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Charitable planning can take various forms, and the right approach depends on your goals and financial situation. Each option offers unique advantages, so selecting the best one is key to aligning with your philanthropic vision.
Private Foundations
A private foundation is a legal entity created by an individual, family or corporation to support charitable causes. Because it is a separate legal entity, there are significant startup and ongoing costs. Foundations must distribute at least 5 percent of their assets annually to 501(c)(3) organizations, but the foundation’s board has complete control over where and how the funds are distributed.
Donor-Advised Funds (DAFs)
A donor-advised fund is a simpler alternative managed by a 501(c)(3) organization. While the sponsoring organization holds legal control over the funds, donors have the ability to advise on how the funds are distributed to charities. DAFs are becoming increasingly popular because they are easy to set up, have minimal costs and are not subject to the same regulations as private foundations.
Fiscal Sponsorship Funds
A fiscal sponsorship fund allows individuals to operate under the umbrella of an established 501(c)(3) sponsor. This fund is created for a specific charitable purpose without the need to establish a new nonprofit.
This option is beneficial for those who want the benefits and protections of operating as a nonprofit without the time-consuming and costly process of setting one up. The sponsor handles administrative tasks, allowing you to focus on your charitable mission.
Direct Charitable Giving
Supporting charitable organizations directly is another option, and it can take many forms. You can make monetary donations, contribute resources or volunteer your time. For those looking for flexibility, you can give directly to the charity or include charitable gifts in your personal trust.
This option is suitable for those who want to stay flexible with their giving, whether in the form of one-time donations or ongoing contributions.
Conclusion
Each charitable planning option comes with its own set of benefits and considerations. Whether you’re interested in establishing a private foundation, using a donor-advised fund, working through a fiscal sponsorship or giving directly, it’s important to choose the vehicle that aligns with your financial capacity and philanthropic goals.
For more guidance on incorporating charitable giving into your estate plan, contact Deka Law Group at [email protected] or call 626.765.6272.
