The perfect vehicle for budding philanthropists is a donor-advised fund. Such a fund lets you turn over assets (money, stocks, bonds) to a program run by a financial-services firm, a community foundation or a charitable group. You then advise the program to give to your favorite charities. The program invests your assets, and as they grow, you have more money to grant. You also get a tax deduction in the year you make a contribution.
| Row 0 - Cell 0 | More $1,000 Ideas |
| Row 1 - Cell 0 | Enter Our Best $1,000 Idea Contest |
Most donor-advised funds offered by mutual fund companies and brokerage firms have high minimum contributions (the average is $10,000). But you can start a donor-advised fund for $1,000 or less through a community foundation.
A community foundation channels gifts from donors to charities in a specific region. More than a third of these foundations have programs that help up-and-coming philanthropists create a donor-advised fund over time, says Doris Heiser, development director for the Greater Milwaukee Foundation, which pioneered the concept. Known as acorn funds or build-a-fund programs, they take contributions until they're large enough to make grants. That threshold is usually $10,000.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Sue Grans, a human-resources manager in her fifties who lives in Rockford, Ill., has contributed small sums since 1999 to a donor-advised fund sponsored by the Community Foundation of Northern Illinois. She expects her fund balance to pass the $10,000 mark next year. She and her three nieces (ages 19 through 26) will then decide which charities they want to receive grants from the fund. "You don't have to put it off," Grans says. "Little by little, you can make a lasting contribution to charity."
When you open a donor-advised fund, you are actually making an irrevocable gift to the community foundation. That means you no longer have direct control over the gift because you have taken the tax break. You may recommend which charities should receive grants, and the foundation will usually respect your wishes. The foundation will make grants to any IRS-approved charity, even if the charity is outside its focus area.
Each foundation has different limits on how much you can grant per year, but 4% is the standard. To find a community foundation in your area, visit the Council on Foundations' directory at www.cof.org/locator.
See Philanthropy Made Easy to learn more about donor-advised funds.
-
Focus on These Five Critical Areas in Retirement PlanningWorried about how you'll pay for your retirement? It can help to structure your finances around five key areas: taxes, income, medical, legacy and investments.
-
Is Downsizing Right for Your Retirement?The lower costs of a smaller home in retirement might sound appealing, but be ready for the trade-offs that come with making this big decision.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until November Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
