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	Charitable Giving Made Easy Personal Finance Advisor by Deloitte & Touche OnLine December 9, 1996

You don't have to be rich to take advantage of foundations.

Have you ever thought about becoming a philanthropist? Being able to fund a private foundation that will help meet the needs of your community? Teaching your children and/or grandchildren the joys and responsibilities of charitable giving? Maximizing current tax benefits from your philanthropy?

Perhaps you have, but then reality sets in. Private foundations are generally established by millionaires who can spare a few million dollars. "Even if you do not have a few million to spare, you may still be able to achieve these worthy goals by establishing a fund at your local community foundation," notes Laura Peebles, Financial Counseling Specialist, Deloitte & Touche LLP.

Community Foundations: All large cities, and many smaller cities, have a community foundation. These foundations, also known as community chests, fill a unique niche. Community foundations receive donations from individuals, businesses, private foundations, or other entities, and then make grants to charities. Community foundations are public charities, and therefore, are not subject to the operating restrictions or donation limitations that apply to private foundations. (If you donate property other than publicly traded securities to a private foundation, the income tax deduction is limited to your cost.)

Special Funds Within the Foundation: Community chests provide opportunities for donors (1) to be recognized in the community for their philanthropy, and (2) to influence which charities receive the benefit of their generosity. This is accomplished by the use of special funds within the community foundation, such as donor-advised funds, field-of-interest funds, unrestricted funds, and designated funds.

Donor-advised funds allow you (or your children or other designees) to recommend that the community foundation make grants to a charitable program that you have selected. Although each foundation will have its own procedures for reviewing charities and a grants committee usually makes the final decision, the recommendations of the donor are generally followed. If a donor expresses an interest in funding certain types of charities, the grants committee may identify and recommend specific charities to support.

Field-of-interest funds allow you to specify a general or specific cause to support. The foundation then makes grants to appropriate charitable projects. Such funds can support very broad issues (e.g., the environment) or very specific projects (e.g., computers for public schools).

Designated funds direct money to a particular charity. Such funds are appropriate for small charities that may not be in a position to manage a sizeable endowment, or for donors who have doubts about the continuing vitality of the chosen charity. The donor can prevent the charity from spending the endowment principal, and if the charity should go out of existence, the income can be redirected in accordance with the donor's instructions.

Unrestricted funds allow the foundation to make grants for any community purpose or issue.

Paperwork: Establishing a fund at a community foundation is relatively simple. The foundation will have a standard form that is used to set up the fund, record the donor's instructions, and designate who (if anyone) is to advise the fund. The foundation will issue a donor acknowledgment that is required by the IRS.

Tax Aspects: For income tax purposes, the deduction for donating to a community foundation is the same as for other public charities. Donations of cash are deductible up to 50% of adjusted gross income, and donations of appreciated property are deductible up to 30% of adjusted gross income. Amounts donated in excess of these limits may be carried forward and deducted during the next 5 years. There is no limitation on the amount that may be deducted for estate tax purposes.

Points to Consider: If you are planning a major donation, consider a fund at a community foundation if any of the following apply:

You have reasons for establishing a private foundation (i.e., perpetuate your family name, establish a memorial or tribute), but want to donate assets other than publicly traded stock. Unlike a donation to a private foundation, establishing a fund at a community foundation will allow a deduction for the fair market value of the assets. Private foundations are also subject to an excise tax and face substantial operating restrictions (e.g., asset ownership restrictions, minimum payout requirements).

You want to favor a specific charity with a large donation, but want to limit the use of the income to specific programs. A fund at a community chest may also be appropriate if your chosen charity is not in a position to manage the funds. The community foundation will be around in perpetuity to manage funds and pay out income. Additionally, a community foundation's investment assets are pooled and professionally managed, so the charity would likely receive more income than if it invested the funds on its own.

You want to expose your children or grandchildren to the joys and responsibilities of philanthropy. Donor-advised funds can be advised by someone other than the donor, such as a spouse or descendant.

You wish to make an anonymous gift. The community foundation must know who you are, but the charitable recipient does not have to know.

A donation to a community foundation may not be right for you if (1) your gift is to benefit a large, well-established charity that can manage its own funds, (2) the selected charity needs the money immediately for operating specific programs, or (3) your donation is large enough and you want to establish a private foundation.

These are some guidelines to consider when making a substantial charitable gift. Your tax advisor can provide additional information and should be consulted before any action is taken.