As we move into the last quarter of 2023 and the season of giving, it seems a good time to discuss charitable giving. Long-term giving plans, as opposed to spontaneous and sporadic gifts, provide many important advantages: more intentional giving, greater impact on the causes that mean the most to you and your family, the opportunity to boost the value of your giving dollars through good investment decisions and tax planning, and the elimination of time and stress associated with reoccurring giving decisions. One way to accomplish a plan is through a family foundation.
Some family foundations are set up under IRS 501(c)(3). This process involves filings with the State and compliance with several rules and regulations. Although not always, these types of foundations are often established to independently serve a specific charity such as a hospital or university, for example. Named for the section of the US Internal Revenue Code that allows for their tax exemption, these entities include public charities, non-profit corporations, and private foundations.
Another way to form a foundation is by using a charitable trust. These can be drafted by your attorney and are an excellent way to support several favorite causes. For example, you could set one up to give certain amounts to a homeless shelter, various scholarships, a church, and a hospital to fund research.
The trustee(s) you select will be responsible for carrying out your plan. These can be one or more individuals and/or a corporation. Choosing family members to serve together can provide an excellent opportunity for them to work together toward a meaningful goal while, at the same time, learning the value of giving to others. Another wise approach is to select 1) a corporate trustee to handle the investments, tax filings, accountings, and other administrative tasks and 2) one or more family members, serving as co-trustee(s), to choose charities and amounts to give away.
You can set very specific directions for use of the funds, provide guidelines, such as which types of charities to serve, or leave your trustee(s) with broader discretion to decide. Finally, you can begin distributions during life, at death, or direct that funds be used to support a loved-one, such as your spouse, for life with all or a portion of what remains at her/his death passing to the foundation.
We are experienced in helping many clients tailor a charitable giving plan specific to their situation, family, and giving goals. Please give us a call if we can help.