Give to charitable organizations
Gifts to established charities provide direct
support to those organizations. These can include, but are not limited to, schools,
hospitals, arts and cultural institutions, human service agencies and religious
congregations. They may also include federated funds such as United Way or Combined Health
Appeals that collect money for these causes. A gift to these nonprofit organizations can
be of any size. Cash gifts to charities are deductible at rates of up to 50% of adjusted
gross income; gifts of appreciated property, including securities, are deductible at rates
up to 30%.
Create a private foundation
By creating a private foundation a donor can retain
personal control and flexibility over his/her giving programs. Private foundations can be
structured as charitable trust funds or nonprofit corporations. According to law, private
foundations must annually pay out funds of at least 5% of their assets and pay a 1-to-2%
excise tax on the net investment income. Cash gifts to private foundations are deductible
at rates up to 30% of adjusted gross income; gifts of appreciated property are deductible
at rates up to 20% of adjusted gross income.
Give to a community foundation
Community foundations are public charities supported by
donations from across their region. Gifts to community foundations can be of any size,
from as little as a dollar to thousands -- or millions -- of dollars. By pooling funds,
community foundations achieve economies of scale for investing, managing and granting
philanthropic dollars. Cash gifts to community foundations are deductible at rates of up
to 50% of adjusted gross income; gifts of appreciated property are deductible at rates of
up to 30% of adjusted gross income.
A donor to a community foundation may designate his/her
gift as:
1. Unrestricted: which would be used where
the foundation's advisors deem it is most needed to meet the needs of the community.
2. Restricted: which provide options for
donors to determine how their contributions will be used. Types of restricted gifts
include:
- Designated funds where donors specify the agency
or agencies to receive their support.
- Field-of-interest funds where donors select the
broad charitable purposes they wish to support (e.g., health, education, the arts).
- Donor-advised funds where donors have the
opportunity to make periodic recommendations on which agencies they wish to support,
although final decisions rest with the foundation
board.
Establish a supporting organization
The supporting organization is a legal entity which
attaches itself to another public charity and takes on the public charity status of the
organization it supports. This structure preserves some of the independence and
identification with the donor, without the administration or limitations of a private
foundation.
The donor or donor designees may serve as board
members, but the supported organization must have 50% or more of the board's voting power
(or veto power) on the supporting organization.
Give to a Charitable Gift Fund
Charitable gift funds are vehicles for giving that are
established as charitable affiliates of for-profit financial institutions such as banks
and mutual fund companies. These funds are donor-advised funds (see descriptions under
community foundations); therefore, distribution is made to nonprofit organizations at the
advice of the donor, with final authority in the board of the charitable affiliate. Cash
gifts are deductible at rates of up to 50% of adjusted gross income; gifts of appreciated
property are deductible at rates of up to 30% of adjusted gross income.
Develop a corporate program
A business owner can develop a philanthropic corporate
program in the form of either a corporate foundation or a corporate giving program. In
both instances, the supporting funds come from corporate profits. For most corporate
programs, philanthropic priorities serve the communities in which their employees live and
work.
Corporate foundations are often started with a
single gift, then funded on an annual basis, as profits allow. Legally, these foundations
operate as private foundations. Officers are generally the company owners and key
executives.
Corporate giving programs are established as ongoing
corporate entities and funded as part of the parent corporation's operating budget.
Corporate contributions staff manage the corporate giving budgets, often directed by the
company's chief executive officer and other key executives.
Businesses can also offer matching gift programs for
employees, matching their gifts to educational, cultural and other 501(c)(3) nonprofit
organizations. Companies can also offer in-kind
donations of goods and services, as well as organizing workplace volunteer efforts to
meet community needs.
Other ways to give
Other ways to be philanthropic are worthy of mention.
These programs offer donors the means of retaining income for life and/or control over
where the principal will go.
With a charitable remainder trust the donor
takes a one-time charitable deduction in the year the trust is formed. The donor then
receives income from the trust for life. Upon the donor's death, the assets of the trust
are distributed to the donor's designated charity or charities.
A charitable lead trust is a variation on the
charitable remainder trust. It provides for a fixed amount to be paid annually to the
charity or charities of the donor's choice for a specific time. Upon the termination of
the trust, the remainder is passed on to the donor's designated heirs.
A qualified terminable interest property (QTIP) trust
will provide the donor's spouse the right to income for life. Upon the spouse's death, the
trust property will be passed on to a designated charity or charities. This arrangement is
more flexible than the charitable remainder trust. Here, the trustee may be given broader
powers including the right to invade trust principal for the support and comfort of the
surviving spouse.
With a charitable gift annuity, the donor contributes
cash or marketable securities in exchange for a contractual promise to pay him/her (and/or
another annuitant) a guaranteed income for life. The rate of that income is based on the
age(s) of the annuitant(s).
A pooled income fund is a life-income arrangement
wherein the income from the donor's gift is paid to the donor (and/or designated friends
and family members) for life at the rate earned by the total pool of gifts. Upon the death
of the last beneficiary, the remaining funds pass to the charity or charities designated.
A donor can also take out (or transfer) a life
insurance policy vesting all ownership rights in the policy to a designated charitable
institution. The donor can pay the annual premium with yearly, tax-deductible
contributions to the charity. Upon the donor's death, the proceeds of the insurance policy
pass to the designated charity or charities, free from estate taxes.
Revised:
November 10, 2004
