Father Joe Carroll recently wrote that more people should give directly to charities rather than using community foundations to do their charitable giving for them. Father Joe was upset with the high fees and loss of control that go along with many of the “charities for other charities.” Our experience has shown that many of the clearing organizations become far more interested in holding on to donor funds so that they can collect their fees and build their domains.
But then a direct large gift to a single charity can easily be misused, particularly if the gift is made years in advance and funded at death. Funds intended by the donor for education or to help the poor may be used instead to build a building or add art work to the conference room. Princeton University recently agreed to pay $100 million back to the Robertson family because it had, according to the Robertson heirs, failed to use the funds as they were intended.
Give to a community foundation — possibly pay high fees and lose generational control over your donations — or give directly to the charity and have no control other than to whom you give the gift. Is there another option? Yes. Of the $750 billion in assets held by organized philanthropies in the U.S., more than half ($430 billion) is held in private (family) foundations. Private foundation contributions receive a lower tax deduction than gifts to operating charities (your church, Father Joe) or to community foundations, but more people choose to make larger donations to them. For example: the William and Melinda Gates Foundation. In fact, they represent 83 percent of all foundation assets and give more than $24.1 billion per year.
Through a family foundation you can give directly to individuals in need, to foreign public service organizations, and to other charities (Father Joe). You can give now and get your deduction now, but decide later who will benefit from your gift. You can dole out your gift so that it is spent each year as you desire rather than leaving it to the future board of your favorite charity to hold true to your original intent. You decide how your money is to be managed and how much is to be donated each year. (You must give at least 5 percent of the prior year’s principal.)
Best of all, you can teach your family the value of philanthropy. Giving your family the opportunity to participate in your vision and passion is perhaps the most important benefit of family philanthropy. Focusing on philanthropy can be a way to bring a family together. Family councils write mission statements, research potential beneficiaries, decide on allocations, monitor the use of gifted funds, etc. Young children and grandchildren can be introduced to philanthropy at an early age with grants they can direct to their school or public project.
Today, family philanthropy is inexpensive to establish and maintain. An initial gift of a few hundred thousand can justify the process. For more information, give me a call.
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