The Lakeway Community Foundation

What is the Lakeway Community Foundation? 

The Lakeway Community Foundation (”Community Foundation”) is a nonprofit organization established in 1997 designed to help people meet their charitable goals in the Lakeway community.  It is a 501(C)(3) entity for federal income purposes, qualifying it for tax deductible gifts and bequests. 

Who are the directors of the Lakeway Community Foundation? 

There are five directors of the Community Foundation.  The board of directors consists of the same five individuals who are elected to serve as trustees of the Lakeway Civic Corporation.  Each director serves for a term of three years.  Serving in 2009 are Tom Smith, Carolyn Huser, Bob Froeschle, Pat Jacobsen, Dennis Brown, Gerry Astorino, and Tom Priddy (ex-officio).

Is anyone else involved with the Lakeway Community Foundation? 

The Community Foundation board of directors recently voted to establish the Lakeway Community Foundation Council.  The purpose of the Foundations Council is to: 

ü      Increase public awareness of the Community Foundation and the benefits that it affords to both the Lakeway community and to individual donors

ü      Make recommendations to the board of directors as to projects and programs that will help the Community Foundation achieve its objectives

ü      Assist the board of directors in the implementation of projects and programs 

The Foundation Council consists of up to ten individuals selected to serve for a three-year term.  The Foundation Council is in the process of being selected and organized. 

Why do we need a community foundation? 

A community foundation allows a donor to see things accomplished that will benefit our community.  A community foundation can help translate a donor’s desire to “give something back” into a reality. 

Since contributions to the Lakeway Community Foundation qualify for federal  income and estate tax deductions, does this mean a donation won’t really cost my  family or me anything after taking into account the tax deductions? 

No.  The tax deductions do lower the cost of giving by lowering your federal tax liability. The amount that a donation truly costs your family or you is (1) The value of the donation: less (2) the reduction in federal taxes received as a result of the gift.  This reduction in federal taxes usually equals the value of the property donated times the appropriate tax rate. 

What kind of property can be donated to the Lakeway Community Foundation? 

√  Cash…..A cash gift is the simplest asset and most convenient means of donating to the Community Foundation.  Cash gifts quality for federal income tax purposes and are fully deductible up to 50% of the donor’s adjusted gross income in any one year.   Deduction amounts exceeding this limit may be carried forward up to five additional years. 

√  Securities…..Gifts of appreciated securities held more than a year (stocks and bonds) often provide important tax advantages to the donor.  Their full fair-market value is deductible as a charitable contribution up to 30% of the donor’s adjusted gross income.  As with gifts of cash, deduction amounts exceeding this limit may be carried forward up to five additional years.  Donors do not have to pay capital gains taxes on the appreciated portion of the gift. 

√  Real Estate….A gift of real estate held more than a year can provide the same federal tax advantages as those described  for  gifts or securities.  However, because the Community Foundation’s ability to accept gifts of real estate depends upon a number of factors, such gifts are considered on a case-by-case basis. 

√  Charitable Lead Trust …..A charitable lead trust permits the Community Foundation to receive an income interest for a specified period of time.  Subsequently the Foundation’s interest terminates, but the trust continues for the benefit (or terminates in favor) of one or more individuals, children, grandchildren, relatives, or others. 

√  Charitable Remainder Trust …..The Community can administer charitable remainder unit trusts which pay income to the donors or other named beneficiaries.  Cash or property is transferred to the trust which distributes to the income beneficiary (ies) an amount equal to a fixed percentage of the trust’s fair market value.  Upon termination of the trust, its assets will be transferred to a fund at the Foundation to support the charitable goals of the donor. 

√  Bequests…..Donors can make any of the above described donations through a bequest in their will to the Community Foundation.           

√  Retirement Plan Beneficiary…..For a charitable bequest, retirement plan assets are excellent because they are so heavily taxed  if left to heirs.  Most inherited assets are subject to estate tax, yet free from income tax.  However, an heir will pay income tax on amounts received from a decedent’s retirement plan (profit sharing plan, 401(k), IRA, etc.)  For a taxable estate over $3 million, estate and income taxes can exceed 75% or more of the total amount in the retirement plan.  A charitable bequest avoids these heavy taxes. 

√  Memorial Gifts…..Gifts may also be made to the Community Foundation in memory of deceased persons, to honor living persons, or to commemorate anniversaries or other special events. 

√  Life Insurance Beneficiary            …..By naming the Community Foundation as beneficiary, the donor retains ownership of the policy and has access to the cash value as well as the right to change the beneficiary.  Since ownership of the policy is retained, there is no charitable organization as beneficiary or for subsequent insurance premiums.  Any proceeds payable to the Community Foundation at the donor’s death will not be subject to federal estate tax.