A Good Way to Give Back

When most of us are thinking about scaling back our spending in response to the latest bad financial news, it may be a stretch to think about giving away money. But people are doing it.

Not just the rich, but ordinary people. There are 64,000 charitable foundations in U.S., 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 New Mexico, there are many individuals of modest means who find themselves with no heirs and substantial assets in the form of a mortgage-free, highly appreciated home. (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 a 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 establishing 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 my opinion. That would be to set up a donor-advised fund at a local community foundation. (There are nine community foundations in New Mexico). The annual fee would be a little higher than the computerized approach of Fidelity or Vanguard, but there would be a personal touch.

A local community foundation knows the community and can offer suggestions and guidance on how to best meet your charitable interests. 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, students, the hungry, the abused, the arts, or any qualified nonprofit organization. The giving doesn't have to wait until you die, either. A non-revocable gift gets you an immediate tax deduction, even if the donations are spread out for years, or forever. Forever is a nice thought. It tends to get your mind off scaling back, and onto something more lasting.

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