When Warren Buffett committed his fortune to the Gates Foundation he did a lot more than give away his money. He put his seal of approval on prioritized, purposeful charity.
That's not the way most of us give.
It's certainly not the pattern you'll find in the Burns household. When I examine our checkbook I find an odd patchwork. Some gifts are unexamined habits. Others were impulses. Still others were made because one of us was asked by a friend or business associate. If your pattern is like ours, I'll bet it's also for the same reason: There was neither a plan nor a schedule. Gifts just happened. Events tend to overrun intentions.
There is a cure. And you don't need the millions required for establishing and operating a personal foundation to get it. All you need is a Charitable Gift Fund. You can start one, today, with as little as $5,000. They are the equivalent of your own personal foundation, without the paperwork.
While there are now more than 20 Charitable Gift Funds, not to mention similar community foundations, the largest three dominate the field with well over $5 billion in assets under management. You start by filling out an application, deciding whether you want to contribute cash or securities, and choosing how you want the money invested.
Once the gift is made you get a tax deduction for the full amount and the ability to choose when you make gifts, and which charitable organizations will receive them.
The tax deduction part is important. Suppose you are having a really good year. And you've got some big gains in mutual funds. Well, the better your year and the bigger your gains, the bigger the helping hand from our friends at the Internal Revenue Service.
Suppose you know you'll be in the 35 percent tax bracket. Suppose you also own shares that have doubled in value. If you donate the shares you'll avoid the capital gains tax--- at least 7.5 percent of the amount you'll give--- and you'll cut your tax bill by another 35 percent. The tax savings mean a gift of $100,000 took only $57,500 out of your pocket. Figure an investment with much larger gains or living in a state with an income tax and the after-tax cost of your gift can be less than fifty cents on the dollar.
Your new fund, however, will have every dollar working for it, earning tax-free. And you'll be free to plan a flow of gifts throughout the year. Knowing the money is already there is a great incentive to be thoughtful and organized.
Fidelity Charitable Gift Fund, the largest and oldest of the group, has $3.5 billion in assets. It recently reduced the minimum initial contribution to $5,000 and the minimum gift to $100. That's pretty flexible. Vanguard Charitable Endowment Program has about $1.3 billion in assets and a minimum initial donation of $25,000. The Schwab Charitable Fund has about $1.1 billion in assets and a minimum initial donation of $10,000.
The best comment on having one of these funds came from a friend who has one: "When you put your giving first, not last, it gets to be real fun."
More information on charitable gift trusts and charitable giving:
Fidelity website: www.charitablegift.org, tel. 800-682-4438
Vanguard website: www.vanguardcharitable.org, tel. 888-383-4483
Schwab website: www.schwabcharitable.org, tel. 800-746-6216
BBB Wise Giving Alliance: www.give.org
American Institute of Philanthropy: www.charitywatch.org
National Center for Charitable Statistics: www.nccs.urban.org
Independent Charities of America: www.independentcharities.org
The Chronicle of Philanthropy: www.philanthropy.com