A Foundation of One’s Own?

Mary McQuillenIn her law practice Mary McQuillen represents a number of private foundations. As she pointed out in an interview with Jennifer Southard, Maine Community Foundation’s director of philanthropic services, a donor-advised fund is sometimes an excellent alternative to a private foundation. McQuillen also puts in a good word for legacy endowments and highlights recent changes to regulations governing supporting organizations.

MaineCF: Why and when do you bring up charitable giving with your clients?

McQuillen: I raise the issue when there are tax benefits to consider—for example, whenever highly appreciated property is to be sold—but also when charitable giving seems relevant to the client’s testamentary intentions. A client who has consistently supported an organization may have not thought about how much her support will be missed when she is gone. A bequest of endowment funds can replace this support or at least provide transitional funding. If it would be imprudent to make the bequest directly to the organization for whatever reasons, a designated fund at the Maine Community Foundation provides the perfect solution.

MaineCF: Are there any recent changes to the laws related to charitable giving that you think your peers or clients should be aware of?

McQuillen: The Pension Protection Act of 2006 imposed new restrictions on supporting organizations. Supporting organizations have been promoted as a way to have your cake and eat it too; in other words, to have the control that a private foundation allows without the administrative and tax burdens imposed on foundations. This was never really the case, but now supporting organizations are actually subject to more restrictions than private foundations in certain respects. This situation only reinforces the appeal of working with a community foundation as an alternative to establishing an independent private foundation.

MaineCF: Do you have a Maine Community Foundation story to share?

McQuillen: I have shepherded several private foundations to MaineCF. A couple of these were family foundations where the participants found the administration too time-consuming, but most were charitable trusts held by banks, where the costs of maintaining the trust as a private foundation began to impinge on its charitable purposes. These transfers worked out well for everyone: the bank trustee, the charitable beneficiaries and the Maine Community Foundation.

A donor-advised fund is often presented as an alternative to a private foundation in the planning phase, but the transfers I’ve been involved in show that a donor-advised fund continues to be an option throughout the life of a private foundation.

MaineCF: In the cases you describe, what was the impetus on the client’s part to say, “Now’s the time to think about trying something else?”

McQuillen: For one family, it was a case where even though they had been advised about how onerous it can be to run a foundation, it didn’t really hit home until they started doing it. They had the idea that one son was going to take the primary responsibility and it turned out he couldn’t do that.

Geography can also affect the running of a private foundation. When family members become far-flung, communication can become difficult, with many decisions around philanthropy turning out to be more of a chore than they used to be. My clients who have private foundations often feel that they can’t make a move without a lot of legal guidance, which can take the fun out of charitable giving.

A partner in the Private Clients Group at Verrill Dana, LLP, Mary McQuillen has practiced law in the trusts and estates area since 1987, in Maine and New York. Her practice includes representation of private foundations and other tax-exempt organizations as well as estate planning, trust and estate administration, and representation of fiduciaries. McQuillen received her B.A. from Smith College and her J.D. from the University of Chicago Law School. Since moving to Maine in 1991, she has served on the boards of several arts organizations and the planned giving committees of local charitable institutions.