“No act of kindness, no matter how small, is ever wasted.” – Aesop
Since 2010, over 240 signatories from 29 different countries have joined the Giving Pledge, a global initiative, uniting individuals of diverse backgrounds towards the common goal of a public commitment to philanthropy.
You may be familiar with some of its founders, Bill Gates, and Warren Buffet, alongside additional individuals who have joined over the years such as MacKenzie Scott and Robert F. Smith. Collectively and individually, their contributions are nothing short of impressive. For instance, MacKenzie Scott’s charitable organization, Yield Giving, alone has contributed $14 billion dollars to over 1,600 nonprofit organizations since 2019.
Charitable Giving at Any Level
With this spirit of unity and philanthropy in mind, WGA is committed to increasing philanthropic literacy so that donors of all income levels can make their mark in the world of charitable giving.
In 2022, Giving USA reported that one out of every five dollars given to charity were derived from charitable foundations, amounting to a staggering $105 billion. What is equally incredible and encouraging, is that over 70% of all charitable gifts were attributed to individual giving or bequests.
As an estate planning attorney in Naples, Florida, I've witnessed firsthand how philanthropy can transcend wealth levels. Consider the story of Amy, a retired teacher who, through a modest bequest, provided ongoing support to a local library, ensuring her love for education lived on. Like Amy, you might wonder, "How can I leave a lasting impact through my charitable giving, regardless of my net worth?"
In this article, we will explore different charitable giving options that suit various financial situations. We'll review Private Foundations, often considered exclusive to the ultra-wealthy but with potential applications for others. We'll also explore charitable trusts & donor-advised funds (DAFs), versatile tools that can provide unique benefits and flexibility.
By the end of this article, you'll have a clearer understanding of how you can align your financial capacity and personal values to build a legacy through charitable giving.
Private Foundations: The Pinnacle of Philanthropic Legacy
A Private Foundation represents the pinnacle of charitable giving in terms of control and legacy. It's an independent legal entity that allows donors to manage their charitable contributions and grantmaking processes actively.
A private charitable foundation can be an impactful avenue for legacy building. However, it is not suitable or feasible for everyone due to the high initial setup and ongoing administrative costs. For example, establishing a foundation typically requires forming a board of directors.
Who are Private Foundations ideal for?
- Ultra-high-net-worth individuals (over $50 million)
- Families seeking to establish a philanthropic legacy
- Individuals with specific charitable interests or goals
- Corporations or organizations aiming for structured philanthropy
Charitable trusts can be an effective strategy, separate from or alongside a private foundation. Charitable trusts are incentivized by the US tax code, making them an attractive option to allocate assets towards charitable causes. CRTs are thus both a philanthropic tool and a tax-efficient estate planning strategy.
A Charitable Trust allows a donor to designate income to either a charity or a beneficiary for a specified period. In a Charitable Remainder Trust (CRT), the beneficiaries receive income first, and the remaining assets go to charity after the term ends. Conversely, in a Charitable Lead Trust (CLT), a charity receives the income initially, and the remaining assets are transferred to the beneficiaries at the end of the term.
Who is a Charitable Trust ideal for?
- Individuals with a net worth of $10 Million to $50 Million
- Individuals seeking tax-efficient ways to transfer wealth
- Donors looking to balance charitable giving with beneficiary support
- Philanthropists interested in long-term charitable commitments
- Estate planners looking for flexible giving options
Donor Advised Funds
If you are drawn to the idea of a private foundation but want to avoid the high set-up and administrative costs, you may consider a Donor-Advised Fund (DAF). DAFs offer a simplified, less costly alternative to a private foundation with similar grantmaking experiences. With a DAF, set up through an organization like Collier Community Foundation, you can fund your account and direct your assets to organizations of your choice at your own pace. All tax deductions are taken at the time of funding your account.
Who is a Donor Advised Fund ideal for?
- Individuals of all income levels
- Donors seeking the control of a Private Foundation without the legwork
- Individuals seeking simplicity in philanthropy
- Individuals who prefer anonymity in donations
- Donors seeking immediate tax benefits
- Families looking to involve multiple generations
Every Charitable Gift Makes a Difference
A charitable gift of any size can be powerful. You may also consider a myriad of options, including bequest in a will or living trust, planned-giving, endowment gifts, gifts of other assets like real estate, and charitable gift annuities.
In my three-decade practice as an estate planning attorney in Naples, FL, I have been fortunate to see the impact magnanimous individuals have had on the community and their legacies. Whether it is through the establishment of a private foundation, the flexibility of a donor-advised fund, or the longevity of a planned gift, each family has a unique philanthropic approach to fit every estate plan.
Identifying an ideal charitable strategy not only aligns your personal financial objectives and tax benefits but can bring lasting gratification.