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Several state and local associations seek to assist their members and others in times of extraordinary need or due to hardships beyond the person’s control, such as floods, fire, or illness. The ways in which they do so vary in size, scope, and mission. The programs are often referred to as benevolent funds.
Benevolent fund awards have provided assistance for:
- insurance deductibles for hospital stays
- funeral arrangements for members’ loved ones who died tragically
- purchase of specially equipped vehicles for greater independence
- adoption of a relative’s child due to a death in the family.
Some associations’ funds are more specific: The California Association of REALTORS® (CAR) Disaster Relief Fund, for example, provides help specifically to members who have been affected by fires or other natural disasters and covers financial assistance for related expenses such as shelter, medical expenses, equipment, repairs, and transportation.
Starting a Benevolent Fund Program
If you are thinking of starting a benevolent fund program for your association, here are some factors to consider, as well as information about how various associations handle them.
501(c)(3) status
It is not necessary to establish a separate organization with 501(c)(3) status for your fund program. You might consider working with a local community based or other 501(c)(3) charitable organization. You should be very cautious about making grants from association funds directly to assist members or other individuals. The IRS takes the position in Revenue Ruling 67-251 that providing “financial aid and welfare services to any member” is inconsistent with, and therefore jeopardizes, the 501(c)(6) tax exempt status of an association.
If you do establish a separate organization and want to limit awards only to members, the IRS is not likely to grant 501(c)(3) status. Some associations feel that they would get more contributions if they had it, since contributions would then be tax-deductible. CAR made a different decision: In order to limit the assistance to CAR members and staff, the association outsourced the administration of the disaster relief fund to an external organization that has 501(c)(3) status.
The process for drafting the fund’s documents and applying for 501(c)(3) status takes at least 3 to 6 months. It also brings some requirements, such as tax filing, reporting, etc. Please consult a lawyer for advice on this topic.
Raising money for the fund, both initially and ongoing
Associations have raised money in a variety of ways. At MAAR, the initial funding was $20,000 raised from REALTOR® funds and affiliates; RANM got its initial funding from the association’s reserves, which was only possible with the 501(c)(3) status. The NEAR fund was seeded with the proceeds from their Annual Recognition Gala, the association’s most popular event. It is okay to start small: the San Luis Obispo association’s fund started with a $500 contribution from the association.
Some fund-raising methods:
- $10 voluntary contribution line on the annual dues bill
- member mailing, including a remittance envelope donated by a vendor
- from REALTOR® association funds and from affiliates
- through fundraisers such as a golf tournament, variety show, silent auction, or even a shredding truck
- the fund’s directors make personal requests at committee and board of directors meetings
- weekly 50/50 drawing or caravan fees
- asking awardees to donate to the fund once they are in a position to do so
- letting members know that the fund exists at an appropriate time – in CAR’s case, when a natural disaster might result in both requests for assistance as well as donations
Eligibility for receiving awards
Most association fund programs consider requests from current members – some require that the member must have been in the association for 12 months or more. Some also include past members, sometimes with a specified length of time – 10 years, for example. Some, particularly those with 501(c)(3) status, also consider requests from current and past staff members; some also include immediate families of members and staff. Associations have occasionally given more than one award to the same person.
Evaluating requests
Most associations do not have strict criteria for requests and evaluate each one individually. The Memphis Area Association of REALTORS® (MAAR) asks to see requesters’ tax returns, and the Bay East Association asks what other organizations are providing assistance to the individual. Almost no association would grant an award to cover association dues. At the Northeast Association of REALTORS® (NEAR), since their board of directors reviews award requests, requesters’ names are removed from the application to maintain their privacy.
Number and size of awards
Associations often set a limit of $5,000 per recipient per year or less. Grants tend to be $100 to $1,000, and directors usually choose to not deplete the fund in order to save money for unexpected requests.
Choose to limit the amount you will spend on operational costs: RANM has committed not to spend more than 25 percent of the fund’s assets; CAR pays 5 percent to the outside firm that manages their fund.
Oversight and management of the fund
Some associations appoint members of their board of directors, others have a dedicated committee for the fund, while others have their CEO oversee it. RANM recommends that the association retain some oversight in the way the fund is managed and run.
Benevolent Funds Toolkit (PDF: 5 MB)
This toolkit for association executives explains the common types of benevolent funds, their advantages and disadvantages, and how to choose the best one for your association's charitable-giving goals and mission.
Learn more about how REALTOR® associations nationwide are using benevolent funds.