Charitable Gifting and You: Exploring Foundations and Endowments
It’s about ensuring that your generosity has a ripple effect.
Giving back to the causes that matter most to you is one of the most fulfilling things you can do. But have you ever thought about how you could make your generosity last beyond today? Tools like foundations and endowments give you the power to turn your charitable gifts into something enduring—something that reflects your values and leaves a meaningful legacy.
Let’s take a closer look at how these options work and how they can fit into your financial and philanthropic goals.
Foundations: Your Giving, Your Rules
Foundations are like creating your own personal engine for giving. You decide where the money goes, how it’s invested, and the kind of impact you want to have. It’s a hands-on approach to philanthropy, ideal if you like being closely involved in the process.
How It Works
Setting up a foundation starts with funding it—this can be cash, stocks, or other assets. From there, you use the foundation to distribute grants to the organizations or causes you care about.
Why It’s Worth Considering:
You’re in Charge: With a foundation, you have full control. You pick the charities, set the rules, and oversee how the funds are used.
Bring the Family In: Foundations can be a great way to involve your family in giving. It’s an opportunity to share values and make philanthropy a family tradition.
Tax Benefits: Contributions are often tax-deductible, and the foundation’s investments grow tax-free, giving you more resources to work with over time.
Real-Life Example:
Say you’re passionate about education. You could use your foundation to fund annual scholarships for underprivileged students or grants to local schools. It’s your vision, your way.
Endowments: Giving That Keeps Going
While foundations are all about control, endowments are about sustainability. When you contribute to an endowment, your gift is invested, and the earnings are used to fund the organization or cause you care about. Think of it as a perpetual gift that keeps supporting your mission year after year.
How It Works
You set up an endowment by working with an institution, like a university, hospital, or nonprofit. The principal amount stays invested, while the earnings go toward funding programs or operations.
Why It Works for Long-Term Impact:
It’s Forever: Because the principal is untouched, your gift provides ongoing support for years—or even decades—to come.
Low Maintenance: Once you’ve made the contribution, the institution manages the investments and distributes the funds, freeing you from administrative tasks.
Targeted Giving: You can designate your gift to support a specific cause, like funding cancer research at a hospital or a library program at a university.
Real-Life Example:
Imagine you’ve always supported the arts. By contributing to an endowment at a local theater, you can ensure that your gift funds performances, workshops, or community programs for generations to come.
Which Option Is Right for You?
Choosing between a foundation and an endowment comes down to your priorities and how hands-on you want to be.
Do you want control? If you like being involved in every decision, a foundation gives you that freedom.
Do you prefer simplicity? Endowments let you make a lasting impact without the responsibility of managing the funds.
What’s your budget? Foundations often require more resources to set up and maintain, while endowments may be a more accessible option.
For many people, a combination of both can strike the perfect balance. You might use a foundation to support multiple causes and contribute to an endowment for something deeply personal, like a scholarship in a loved one’s name.
Donor-Advised Funds
Donor-advised funds (DAF) are another way to administer your philanthropic giving. A donor-advised fund is a private account created to manage and distribute charitable donations on behalf of an organization, family, or individual. Donations to the fund are typically made in stocks, cash, or bonds but can include other types of assets.
Your donation to a DAF is a tax-efficient way to support charities. The money in your DAF account is invested and grows tax-free until you decide to give it away. Custodians like Schwab and Fidelity have DAF programs to establish the account and manage distributions.
Getting Started
The idea of creating a DAF, foundation or contributing to an endowment might sound overwhelming, but it doesn’t have to be. Here’s how to take the first step:
Think About Your Legacy: What causes inspire you? What impact do you want to have? Answering these questions will help shape your giving strategy.
Talk to the Right People: Working with your financial advisor, attorney, and even the organizations you want to support can help you build a clear plan.
Start Small if Needed: You don’t need millions to start making an impact. Begin with what’s manageable, and grow your giving over time.
A Legacy Worth Leaving
Charitable gifting through foundations, DAFs, and endowments isn’t just about writing a check—it’s about creating something lasting. It’s about ensuring that your generosity has a ripple effect, touching lives for years to come. Whether you want to fund scholarships, support research, or give back to your community, these tools let you align your giving with your values and financial goals.
If you’re ready to explore how charitable giving can be part of your financial plan, we’d love to help you get started. Let’s make a difference—together.
-
V24337190