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Donor Advised Endowment Funds at Morton Community Foundation - Episode 24 Thumbnail

Donor Advised Endowment Funds at Morton Community Foundation - Episode 24

Today we welcome Scott Witzig of Morton Community Foundation to Retire Your Way Radio as our first podcast interviewee. In this interview, I asked Scott a few questions about Morton Community Foundation and donor advised endowment funds.

Listen to Episode 24 Here:

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Interview with Scott Witzig of Morton Community Foundation

Scott Witzig is the Executive Director of Morton Community Foundation in Morton, Illinois. He is a lifelong Mortonite whose work experience includes management in a family owned retail department store, Executive Director of the Morton Chamber of Commerce, and Director of Marketing for RMH Foods in Morton. He has also been active in volunteer roles through the Morton Downtown Business Association, Morton Chamber of Commerce, Morton Rotary Club, Board of the Alliance of IL Community Foundations, and his church. Scott has been married for 40 years to Darci, and has 4 adult children and 4 (soon to be 5) grandchildren.

Can you briefly talk about what the Morton Community Foundation is and how this organization helps the local community? 

Scott: We're sitting in the new offices of the Morton Community Foundation. We just moved here to the corner of First and Adams Street in Morton, and we love the new surroundings. If you look at the wall over here, we've added the new tagline that we like to use for the Community Foundation that says we gather, grow, and grant. That's our sort of quick and easy way to explain what the Community Foundation does.  

We gather donations from individuals who have a passion for some charitable organization or charitable cause in the community. Then we invest those donations - we don't spend the donations themselves, we invest that - so we grow the balance in those funds. And then we use the proceeds from those investments to make grants. And those grants are distributed to local, and also sometimes outside of our area, charitable organizations.

Can you talk more about the history of Morton Community Foundation and how you came to work with this organization? 

Scott: The organization was started in 2000. It was primarily driven by a local insurance company owner, Phil Kuhl, of Kuhl Insurance. And Phil had heard about community foundations in some other parts of the country. Primarily, this one that he heard about was in Kosciusko County, in Indiana. So he got connected to that, learned a little bit more about it, and decided that we should have a community foundation in Morton. 

So he gathered together a group of local business owners, and they started the foundation in 2000. Most of the people on the board at the time were probably not super aware of what they were even getting started. Within three years, they gathered some money and they were able to give the first grants. That was in 2003.  The dollar amount they had to distribute was about $3,000. And they literally went to some of these local organizations, the library, the park district, the schools, and said, 'hey, we've got $3,000 we'd like to distribute for our grants. But you'll need to apply for the grant.'

So that was kind of the beginning. Today, 20 years later, we are distributing about $350,000 in grants. So it's grown a lot and impacts our community in a huge way. I was blessed to come be part of the organization in 2007, and I was the first staff person that they hired. We've grown and it's exciting to see it continue to grow.

Tim: Well, for anybody out there that may come and visit the new building, it looks great! And it's in a perfect location right in the middle of Morton. 

Can you describe how your endowment donor advised funds work?

Tim: At Eagle Ridge Wealth Advisors, we do a lot of tax planning for our clients. We use donor advised funds and charitable giving, in general, to help with clients' tax planning and limiting their lifetime tax liability. Here, at Morton Community Foundation, it's a similar concept, but it's not a straight donor advised fund. You talk about it as an endowment donor advised fund. Could you describe a little bit how that works?

Scott: Any community foundation that technically qualifies as a community foundation would have its primary purpose as building endowment funds for the future of its community. So our donor advised funds are advised funds that are invested for the long haul. When you put money into an endowed donor advised fund, your intent would be to not ever spend the principal amount that you deposited, but again, only the proceeds of the invested portion of that money. So that would be the primary difference, probably, between most of the donor advised funds they that you would work with. 

Tim: Just a little clarification. So an endowed donor advised fund would be, you know, same tax advantages, same benefits for the client, but how the money is actually spent is actually a percentage each year, rather than just writing a check, possibly down to zero.

Scott: Exactly. So their goal would be in the long haul maybe to build that fund up to a larger and larger amount so that the grant money every year can grow, and then it would go on beyond their lifetime onto other individuals from their family they might assign as donor advisors for the future. So it can be done that way.

How would someone go about setting up a donor advised endowment fund with Morton Community Foundation?

Scott: They could do it one of two ways. In both cases, I'm going to ask them to use their tax accountant or their professional advisor, like yourself, to give them advice on the tax benefits to them because every individual is different. I'm not a tax advisor, and I'm not a financial adviser. But what I can do is work hand to hand  with you or someone's advisor to make sure that they accomplished the philanthropy that they're looking to accomplish in the community based on the best way for their tax plan,

What is the minimum contribution to open a donor endowment fund? And what is the average size of an endowment?

Scott: An endowment can be started with as little as $1,000. The commitment, though, would be to build that to $10,000 within no more than 10 years. We won't distribute grants until a fund hits $10,000. So the donor typically wants to get it funded to $10,000 as soon as possible so they can begin giving grants. But it can be done for as little as $1,000. I would say that the average fund is started with at least $10,000, but we have had some that were started with a couple thousand dollars.

Tim: If it's done for tax planning purposes, you almost have to have it that high to move the needle at all.

What options do the fund owners have in choosing when money is paid out of the endowment and to what organizations? 

Scott: With a donor advised endowment fund, that timeline is basically every spring is when we calculate the available funds. So typically there's one time period when people will distribute those monies. If there's a reason where they need to do it at a different time of the year, we could make that happen. We have somebody that has a fund like this that distributes at the Thanksgiving/Christmas timeframe, but most of them would distribute during the spring.

Tim: Okay, and what kinds of organizations?

Scott: Typically any 501(c)(3) or charitable equivalent, so that could be a government entity, like a school, the library, the park district. It could be a public or parochial school.

How would the endowment funds be invested?

Scott: We pool our investments with the Community Foundation of Central Illinois. And they have a very specific investment policy, which anyone is welcome to have a copy of that, but it's basically the 60/40 split [60% equities, 40% bonds or fixed income].

Tim: Yeah, it makes perfect sense for something that you want to continue to draw from over time.

Is there any other information you want our audience, which is primarily retirees and those close to retirement, to know about donor advised endowment funds?

Scott: I just think for people that are looking down the road and saying, 'hey, I want to do something for my community that makes an impact,' this is a perfect way to do it. Because we can be completely flexible to impact whatever organization, including a church or faith based organization, if somebody wants to do that. If they're very involved in any church or charity that they'd like to impact into the future, we'd love to help them set something up that could be a permanent source of revenue for that organization.

Is there anything else you would like to say about Morton Community Foundation?  

Scott: If you're interested in checking out The Giving Tree downtown, that giving tree at the corner of First and Jefferson Street is a beautiful symbol of what we do. 

Tim: It's a beautiful tree too. Scott explained it to me last fall when we met, but if you want to go ahead and explain a little more.

Scott: It's a stainless steel tree, and it's got leaves that are laser cut with the names of donors who have given to the Community Foundation over a period of time, at a certain level. It's got that sort of symbolism: we sit under the shade of a tree that somebody planted many years ago. With an endowment, basically what you're doing is you're saying today, I want to start something that's going to benefit people in the future that may never know who I am, but they're going to receive benefit from it. So that's a beautiful symbol of the kind of work that we do, and I'd love to meet with some of your clients and see if we can do something good for the future.

Tim: Well, obviously you know I have my firm in Morton. I definitely like to keep as much as I can local if it's possible. So that's one of the reasons we're here. And with that, I want to say thank you very much for being my very first interviewee for the podcast.

For more information, please visit the Morton Community Foundation website, and talk to your financial advisor about how a donor advised endowment fund could be a good choice for charitable giving while also limiting your lifetime tax liability.