Planning for Philanthropy

For Yom Kippur, I'll close my little series on charities, not with a specific charity but with some tactics for planning your charitable giving. If you are very serious about making a regular practice of charitable giving, and if you would like to increase your own charitable capacity in the future, you should consider setting aside some amount of money every year to create an endowment for future giving. "Endowment" sounds like something only for millionaires, but really an endowment can be any size at all. It is merely the regular practice of setting money aside, where it can accummulate over time.

For one thing, it is much more prudent to take a disciplined approach to your charitable giving. Most of us are often confronted with telephone and mail solicitations asking us to donate to good causes. Much as it would be nice to give something to every worthwhile cause that comes knocking, that's not a practical approach. What works better is to save your money regularly, and then once or twice a year consider how much money you have for charitable giving, which good causes you've learned about, and decide how you'd like to divide the money you have among the possible causes. Hopefully you plan most of your finances with this kind of discipline, so you should apply the same kind of discipline to your philanthropy as well. (It also gives you a very reasonable thing to say to people who telephone you soliciting for good causes. You say, "Your cause sounds worthwhile, but I never give money or make commitments spontaneously on the phone like this. Please send me your info in the mail, I'll put it in my file, and give it consideration when I'm making my charitable decisions later in the year.")

If you have enough of an endowment, you should also consider a vehicle called a "donor-advised fund". You've probably heard of philanthropic foundations (you know, the Geraldine R. Dodge Foundation, or the William and Flora Hewlett Foundation, or all those other organizations that you hear as sponsors on NPR), but figured those are for millionaires, and for private foundations, that's close to true. However, for those of us "thousand-aires", with a minimum endowment of $10,000 (typically), you can establish what is called a "donor-advised fund" within a larger charitable organization. We set up one of these the year we got married, and ours is with the Schwab Charitable Foundation. The way it works is that technically, we made a donation to the Schwab Foundation (the charitable arm affiliated with the Charles Schwab brokerage firm). However, the amount that we donated is tracked separately, in a fund that we pretentiously got to name the George D. Scheideman III and Thomas R. Chatt Philanthropic Fund, and we are the "donor advisors" for that fund. Within the guidelines set up by Schwab Charitable, we can direct the investment of "our" fund, and we can recommend grants from our fund to any IRS-recognized charitable organization. (Also, we can add to the fund year after year. We also had donations to our fund as one of our wedding gift suggestions, and our friends and family were generous.) The money that we put into this fund is tax-deductible as a donation, and the investment earnings in the fund are tax-free. This vehicle enables us not only to make regular charitable giving, but also to look forward to philanthropy as one of our retirement pursuits. You can also name other donor-advisors, so that your fund can continue to be managed by your designees after you pass on. In our case, I'm thinking that when my godson is a bit older, it will be a great way to inculcate him in philanthropy, to include him in deliberations for our yearly giving, and to include him as an advisor to the fund.

For those just another bracket up (ten-thousand-aires?), I can also recommend the California Community Fund. This organization has a similar donor-advised fund concept, but also has a variety of other mechanisms scaling up, depending on how much involvement, flexibility, and/or help you want. A CalFund fund can be completely "self-serve" as with Schwab, or they can also provide support from their staff to assist in research and grant-making. (Their minimum "in" is also $10,000, however I found that their fee structure is somewhat disincentive for smaller funds, and doesn't really become beneficial unless you have about $40,000 or more. However, if you're in that league, they have a good investment team that gets great returns on their funds, and their scale-up levels of service will give you good room to grow.)

Regardless of your resources, consider putting aside what you can, however small, on a regular basis, and make your charitable donations in a methodical way, rather than just spontaneously. And if it is within your resources, you should consider a donor-advised fund, as a "gift that will keep on giving".