really make a difference and award grants to local organizations. The Foundation also funds and leads programs that serve our community. Contact us today to learn how we can work together.
