A New Way to Give Your Money Away
IF you have philanthropic aspirations, but are short the half a million dollars that attorneys recommend as a minimum to set up a private foundation, there may be an alternative.
For a low-budget $10,000 you can now start a foundation under your own name with Fidelity Investments' Charitable Gift Fund without the usual administrative hassle, legal counsel, and high fees. If $10,000 is still a stretch, you can pool resources with family or friends without losing tax benefits and flexibility in gifting out your dollars.
That's the pitch made by Fidelity's Jamie Jaffee, the fund's executive director.
The first Internal Revenue Service-approved public charity for a financial services company, the Gift Fund enables donors to distribute their dollars to any charity, at any time, in any amount over $250.
Ms. Jaffee says the fund alleviates the end-of-year pressure of deciding which charities to support and how generously - a choice that can be formidable. Americans gave away $125 billion in 1991 to 500,000 nonprofit organizations.
Retiree Elvar Polk, a charter member of the fund, says, "the basic appeal was the fact that you could take a tax deduction on your contribution going in and then not decide what charities to gift it to until later."
Mr. Polk and his wife Mary, who each have a charitable account with Boston-based Fidelity, worry that the new administration in Washington might make them wish they hadn't made their tax-deductible contributions so far in advance.
"Now that we have a Mr. Clinton running the government of the United States, taxes will go up," Polk predicts in a telephone interview from their winter home in Florida. "So probably I lost something there taxwise - rather than making contributions in the future on a year-to-year basis when I might be in a higher tax bracket."
Jaffee is excited about the fund's philanthropic potential. Set up in late 1991 but not launched publicly until Labor Day last year, the fund has attracted almost 600 donors and swelled three investment pools within the Gift Fund to $30 million. More than $4 million have been distributed in donations.
"This is just one more tool or one more vehicle that a prospective donor will have for building an endowment and having more to give away in the future," Jaffee says.
In addition, she says nonprofits across the country are starting to contact her about how to spread the word to their donor base.
Most of the Gift Fund's donors at present are individuals rather than corporations and run the gamut from those who already have private foundations and see this as another option to baby boomers with bumper salary bonuses they want to give away over time.
Last year's returns on two of the three pools of funds - which have "growth," "equity income," and "interest income" strategies - outperformed the Standard & Poor's 500 stock index. Unlike the usual bank-managed charitable trust, all interest earned goes back into the donor's account.
Of course, "we don't get the tax advantage of that," Polk says. "We just get more money to give away."