Feeling charitable? Here are some guidelines to giving

By Julie Jason

King Features Syndicate

Published: June 6, 2014 04:17PM
Updated: June 6, 2014 04:17PM
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Retirement and investments columnist Julie Jason

If you believe you can make a difference in the lives of others, you may be thinking about volunteering your time to charitable causes or making gifts to charity.

The “vast majority” of high-net-worth individuals and families do, according to the Bank of America Study of High Net Worth Philanthropy for 2012. Almost 95 percent of those surveyed give to charity, and almost nine out of 10 volunteer.

Why do people give to charity?

Most (74 percent) give because of “being moved at how a gift can make a difference,” according to the study. Donors report feeling personally fulfilled when they engage in charitable activity. Of all the reasons for making gifts, only 31.7 percent make gifts to charity because of tax benefits.

For people who want to have a more direct impact on a person in need, private foundations are worth a consideration. There are close to 80,000 private foundations, according to the Indiana University Lilly Family School of Philanthropy.

Barbara and Stephen Miller’s foundation intervenes at “crisis points,” when people find themselves on the verge of becoming homeless. Something as simple as a car breaking down can cause someone to be unable to pay a utility bill. The foundation steps forward with a grant of less than $1,000. That’s made a difference in the lives of 109 people the foundation has helped in two years.

A private foundation is usually funded by a family or corporation. Its primary activity is giving away money to other charities, but private foundations are able to give to individuals in need as well. The IRS publication to read is “Disaster Relief: Providing Assistance Through Charitable Organizations,” at http:// www.irs.gov/pub/irs-pdf/p3833.pdf.

The individuals cannot be relatives or friends. Such gifts are not permitted under self-dealing rules and trigger an excise tax. You’ll want to read more on that topic in IRS Publication 557, “Tax-Exempt Status for Your Organization.” Another resource is Cycle of a Private Foundation,” which you can find at www.irs.gov.

Foundation Source, the nation’s largest provider of support services for private foundations and the winner of the “Best Philanthropy Offering” at the inaugural Family Wealth Report Awards 2014, provides 10 reasons to consider setting up a foundation at www.foundationsource.com.

Here are a few to consider:

• Get a current tax deduction in the year that you make a contribution to your foundation. However, you can make grants from the foundation to your charitable causes over time. You are required to distribute 5 percent of the assets of the foundation yearly.

• Leave a lasting legacy: Foundations last beyond the donor’s lifetime, as the assets of the foundation can grow due to earnings and additional gifting. As a result, your grants to your charitable causes can be far greater than the amounts you donate to your foundation.

• Family involvement: Through your foundation, you can establish a tradition of charitable giving with your children and grandchildren. For more information on private foundations, Foundation Source provides a wealth of resources for those who want to learn more about setting up and running a private foundation at www.foundationsource.com/tools/knowledge-source/.

For a copy of the 2014 Foundation Source Annual Report on Private Foundations, go to www.foundationsource.com/resources/ FS_2014_Annual_Report.pdf.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.), welcomes your questions/ comments (readers@juliejason.com).