What is philanthropy?
There are a number of options to choose from if you would like
to create your own philanthropy. This is a guide to finding the
choice that is right for you.
By giving to charitable and philanthropic organizations we exercise
our support for the goals, the people, and the purposes we believe
in. It is our individual response to human needs; an opportunity
to give is an opportunity to be involved. It is caring and serving.
Philanthropy gives our wealth meaning, and engages us as stewards
in the betterment of society.
When properly designed, a giving program can achieve a wide range
of valuable goals for you:
- It can provide for the future needs of your family. At the
same time, you can help to ensure a tradition and a sense of value
for caring in your children, friends, and colleagues.
- It can provide for the long-term needs of the organizations
and the people you want to help. An investment in people is one
that continues in perpetuity. The income generated by the principal
continues to make an impact for generations to come.
What are our giving options?
Make a direct gift to an established charity
Create a family foundation or other
private foundation
Give to or through a community
foundation or other public foundation
Develop a corporate giving program or a
corporate foundation
Establish a supporting organization
Establish your own giving circle
Explore your planned giving options
With the various giving options in mind outlined below,
your contribution may consist of almost any property, tangible or
intangible.
The types of assets available play a part in determining what kind
of foundation should be set up and whether a private foundation
is an appropriate charitable outlet. Frequent gifts are cash, marketable
securities, stock in a closely held corporation, life insurance
policies, mutual funds, income from trust funds, artwork, and real
property (with values determined by independent appraisal).
- Cash
Lifetime gifts of cash to a private foundation afford the donor
a deduction of up to 30% of adjusted gross income, with a five-year
carry-over privilege for amounts in excess.
- Appreciated Property
Lifetime gifts of appreciated property, such as closely held stock
and real estate, may be deducted at cost. Publicly traded stock
may be deducted at its fair market value. All gifts of appreciated
property to private foundations may be deducted up to 20% of the
donor's adjusted gross income, with five-year carry-over privileges
for amounts in excess.
The above limitations apply only to lifetime gifts. Bequests are
all deductible from the estate of the donor at full value.
Make a direct
gift to an established charity
Most of us are not strangers to the world of philanthropy. We have
been asked to lend our names, time, and financial support to a number
of charitable causes. Educational institutions, churches, hospitals,
museums, orchestras, and other organizations have probably benefited.
Perhaps you serve on boards of directors or advisory councils for
some of these charities. The tax deduction for gifts of cash to
charity can be up to 50% of your adjusted gross income for the year.
Federated funds, like the United Way, Earth Share California, and
others, participate in annual workplace giving campaigns that raise
millions of dollars for distribution to local, state, and national
nonprofit organizations. Check with your employer for details.
Create
a family foundation or other private foundation
Family foundations provide a forum in which family members and
others can work towards common goals. In addition, there are the
key advantages of choosing to create a private foundation:
- Personal Control and Flexibility
Because a private foundation is actually a charitable trust fund
or a nonprofit corporation, you retain personal control and flexibility
over its giving programs. By making endowed gifts, your influence
continues to make an impact for generations to come.
- Tax Benefits
Since it is a charitable organization it is exempt from federal
income tax on its income, and your gifts to it afford you certain
tax advantages. You may deduct up to 30% of your annual adjusted
gross income for cash donations. Gifts of property may be deducted
according to the chart that follows at the end of this brochure.
If any of your gifts in any year exceed the allowed maximum deduction,
you may carry over the excess deduction for up to five years.
- Perpetuity
Another important benefit is that your funds continue to make
an impact for generations to come and provide for the long-term
needs of the organizations and the people you want to help. Foundation
funds are invested and income is paid out annually in grants.
By law, private foundations must pay out 5% of assets in grants
and 1-2% excise tax on net investment income.
Give
to or through a community foundation or other public foundation
Community foundations are local charitable entities that administer
a number of donor advised funds primarily for local purposes, to
solve community or regional problems, and to improve the lives of
people in their geographic area.
Because community foundations are public charities supported by
donors from across the community, all contributions are allowed
the maximum tax benefits, up to 50% of adjusted gross income. Funds
are not subject to the excise tax and payout requirements of a private
foundation.
Many individuals, families, and corporations are creating donor-advised
funds with local community foundations. You can name the fund, establish
a broad purpose for the fund, or designate a specific charitable
organization-such as the local library-to benefit. Family members
may join you in recommending grants from the fund, however, the
final decision on grant distributions rests with the board of the
community foundation.
Develop a corporate
giving program or a corporate foundation
Companies can provide funding through a foundation or a giving
program. In addition to grant programs that enhance the corporation's
strategic business interests, corporate foundations and giving programs
often match employee gifts of cash and volunteer time to nonprofit
organizations. Because the priority is to serve those communities
where company employees and facilities are located, companies may
make "in-kind" gifts of products to charities and/or organize
workplace volunteer efforts for the good of the community.
The two main types of corporate philanthropy are:
- Corporate Foundation
The corporate foundation is usually started with a single gift
that can become the endowment, which may be added to on an annual
basis or when, and if, profits allow. Advantages that may appeal
with this option include the ability to preserve the company's
charitable giving during lean economic times and the ability to
preserve the company's name in an era of mergers and acquisitions.
The corporate foundation is subject to the same rules and regulations
applicable to other private foundations.
- Corporate Giving Program
The corporate giving program, organized to make charitable grants,
is established within the corporation. It receives its funding
as part of each year's operating budget for the parent corporation.
This program has no independent endowment. A corporate giving
program is not subject to the rules and regulations of a private
foundation.
Establish a supporting
organization
If you are seeking to support a particular charitable organization
and prefer close involvement with grant decisions, yet want an alternative
to establishing your own private foundation, a supporting organization
lies between a private foundation and a donor-advised fund.
Since the supporting organization is identified with a publicly
supported charity, the donor enjoys the tax benefits of a public
charity, and the donor and/or donor's family may serve as members
of its separate board. The mission of the supporting organization
must also be compatible with the mission of the public charity with
which it is identified.
Cash donations, as with other public charities, are tax deductible
up to 50% of adjusted gross income.
Establish your
own giving circle
Many donors are discovering the joys of philanthropy by joining
with other like-minded individuals to form giving circles. The common
link may be that they are peers, colleagues, family members, or
simply interested in a common area of interest (i.e., education,
arts, the environment). To form a giving circle, donors pool their
funds, invest them, and then make joint decisions about how to distribute
the income and/or principal of these funds to other philanthropic
or charitable organizations in the form of grants. Donors often
commit to a giving circle for a number of years at an established
dollar level. The pooled funds may be held at a community foundation,
at a local bank, or at some other nonprofit or commercial entity
that invests the funds and enable them to earn income.
Explore your
planned giving options
Planned giving makes it possible for you to give to the philanthropy
or charity of your choice while meeting your current income needs
and providing for your heirs. To determine the ideal formula for
you and your family, work with a qualified attorney, certified financial
planner, or other professional financial advisor.
- The charitable remainder trust, a popular planned giving instrument,
lets you take a charitable deduction for your gift to the trust
in the year in which the trust is formed. (Additional funds can
be added in later years.) You then receive income from the trust
for life, after which the assets pass to a philanthropic fund
or charity that you have designated.
- A charitable lead trust established by you provides for a regular,
fixed amount to be paid to a philanthropic fund or charities of
your choosing for a specific number of years. At the end of that
specified period, the remainder of the trust passes to your designated
heirs or other noncharitable beneficiaries.
In each case, your may designate a particular nonprofit organization
or multiple organizations, your own private foundation, your local
community foundation, or your own supporting organization to receive
the benefits of your planned gifts. Please consult with your financial
or legal advisor about the many other kinds of planned giving options
that are available to you. |
