Updated: May 3, 2013 12:14PM
Originally published: December 23, 2004
This gift helps others as well as yourself
While you’re still in the holiday spirit of giving, here’s an idea that will help our local community, and give you an interesting tax break, as well.
I’ve written before about Charitable Gift Funds. Major mutual fund companies such as Fidelity and Vanguard have developed and publicized this concept. Since the Fidelity Gift Fund’s inception in 1992, more than 32,000 donors have recommended grants totaling more than $4.4 billion to more than 84,000 nonprofit organizations.
Charitable gift funds prove you don’t have to be a Rockefeller to donate like one.
A gift-fund account lets individuals set up their own private charitable foundations. The investment contribution into the account gives them an immediate tax deduction for their contribution -- money that cannot be withdrawn but will ultimately be given to one or more recognized charities.
These foundations typically require a minimum initial contribution of $10,000 to open the account. The money can be left to grow inside the fund in a choice of several different investment pools. All the future growth or income earned on the contribution is tax-free.
$250 minimum donation
Then, at any time and at your discretion, the money can be distributed to registered charities of your choice -- with a minimum distribution of $250.
Setting up your foundation is easy because the fund has done all the legal work. All you have to do is make an irrevocable contribution of cash or securities.
If you donate stocks that have appreciated in value -- a real possibility this year -- you won’t have to pay taxes on the gains. And in future years, they’ll write the checks out of your account, to send the money to the charities per your written instructions.
Giving combines with good tax planning. You get an immediate tax deduction, and your money starts growing, waiting for instructions to disburse gifts to the registered charities you name.
And this year, there’s a third dimension to this charitable gift fund concept -- a Chicago connection.
I learned something new this year from Jennifer Jobrack of the Chicago Community Trust. She contacted me, anticipating that I might write about the charitable gift-fund concept again this year.
From her I learned that many communities around the country have their own “donor-advised” charitable gift funds. In fact, there are more than $11.3 billion in assets in 90 of the largest community funds, and last year those funds distributed more than $2 billion to local charities.
The Chicago Community Trust (www.cct.org or 312-616-8000) fund program is one of the largest and most active. It currently has about $154 million in donor-advised funds, along with a total endowment of $1.2 billion.
The CCT donor-advised fund works just like those described above, requiring a $10,000 initial contribution and minimum $250 disbursements to registered charitable organizations. Last year, $18.3 million was given out from this fund, the majority of which went to local charities.
The unique Chicago aspect of this fund is the expertise of the professional grant-making staff at the Chicago Community Trust in identifying appropriate local charities.
They work with corporate and individual donors who want money directed to the most worthy local charities in specific categories, ranging from homeless programs to child welfare issues to the arts. If you open an account in the CCT charitable gift fund, you have access to their professional knowledge and guidance in making distributions.
Working with CCT, your money can be invested inside the plan in a variety of investments -- including a choice of Fidelity mutual funds and mutual funds managed by the Northern Trust. As noted above, you don’t get the benefit of any gains, but the growing pool can provide for larger future gifts made in your name. Again, those gifts can be made to local charities -- or any charity you designate at any time in the future.
One more gift to give
So now that your holiday shopping is done, you have one more gift-giving opportunity -- a gift that will grow in the future and impact lives of families who read the Chicago Sun-Times and watch local television, and see all the holiday shopping stories -- but will never share in the goodies unless you help. And that’s The Savage Truth.
Terry Savage is a registered investment adviser, and appears weekly on WMAQ-Channel 5’s newscasts. Distributed by Creators Syndicate.