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Don’t scale down, give back

April 29, 2009

From the San Bernardino County Sun, in response to Wall Street Journal article on April 22: When most of us are thinking about scaling down our spending and other ways to cope with the latest bad financial news, it is a stretch to think about giving away money. But people are doing it.

Not just the ultra-rich, but more or less ordinary people who happen to have made a little more than most of us. There are 64,000 charitable foundations in this country, and 37,500 of them are family foundations. About 60 percent of those are small, according to the New York Community Trust, a community foundation.

By small, they mean assets of less than $1 million, which of course isn’t all that small. But if you think about it, in our own communities there are many thousands of individuals of modest means who find themselves with no heirs and substantial assets in the form of a mortgage-free, highly appreciated house. (The appreciation has gone the wrong way lately, but it still can be worth a chunk.)

Those people can always give their assets to a distant nephew or niece, but many would rather donate to a worthy cause, or several of them. One way is to set up their own private foundation.

But why do that when there is a simpler, more efficient and less expensive way? As the Wall Street Journal reported last week, increasing numbers of individuals and families are setting up donor-advised funds operated by such financial institutions as Fidelity Investments or the Vanguard Group.

For an annual fee of as little as a few hundred dollars, a budding philanthropist call tell Fidelity or Vanguard where, when and how much of their gift to donate, either in broad terms or very specifically. The advantages, besides efficiency, are that the donor is entitled to a bigger tax deduction.

Although Fidelity, Vanguard and others are very cost-efficient, there is an even better alternative, in our opinion. That would be to set up a donor-advised fund at a local [community] foundation.

The annual fee would be a little higher than the computerized approach of Fidelity or Vanguard, but there would be a personal touch. What’s more important is that the local foundation’s focus is on the community. You could specify gifts to an international charity, or to a local one, or to many, or even to a range of local charities doing work with children, the homeless, the abused, the arts, or whatever qualifies as a legitimate charity.

The giving doesn’t have to wait until you die, either. A nonrevocable gift gets you an immediate tax deduction, even if the donations are spread out for years, or forever.

That’s a nice thought. Forever. It tends to get your mind off scaling down, and onto something more lasting.

In Greater Birmingham, we agree.

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