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Make the Most of Your Charitable Dollar
An increasingly popular way to make a big impact on a charity without the high costs or administrative hassle is through a donor-advised fund.
These funds, managed by charitable organizations, are easy to set up -- often with as little as $5,000 -- and donors can contribute through a website where they can also manage transactions and track progress of the fund.
"In a day, you can start a giving platform and have it last for generations," says Eileen Heisman, CEO of National Philanthropic Trust in Jenkintown, Pa.
The tax benefits also make these funds popular. Individuals are allowed a federal deduction of up to 50 percent of adjusted gross income for cash donations and 30 percent for appreciated securities.
Aside from the tax savings and ease of establishing a fund, your buck has more bang. "You're pooling money with like-minded individuals, sharing the overhead expenses with all the other donors who support the charity," says Heisman.
Funds vary in fees, rules, methodology and goals. Once you've narrowed down the ones that are closely-aligned with your charitable goals, here are some additional tips for finding the best fit:
- Check out the policies and rules. Some funds managed by religious or educational organizations will allocate a percentage toward a university or church, for example. Also check the succession planning rules if it's important for you to pass on the fund to future generations.
- Look at the fees and make sure the investments are compatible with your own goals. Fees have been driven down and are usually under a percent, Heisman says.
- Make sure you don't have limits on donations. Some funds have a spending rule that limits how much you can endow per month or quarter. "I call that philanthropy jail," Heisman says.
- Check with online websites like GuideStar or Charity Navigator for a fund's rating. Also, look at the fund's website, the board of directors and its giving philosophy. If there are a lot of heavy-hitters donating, it could be a sign the fund is well-respected, Heisman says.
The benefits of donor-advised funds and the increasing number of choices will make it easier for individuals to manage their wealth while supporting worthy causes.
"There's no magic grid for how to choose a fund," says Heisman. But with a little research, you can find one that matches your mission.