Ready to Give
There are a number of ways to be a philanthropist. What follows is an introduction to the options for private giving that are available to individuals and/or businesses.
1. Give to charitable organizations
2. Create a private foundation
3. Give to a community foundation
4. Give to a public foundation
5. Establish a supporting organization
6. Develop a corporate program
7. Giving Circles
8. Other ways to give
Give to charitable organizations
Gifts to established charities provide direct support to those organizations. These can include, but are not limited to, schools, hospitals, arts and cultural institutions, human service agencies and religious congregations. A gift to these nonprofit organizations can be of any size. Cash gifts to charities are deductible at rates of up to 50% of adjusted gross income; gifts of real property are deductible at rates up to 30%.
Create a private foundation
By creating a private foundation, a donor can retain flexibility and personal control over his/her giving programs. A private foundation can be a charitable trust fund or a nonprofit corporation. According to law, private foundations must pay out funds of at least 5% of their assets annually, plus pay a 1-to-2% excise tax on the net investment income. Cash gifts to private foundations are deductible at rates up to 30% of adjusted gross income and gifts of real property at rates up to 20% of adjusted gross income.
Give to a community foundation
Community foundations are public charities supported by donations from across their region. Gifts to community foundations can be of any size, from $1.00 to $1 million. By pooling funds, community foundations achieve economies of scale for investing, managing and granting philanthropic dollars. Cash gifts to community foundations are deductible at rates of up to 50% of adjusted gross income; gifts of real property are deductible at rates of up to 30% of adjusted gross income. A donor to a community foundation may designate his/her gift as:
- Unrestricted: used where the foundation’s advisors deem is most needed in meeting the needs of the community.
- Restricted: provide options for donors to determine how their contributions will be used. Types of restricted gifts include:
- Designated funds where donors specify the agency or agencies to receive their support.
- Field-of-interest funds where donors select the broad, charitable purposes they wish to support (e.g. health, education, the arts).
- Donor-advised funds where donors have the opportunity to make periodic recommendations on which agencies they wish to support, although final decisions rest with the foundation board.
Give to a public foundation
Public foundations often operate much like community foundations, with the major difference being that community foundations operate within defined geographic areas (e.g. a city, county, region, state) and work to improve a broad range of issues within these geographic boundaries, while public foundations recruit donors who wish to address a particular issue (e.g. social justice, LQBTQ+ rights).
Establish a supporting organization
The supporting organization is a legal entity which attaches itself to another public charity and takes on the public charity status of the organization it supports. This structure preserves some of the independence and identification with the donor, without the administration or limitations of a private foundation. The donor or donor designees may serve as board members, but the supported organization must have 50% or more of the board’s voting power (or veto power) on the supporting organization.
Develop a corporate program
A business owner can develop a philanthropic corporate program in the form of either a corporate foundation or a corporate giving program. In both instances, the supporting funds come from corporate profits. For most corporate programs, philanthropic priorities serve the communities in which their employees live and work.
- Corporate foundations are often started with a single gift, then funded on an annual basis, as profits allow. Legally, these foundations operate as private foundations. Officers are generally the company owners and key executives.
- Corporate giving programs are established as ongoing corporate entities and funded as part of the parent corporation’s operating budget. Corporate contributions staff manage the corporate giving budgets, often directed by the company’s chief executive officer and other key executives.
Business and corporations can also offer matching gift programs for employees, matching their gifts to educational, cultural and other 501(c)(3) nonprofit organizations. Companies may also offer in-kind donations of goods and services, as well as organizing workplace volunteer efforts to meet community needs.
This giving approach can take many forms. It can be a large organization with committees put together to perform different grantmaking functions, or a small group of friends gathering together informally to pool their funds. In forming a giving circle, a group of people get together, discuss what type of organizations they would like to support, and in what way, and then pool their money and donate it to the organizations they choose.
Other Ways to Give
There are many forms of planned giving vehicles, such as charitable remainder trusts, charitable lead trusts, QTIP trusts, charitable gift annuities, pooled income funds, and life insurance. Because of the individual variables of these types of giving, we recommend that you seek the advice of an attorney, financial advisor, estate planner or insurance broker.
Special thanks to Philanthropy Northwest for this page of content. Specific sources include:
“Why Establish a Private Foundation,” published by the Forum of Regional Associations of Grantmakers
“So You Want to Give,” published by the Forum of Regional Associations of Grantmakers
“So You Want to Give: Options for Giving,” published by the Council of Michigan Foundations
“First Steps in Starting a Foundation,” published by Council on Foundations