You don’t have to be rich to set up the equivalent of a charitable foundation — one that can continue making donations even after your death. “Jonathan” was a successful corporate manager who received a big payday when a major firm acquired the company he worked for. With no children of his own, he’d arranged for most of his wealth to be divided between two favorite charities: a local boys club and an organization that helped homeless people train for work and find jobs. Life had been good to Jonathan, and he wanted to give back.
A recent Time article, titled “Give to Charity Like Bill Gates…Without Being Bill Gates,” describes the concerns of Jonathan, as recently there had been some management changes at the charity. Consequently, Jonathan was not confident that his gift would be well used. He was considering taking them out of his trust.
Leaving an ongoing charitable legacy is not just for the wealthy. You do not need to be Bill and Melinda Gates with a foundation that gave away $3.6 billion last year. Foundations offer trustees greater control over investing and distribution of gifts, but they can be expensive to create and maintain, with strict compliance rules.
However, one idea from the original article is to amend your trust, so that upon your death your funds go to a DAF—a donor-advised fund — a type of investment that manages contributions made by individual donors. Jonathan had not thought about donating all his wealth to a DAF after his death. With a DAF, he could map out a lasting legacy of continued giving beyond his own life. Also, since there is no organization named in the trust documents, you can change your mind about what charities you want to benefit.
DAFs are a simple and relatively low cost alternative with a built-in advisory board, which makes them an ideal instrument for securing a financial legacy. Unlike foundations, there is no cost to create, and there are some tax advantages. The IRS allows greater tax deduction for gifts of cash, stock, or property to a donor-advised fund, compared to a foundation. Foundations must give away 5% of their assets annually; there are no distribution requirements for DAFs.
The original article explains that all DAFs have a board of directors, and many are willing to maintain the gifting goals of a donor after their death and insure that the recipient charities are eligible for annual grants. You have many options, and DAFs come in a variety of shapes and sizes. Independent brokerage firms have their own funds with minimum initial contributions, typically as low as $5,000.
You can easily find a suitable home for your estate and leave a lasting legacy with the help of an estate planning attorney.
Please contact our office today at 239-225-7911 to schedule an appointment with Barbara M. Pizzolato if you are interested in protecting your legacy and need to create or update your estate plan. You may also wish to attend one of our free seminars.
Reference: Time (Oct. 14, 2014) “Give to Charity Like Bill Gates…Without Being Bill Gates”