| Author |
Message |
Jonathan Kamens
Guest
|
 Posted:
Mon Sep 26, 2005 12:00 am Post subject:
Can a random private individual set up a charitable trust? |
|
|
Forgive me if this is a stupid question, but I thought it
might be beneficial to bounce it off the readers of this
newsgroup before I go spend money on a tax attorney.
My family is having a bit of a "tiff" with our place of
worship, such that we would like to withhold the financial
support we would customarily give them until such time as we
believe the leadership is spending the congregation's money
wisely. It may be that we will eventually give them the
money we've withheld; it may be that we will instead
eventually decide to give the money to some other charitable
cause recognized by the IRS.
We have a certain amount of money budgeted each year to
charitable giving, and we rely on that giving in our tax
planning (i.e., we expect to be able to deduct that amount
from our income). So the question I have is, can a private
individual like me, with minimal muss, fuss and expense, set
up a charitable trust into which we can deposit the withheld
funds, such that we can recognize them now as charitable
deductions for tax purposes but not decide where the money
actually goes until later?
Thanks for any advice you can provide.
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Robert Daniels
Guest
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| Posted:
Mon Sep 26, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
"Jonathan Kamens" <jik@kamens.brookline.ma.us> wrote:
| Quote: | ....My family is having a bit of a "tiff" with our place of
worship, such that we would like to withhold the financial
support we would customarily give them until such time as we
believe the leadership is spending the congregation's money
wisely. It may be that we will eventually give them the
money we've withheld; it may be that we will instead
eventually decide to give the money to some other charitable
cause recognized by the IRS.
We have a certain amount of money budgeted each year to
charitable giving, and we rely on that giving in our tax
planning (i.e., we expect to be able to deduct that amount
from our income). So the question I have is, can a private
individual like me, with minimal muss, fuss and expense, set
up a charitable trust into which we can deposit the withheld
funds, such that we can recognize them now as charitable
deductions for tax purposes but not decide where the money
actually goes until later?
Thanks for any advice you can provide.
|
The name for what you describe is a "donor advised fund",
and several mutual fund organizations provide just such a
vehicle for contributions. Take a look at Vanguard's
Charitable Endowment, online at
http://www.vanguardcharitable.org/index.asp
and the Fidelity Charitable Gift fund at
http://www.charitablegift.org/index.shtml.
The minimum deposits to open such an account are not small
--Vanguard has a $25K minimum, and Fidelity a $10K minimum.
(These are the total contributions -- the annual
administrative cost is 0.57% (Vanguard) to 1% (Fidelity) of
asset value). Still, using funds like these is a lot cheaper
than paying all the attorney fees and transaction costs
involved in setting up and operating your own charitable
trust.
Bob Daniels
"He gave the little wealth he had
To build a home for fools and mad.
And showed, by one satiric touch,
No nation needed it so much."
- Jonathan Swift, "Verses on the Death of Dr. Swift" (1731)
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Stuart A. Bronstein
Guest
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| Posted:
Mon Sep 26, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
jik@kamens.brookline.ma.us (Jonathan Kamens) wrote:
| Quote: | So the question I have is, can a private
individual like me, with minimal muss, fuss and expense, set
up a charitable trust into which we can deposit the withheld
funds, such that we can recognize them now as charitable
deductions for tax purposes but not decide where the money
actually goes until later?
|
We've been discussing a very similar topic recently, and the
answer is probably not. Generally you will be required to
fill out IRS Form 1023 and have the exemption approved by
the IRS. That can take several months. The IRS fee for
reviewing the form, the last time I checked, was $500.
Techically a nonprofit may not be required to get IRS
approval if gross recepts are under $5000 (or perhaps higher
- I don't remember the exact numbers). But that may only
apply to whether the organization pays taxes on income
related to its exempt purpose, not to whether contributions
to the organization and deductible.
Stu
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JoeTaxpayer
Guest
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| Posted:
Mon Sep 26, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Jonathan Kamens wrote:
| Quote: | Forgive me if this is a stupid question, but I thought it
might be beneficial to bounce it off the readers of this
newsgroup before I go spend money on a tax attorney.
My family is having a bit of a "tiff" with our place of
worship, such that we would like to withhold the financial
support we would customarily give them until such time as we
believe the leadership is spending the congregation's money
wisely. It may be that we will eventually give them the
money we've withheld; it may be that we will instead
eventually decide to give the money to some other charitable
cause recognized by the IRS.
We have a certain amount of money budgeted each year to
charitable giving, and we rely on that giving in our tax
planning (i.e., we expect to be able to deduct that amount
from our income). So the question I have is, can a private
individual like me, with minimal muss, fuss and expense, set
up a charitable trust into which we can deposit the withheld
funds, such that we can recognize them now as charitable
deductions for tax purposes but not decide where the money
actually goes until later?
Thanks for any advice you can provide.
|
Schwab or Fidelity can do what you need. Check for the
minimum amount. (This is called a charitable gift trust, I
believe)As you want, the deduction is taken in the year you
send the broker the money, and then you can direct it to the
charity when you need to.
This would seem the way to go, compared to the expense of
setting up a seperate trust just for your purpose.
JOE
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Harlan Lunsford
Guest
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| Posted:
Wed Sep 28, 2005 4:00 pm Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Jonathan Kamens wrote:
| Quote: | Forgive me if this is a stupid question, but I thought it
might be beneficial to bounce it off the readers of this
newsgroup before I go spend money on a tax attorney.
My family is having a bit of a "tiff" with our place of
worship, such that we would like to withhold the financial
support we would customarily give them until such time as we
believe the leadership is spending the congregation's money
wisely.
|
(snipped)
reminds me of this fellow alone on desert island maybe 15
years, almost despairing, but finally rescued by a passing U
S Navy ship. The short party came in to pick him up and the
lieutenant noticed three really nice buildings in a row.
The first one they found out as the fellow was packing his
things was his house that he lived in. Asked about the next
building, the castaway explained that that was his church.
Very nice building. And the third building? that was where
the castaway used to go to church.
ChEAr$,
Harlan
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Rich Carreiro
Guest
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| Posted:
Wed Sep 28, 2005 4:00 pm Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
"Robert Daniels" <rhdlaw@pacbell.net> writes:
The problem with those, relative to the original poster's
query, is that I believe both of those funds explicitly
say that they will *not* release money to the donor's
church/synogogue/etc.
But it's been a few years since I looked at it, so I
may be misremembering.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
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cballard@tyyni.net
Guest
|
| Posted:
Wed Sep 28, 2005 4:00 pm Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Robert Daniels wrote:
| Quote: | "Jonathan Kamens" <jik@kamens.brookline.ma.us> wrote:
....My family is having a bit of a "tiff" with our place of
worship, such that we would like to withhold the financial
support we would customarily give them until such time as we
believe the leadership is spending the congregation's money
wisely. It may be that we will eventually give them the
money we've withheld; it may be that we will instead
eventually decide to give the money to some other charitable
cause recognized by the IRS.
We have a certain amount of money budgeted each year to
charitable giving, and we rely on that giving in our tax
planning (i.e., we expect to be able to deduct that amount
from our income). So the question I have is, can a private
individual like me, with minimal muss, fuss and expense, set
up a charitable trust into which we can deposit the withheld
funds, such that we can recognize them now as charitable
deductions for tax purposes but not decide where the money
actually goes until later?
|
While you could set up a donor advised fund as others have
suggested (and this may be the best option for you), you
could also set up a charitable trust, which was your initial
inquiry. Whether it will be with minimal fuss and expense
depends on your particular circumstances and the expertise
of your attorney and accountant.
A charitable trust is an irrevocable trust where all of the
beneficiaries are charitable entities. A charitable trust
is defined in Code section 4947(a)(1). A charitable trust
is not required to file an application for tax exemption.
Reg 1.508-2(b)(1)(viii). In order for contributions to the
trust to be treated as deductible for income tax purposes,
certain mandatory language must be present in the trust
instrument. See Code sections 508(d) and 508(e).
A charitable trust is not tax exempt, but it is still
required to follow the excise tax rules that private
foundations must follow. Among other rules, this would
require the trust to distribute a minimum of 5% of its
assets to the charitable beneficiaries of the trust each
year.
The excise tax rules are complicated and these taxes can be
imposed on both the trust and on the trustee of the trust.
You will want to have professional assistance both in
setting up the trust and in staying within the private
foundation rules.
You will also probably be required under your state law to
register with your state's attorney general and to provide
regular reports to the attorney general about the trust's
activities.
--Chris Ballard
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MTW
Guest
|
| Posted:
Fri Sep 30, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Rich Carreiro wrote:
| Quote: | The problem with those, relative to the original poster's
query, is that I believe both of those funds explicitly
say that they will *not* release money to the donor's
church/synogogue/etc.
|
I was wondering about that, or more specifically whether the
funds would make grants to religious organizations that have
NOT formally applied for exempt status (churches are not
~required~ to formally apply). My guess (and that's all it
is) is that these funds won't release money to any
organization that isn't on the IRS Publication 78 (?) list.
MTW
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<< and does NOT constitute legal OR professional advice. >>
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Silicon Valley Dude
Guest
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| Posted:
Thu Oct 13, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
According to Rich Carreiro <rlcarr@animato.arlington.ma.us>:
[quote]"Robert Daniels" <rhdlaw@pacbell.net> writes:
The name for what you describe is a "donor advised fund",
and several mutual fund organizations provide just such a
vehicle for contributions. Take a look at Vanguard's
Charitable Endowment, online at
http://www.vanguardcharitable.org/index.asp
and the Fidelity Charitable Gift fund at
http://www.charitablegift.org/index.shtml.
The problem with those, relative to the original poster's
query, is that I believe both of those funds explicitly
say that they will *not* release money to the donor's
church/synogogue/etc.
But it's been a few years since I looked at it, so I
may be misremembering.
[/quote]
That's definitely wrong. We've been running the majority of
our giving to churches through the Fidelity Charitable Gift
Fund for several years. What *is* true is that they require
that you not get any personal benefit from the gift (e.g.,
no paying for your church fundraising auction purchases or
religious tuition), and you must certify that the gift is
not to fulfill a pre-existing pledge or obligation to the
organization. See
http://www.charitablegift.org/forms/progcirc.pdf page 13.
They've gotten pickier over the years about that last, to
the point that they now interpret it as meaning that you
should not have had any prior discussions with the
organization in which you offer a specific amount. This is
a PITA for the organization, who want to know what is likely
to come in so they can do their budgeting.
So what we've wound up doing each year is first sending
Fidelity the form recommending a future grant on particular
dates in the coming year, and then letting the organization
know what we've done. That way, the certification is valid
as of the time we send in the form, and the organization
gets to do appropriate planning.
--
Silicon Valley Dude
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rick++
Guest
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| Posted:
Sun Oct 16, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
JoeTaxpayer
| Quote: | Schwab or Fidelity can do what you need.
|
Some charities will do this too. For example my alma
mater will do this for free, if they are the recipient.
You have some discretion who within the college
gets the funds.
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Stuart Bronstein
Guest
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| Posted:
Mon Oct 17, 2005 5:59 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
"rick++" <rick303@hotmail.com> wrote:
| Quote: | JoeTaxpayer
Schwab or Fidelity can do what you need.
Some charities will do this too. For example my alma
mater will do this for free, if they are the recipient.
You have some discretion who within the college
gets the funds.
|
But that was his point - he wanted to be able to deduct
contributions in the current year but not decide which
charity to give them to until later. Unless the amounts are
very large, I suspect it would be difficult to find an
organization that would be both able and willing to enter
into this kind of arrangement.
To set up a private trust would likely result in its being a
private foundation, in which case there would be
restrictions on amounts donated and requirements that
certain amounts actually go to charity in the current year.
Stu
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Barry Margolin
Guest
|
| Posted:
Tue Oct 18, 2005 1:34 pm Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Stuart Bronstein <spamtrap@lexregia.com> wrote:
| Quote: | "rick++" <rick303@hotmail.com> wrote:
JoeTaxpayer
Schwab or Fidelity can do what you need.
Some charities will do this too. For example my alma
mater will do this for free, if they are the recipient.
You have some discretion who within the college
gets the funds.
But that was his point - he wanted to be able to deduct
contributions in the current year but not decide which
charity to give them to until later. Unless the amounts are
very large, I suspect it would be difficult to find an
organization that would be both able and willing to enter
into this kind of arrangement.
To set up a private trust would likely result in its being a
private foundation, in which case there would be
restrictions on amounts donated and requirements that
certain amounts actually go to charity in the current year.
|
You don't need a private foundation, you can establish an
account with Fidelity Charitable Gift Fund, or a similar
fund with other financial institutions. This is a
"donor-advised fund" -- it's basically a mutual fund that
you can't withdraw from, all you can do is contribute to it
and tell it to make contributions to other charities. The
fund is treated as a charitable organization, and your
contributions to it are deductible.
Go to www.charitablegift.org for information about
Fidelity's fund.
--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
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Stuart A. Bronstein
Guest
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| Posted:
Wed Oct 19, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Barry Margolin <barmar@alum.mit.edu> wrote:
| Quote: | You don't need a private foundation, you can establish an
account with Fidelity Charitable Gift Fund, or a similar
fund with other financial institutions. This is a
"donor-advised fund" -- it's basically a mutual fund that
you can't withdraw from, all you can do is contribute to it
and tell it to make contributions to other charities. The
fund is treated as a charitable organization, and your
contributions to it are deductible.
Go to www.charitablegift.org for information about
Fidelity's fund.
|
The thing I was concerned about is that make deductible
contributions and have them held indefinitely. With larger
funds that's unlikely to be a problem, since they will
likely make their minimum contributions whether or not
contributions come out of your particular account in any
particular year. The website has the following to say on
this point, which should satisfy the OP's needs:
"Historically, the Gift Fund has donated more than 20% of
assets to charities each year. Our formal grantmaking policy
requires that minimum annual grants, on an overall basis, be
greater than 5% of the Gift Fund's average net assets on a
fiscal five-year rolling basis. If this requirement is not
met in a year, we will ask for grant recommendations from
donors who have not had grant activity of at least 5% of the
account's average net assets over the same five-year
period."
Stu
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<< The foregoing is intended for educational purposes only >>
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Barry Margolin
Guest
|
| Posted:
Thu Oct 20, 2005 8:00 am Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
"Stuart A. Bronstein" <spamtrap@lexregia.com> wrote:
| Quote: | Barry Margolin <barmar@alum.mit.edu> wrote:
You don't need a private foundation, you can establish an
account with Fidelity Charitable Gift Fund, or a similar
fund with other financial institutions. This is a
"donor-advised fund" -- it's basically a mutual fund that
you can't withdraw from, all you can do is contribute to it
and tell it to make contributions to other charities. The
fund is treated as a charitable organization, and your
contributions to it are deductible.
Go to www.charitablegift.org for information about
Fidelity's fund.
The thing I was concerned about is that make deductible
contributions and have them held indefinitely. With larger
|
Is there something missing from that sentence? Are you
worried about *your* contributions being held indefinitely,
or other contributors'?
Since donors can't access the funds they contribute, there's
little reason to let them sit indefinitely, so they might as
well make grant recommendations. When you first establish
the account you might want to let it sit around for a few
years so it has a chance to grow, but eventually you might
as well start distributing to charities.
--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
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Stuart A. Bronstein
Guest
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| Posted:
Thu Oct 20, 2005 9:07 pm Post subject:
Re: Can a random private individual set up a charitable trus |
|
|
Barry Margolin <barmar@alum.mit.edu> wrote:
| Quote: | "Stuart A. Bronstein" <spamtrap@lexregia.com> wrote:
Barry Margolin <barmar@alum.mit.edu> wrote:
Go to www.charitablegift.org for information about
Fidelity's fund.
The thing I was concerned about is that make deductible
contributions and have them held indefinitely. With larger
Is there something missing from that sentence? Are you
worried about *your* contributions being held indefinitely,
or other contributors'?
|
Sorry. The thing I was concerned about was that the OP
wants to make deductible contributions but keep them from
actually being distributed indefinitely.
| Quote: | Since donors can't access the funds they contribute, there's
little reason to let them sit indefinitely, so they might as
well make grant recommendations.
|
But that's exactly what he said he wanted to do, apparently
to put pressure on the intended recipient. However the site
you gave the url for appears to have a large enough fund
that it will be able to make significant contributions each
year. So if an individual donor's contributions are held up
for a while, it should not cause a problem.
Stu
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