We have a lot of ways to express this sentiment. "Don't forget where you came from," some will say. Others remark that "it takes a village to raise a child."(While neither was the first to say these things) recording artist Jim Jones said he was a product of his environment while Isaac Newton likened his findings to merely standing on the shoulders of giants.
Who we are today depends greatly on the communities and institutions that we grew up in.
It is important to give back to those communities and institutions so that others can share and grow in towards the good fortune we have been offered. Colleges and universities are particularly good at this, with some schools raising billions to support their students, staff and mission. Many community organizations, on the other hand, have far fewer resources to start with, relying on minimal, or even volunteer staff to bring in grants and individual donations.
With many different causes begging for our attention, it can be difficult to really plan charitable giving. It can be difficult to pick out a charity to give to if you want to make it a part of your regular budget, or when a special need arises, we may not have the funds available to give. While the ultra-wealthy may set up their own foundation to have more clarity and control over their giving, that is not a practical option for most people. It is not possible, however, for almost anyone to have access to an account with similar benefits as a private foundation while remaining cost effective down to amounts as low as $5,000.
Donor-Advised Funds are an increasingly popular way to plan charitable giving. This is an account which essentially acts as a private foundation for any individual. These allow the account owner to make a gift to the fund, and allocate the final recipients later. Gifts can be made on a one time or recurring basis, and can consist of cash or tradeable securities. Whenever you desire to donate, you have an account specifically designated to give from.
Donor-Advised Funds have many benefits beyond simplifying charitable giving. The tax advantages of donating appreciated stock are immense. Not only do you avoid paying capital gains tax on the sale of the stock, you get an income deduction for the amount of the donation. This reduces the cost of giving to the donor, and increases the value of gifts to the charity! Not all charities are set up to accept stock transfers, but the Donor-Advised Fund can take the stock, and disburse cash to the charity. As the Donor-Advised Fund is a distinct entity, it can be named as beneficiary of other accounts, insurance policies and in your will. This makes it a valuable part of estate planning if a charitable legacy is important to you.
There are a few ways to open an account like this. The Jackson Community Foundation is set up to allow gifts like this, or if you prefer more visability and control, brokerages like Charles Schwab and TD Ameritrade custody this type of account as well. Don't hesitate to get in touch if you have any questions about setting up your own little foundation!
