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Private Foundation, Community Foundation,
or For-Profit Charitable Funds: What Are My
Options?
Has your desire to help good causes outgrown buying Girl Scout
cookies and writing yearly checks to a handful of charities? If so,
maybe it's time you move beyond a scattershot, reactive approach
to charitable giving and start thinking strategically.
You don't need to be a Bill Gates or an Oprah Winfrey to be a
philanthropist. With a reasonable amount of money you can
launch a permanent charitable endeavor, leave a legacy (and
enjoy it while you're still around), introduce your children to
giving something back to society, establish a family tradition –
and have fun in the process.
The caring person who wants to move beyond occasional checks
to worthy causes has four primary philanthropic options
available:
#1. PRIVATE FOUNDATIONS: ARE YOU READY FOR
THE WORK?
Many people imagine setting up their own philanthropic
foundation to make grants to charities. It's a great way to give
something back to your community and create a legacy.
But, you need lots of money to start your own foundation –
enough to disburse 5% of the invested assets each year (the legal
minimum) and to pay a 2% excise tax on net investment income
without encroaching on capital. You also need a board of
directors; investment consultants; and legal and accounting
expertise to incorporate, register, and organize the foundation.
Maybe you're not ready to start your own foundation. It's a major
undertaking. But there is another solution. You can set up a
charitable fund, at a much lower cost in partnership with your
local community foundation – the Tri-Valley Community
Foundation.
#2. THE COMMUNITY FOUNDATION OPTION: GIVING
UP CLOSE AND PERSONAL
An increasing number of people are turning to their local
community foundation when they want to launch out into
philanthropy – after selling a business, after reaching a
significant milestone in their lives, to transmit a culture of giving
to their children, or when they want to memorialize a loved one.
"I had looked at setting up our own foundation, but it's a
cumbersome process," says one executive who started a donor-
advised fund with a local community foundation. "With the
community foundation, what you do is ride along on their
coattails."
Regardless of your philanthropic interests, you can choose from
among a variety of fund options offered by the Tri-Valley
Community Foundation to achieve your goals. Donor-Advised
Funds have become an especially attractive option for donors. A
donor-advised fund is a philanthropic vehicle that allows donors
to create accounts with their donated assets, qualify for an
immediate tax deduction, and then recommend grants from
those accounts to charitable organizations. Donor-advised funds
are the fastest-growing philanthropic vehicle in the nation.
The price of entry is not high. You can start a charitable fund for
as little as $3,000, and see grants awarded once your fund reaches
$10,000. Your own charitable fund behaves a lot like a full-sized
foundation without the administrative costs and headaches. You
may even name the fund after yourself or someone you love, or
keep your giving completely anonymous. When you give money
or appreciated assets into a fund, the community foundation acts
as your ears and eyes in the world of good causes, helping you to
research the charities that will most effectively carry out your
goals.
"Turning a donor-advised fund into a family affair can also be
ideal for wealthy families who worry that their children will grow
up thinking every kid owns enough electronic toys to stock a Best
Buy. Getting a privileged kid involved in charitable decisions can
expose him or her to neighborhoods that could be a short freeway
trip away, but may as well be sitting on the far side of Venus,"
says Lynn O'Shaughnessy , author of The Retirement Bible and
The Investment Bible.
A fund that's launched with limited amounts can build gradually
for many years because donors may spend only a small portion of
their fund annually. Donors are also encouraged to add to their
initial contribution, and to get their family and friends to make
tax-deductible contributions as well. Gifts are fully tax-
deductible, and if you donate appreciated stock or property, you
also avoid capital gains taxes.
#3. ENTER THE FOR-PROFIT SECTOR
Community foundations have been around since 1914 to help
launch novice philanthropists and to offer opportunities for up-
close and personal charitable giving. Recently, the for-profit
financial sector has entered the donor-advised fund arena, seeing
charitable giving funds as a lucrative business opportunity.
Fidelity Investments, Vanguard, and other for-profit investment
institutions have established charitable gift funds.
If you choose to place money in these funds, you will get the
same tax break, but you won't get the guidance that community
foundations provide. For-profit institutions will cut a check when
you want to send a charity money, but they won't help you figure
out who's the most effective charity or take you on a tour of
community agencies. It's a far more impersonal process.
Like all community foundations, the Tri-Valley Community
Foundation is rooted in the local communities we serve. The
only reason we open our doors every day is to help create healthy,
vibrant, and culturally rich communities in the Tri-Valley –
communities that support a bright future for all our children and
that truly care for the most vulnerable among us.
As a community foundation, and not a for-profit venture, we are
able to devote our energies to bringing people together –
charitable donors, community and government leaders, small
businesses and large corporations, charitable organizations and
service providers – to assess community needs, provide
leadership and resources in addressing those needs, and serve as a
prudent and accountable steward of charitable contributions.
#4. Estate Planned Gifts: Giving Now, Giving for the
Future
Community foundations also offer a wide array of estate-planned
gifts. We are available to explain these options to you and help
you think through the possibilities, at no cost to you: charitable
gift annuities, charitable lead trusts, charitable remainder trusts,
a pooled income fund, bequests, and gifts of real estate,
insurance, and appreciated securities. These opportunities can
enable you to receive guaranteed tax-reduced income for life,
immediate tax deductions, the chance to see your philanthropy in
action while you're still around to enjoy it, and the peace of mind
that comes from knowing the causes you care about today will be
supported forever, exactly as you intend.
or For-Profit Charitable Funds: What Are My
Options?
Has your desire to help good causes outgrown buying Girl Scout
cookies and writing yearly checks to a handful of charities? If so,
maybe it's time you move beyond a scattershot, reactive approach
to charitable giving and start thinking strategically.
You don't need to be a Bill Gates or an Oprah Winfrey to be a
philanthropist. With a reasonable amount of money you can
launch a permanent charitable endeavor, leave a legacy (and
enjoy it while you're still around), introduce your children to
giving something back to society, establish a family tradition –
and have fun in the process.
The caring person who wants to move beyond occasional checks
to worthy causes has four primary philanthropic options
available:
#1. PRIVATE FOUNDATIONS: ARE YOU READY FOR
THE WORK?
Many people imagine setting up their own philanthropic
foundation to make grants to charities. It's a great way to give
something back to your community and create a legacy.
But, you need lots of money to start your own foundation –
enough to disburse 5% of the invested assets each year (the legal
minimum) and to pay a 2% excise tax on net investment income
without encroaching on capital. You also need a board of
directors; investment consultants; and legal and accounting
expertise to incorporate, register, and organize the foundation.
Maybe you're not ready to start your own foundation. It's a major
undertaking. But there is another solution. You can set up a
charitable fund, at a much lower cost in partnership with your
local community foundation – the Tri-Valley Community
Foundation.
#2. THE COMMUNITY FOUNDATION OPTION: GIVING
UP CLOSE AND PERSONAL
An increasing number of people are turning to their local
community foundation when they want to launch out into
philanthropy – after selling a business, after reaching a
significant milestone in their lives, to transmit a culture of giving
to their children, or when they want to memorialize a loved one.
"I had looked at setting up our own foundation, but it's a
cumbersome process," says one executive who started a donor-
advised fund with a local community foundation. "With the
community foundation, what you do is ride along on their
coattails."
Regardless of your philanthropic interests, you can choose from
among a variety of fund options offered by the Tri-Valley
Community Foundation to achieve your goals. Donor-Advised
Funds have become an especially attractive option for donors. A
donor-advised fund is a philanthropic vehicle that allows donors
to create accounts with their donated assets, qualify for an
immediate tax deduction, and then recommend grants from
those accounts to charitable organizations. Donor-advised funds
are the fastest-growing philanthropic vehicle in the nation.
The price of entry is not high. You can start a charitable fund for
as little as $3,000, and see grants awarded once your fund reaches
$10,000. Your own charitable fund behaves a lot like a full-sized
foundation without the administrative costs and headaches. You
may even name the fund after yourself or someone you love, or
keep your giving completely anonymous. When you give money
or appreciated assets into a fund, the community foundation acts
as your ears and eyes in the world of good causes, helping you to
research the charities that will most effectively carry out your
goals.
"Turning a donor-advised fund into a family affair can also be
ideal for wealthy families who worry that their children will grow
up thinking every kid owns enough electronic toys to stock a Best
Buy. Getting a privileged kid involved in charitable decisions can
expose him or her to neighborhoods that could be a short freeway
trip away, but may as well be sitting on the far side of Venus,"
says Lynn O'Shaughnessy , author of The Retirement Bible and
The Investment Bible.
A fund that's launched with limited amounts can build gradually
for many years because donors may spend only a small portion of
their fund annually. Donors are also encouraged to add to their
initial contribution, and to get their family and friends to make
tax-deductible contributions as well. Gifts are fully tax-
deductible, and if you donate appreciated stock or property, you
also avoid capital gains taxes.
#3. ENTER THE FOR-PROFIT SECTOR
Community foundations have been around since 1914 to help
launch novice philanthropists and to offer opportunities for up-
close and personal charitable giving. Recently, the for-profit
financial sector has entered the donor-advised fund arena, seeing
charitable giving funds as a lucrative business opportunity.
Fidelity Investments, Vanguard, and other for-profit investment
institutions have established charitable gift funds.
If you choose to place money in these funds, you will get the
same tax break, but you won't get the guidance that community
foundations provide. For-profit institutions will cut a check when
you want to send a charity money, but they won't help you figure
out who's the most effective charity or take you on a tour of
community agencies. It's a far more impersonal process.
Like all community foundations, the Tri-Valley Community
Foundation is rooted in the local communities we serve. The
only reason we open our doors every day is to help create healthy,
vibrant, and culturally rich communities in the Tri-Valley –
communities that support a bright future for all our children and
that truly care for the most vulnerable among us.
As a community foundation, and not a for-profit venture, we are
able to devote our energies to bringing people together –
charitable donors, community and government leaders, small
businesses and large corporations, charitable organizations and
service providers – to assess community needs, provide
leadership and resources in addressing those needs, and serve as a
prudent and accountable steward of charitable contributions.
#4. Estate Planned Gifts: Giving Now, Giving for the
Future
Community foundations also offer a wide array of estate-planned
gifts. We are available to explain these options to you and help
you think through the possibilities, at no cost to you: charitable
gift annuities, charitable lead trusts, charitable remainder trusts,
a pooled income fund, bequests, and gifts of real estate,
insurance, and appreciated securities. These opportunities can
enable you to receive guaranteed tax-reduced income for life,
immediate tax deductions, the chance to see your philanthropy in
action while you're still around to enjoy it, and the peace of mind
that comes from knowing the causes you care about today will be
supported forever, exactly as you intend.
#1. Establish a private foundation #2. Establish a philanthropic fund with your local community foundation #3. Establish a philanthropic fund with a for-profit financial services institution #4. Make an estate-planned gift, such as a bequest, charitable gift annuity, charitable lead trust or remainder trust, or transfer of a life insurance policy to a nonprofit organization |
| Want to explore the possibility of becoming a philanthropist, with no strings attached? Click here to contact the TVCF. |
| Source: Adapted from an article by The Philadelphia Foundation. |
Why Choose a Community Foundation?