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You don’t have to be Rockefeller rich to give away money like a Rockefeller.
Nearly 100 years ago, oil baron John D. Rockefeller created a foundation through which he funneled his family’s money to charitable causes. Today families with only a fraction of his wealth can do the same.
In the past 15 years, the number of family foundations established in Washington has tripled to nearly 900. “More and more of the sophisticated tools of philanthropy are becoming accessible downstream,” says Barry Glassman, a financial planner with Cassaday & Company in McLean.
Typically, families set up foundations to establish a legacy of giving. Family members give to the foundation and take a tax deduction, and the gifts make up an endowment. Over time, the family takes interest from the endowment to make charitable contributions.
Not long ago, Glassman says, he recommended that clients set up a foundation only if they had at least $5 million in assets to give away. Attorneys and accountants had to be hired to handle incorporation and file IRS paperwork. Some foundations hired staff to manage donation requests.
Recent years have seen the blooming of a cottage industry of philanthropic-service companies that make foundations less expensive. Connecticut-based Foundation Source can create a foundation in three days for about $5,900, including filing fees. Its clients include families with charitable assets of as little as $250,000, says Page Snow, chief philanthropic officer.
Foundation Source can take over the back-office work—handling tax filings, processing donation requests—and advise clients on compliance issues and grant-making.
Kristy Rodriguez of Annandale likes the Web site that Foundation Source created for her family, which is spread all over the country. The company stores documents and helps relatives manage their giving long-distance. “It’s a one-stop shop for us,” says Rodriguez, 31.
Eric Kessler, who worked in nonprofits for 15 years, founded DC-based Arabella Philanthropic Investment Advisors in 2004. It can handle a foundation’s administrative work and helps families develop and implement a philanthropic strategy. The Gates and Kresge foundations have used Arabella as a consultant.
There are other ways to develop a strategy for giving. A donor-advised fund is an account hosted by a foundation or other institution, and it functions much like a family foundation. Individuals make donations of cash, stock, or other assets to their fund and take a tax deduction. Over time, they recommend to the host organization where and when to make charitable gifts.
A family foundation offers more control of gifts, but a donor-advised fund is simpler. The host organization handles investments and paperwork. The funds are bound by fewer federal provisions, including the requirement that 5 percent of foundation assets be given away each year.
Fidelity, Vanguard, and other major investment companies are among the biggest to offer donor-advised funds, but those hosted by community foundations have become increasingly popular. Sharon Berman, an accountant who handles family-wealth management for McLean-based Argy, Wiltse & Robinson, says donor-advised funds have become popular with her clients as charitable giving has come under increased scrutiny.
“The IRS has really clamped down,” she says. It frequently asks clients for documentation of every gift. “If they can give $10,000 to a donor-advised fund, that’s one check and one receipt.”
Depending on the fund, you can set up an account with as little as $5,000. But Berman says even clients with millions in assets are starting funds.
The Community Foundation for the National Capital Region (202-955-5890; cfncr.org) has more than 600 funds, most set up by individuals and families. It’s the area’s largest community foundation, with affiliates in Alexandria as well as Montgomery and Prince George’s counties. The minimum contribution to start a fund is $10,000.
Smaller ones include the Northern Virginia Community Foundation (703-917-2600; novacf.org); the Arlington Community Foundation (703-243-4785; arlcf.org); and the Community Foundation of Frederick County (301-695-7660; cffredco.org).
Another new instrument of philanthropy is the giving circle, a group of people who pool their dollars and collectively decide where to donate. Some of these are administered by an employer or foundation; others are informal groups that grow out of book clubs or neighborhood associations.
In Washington, giving circles include several sponsored by the Washington Area Women’s Foundation (202-347-7737; thewomensfoundation.org); Many Hands (manyhandsdc.org), a Chevy Chase group that gives away $100,000 every two years; and the Giving Circle of Hope (members.cox.net/strup/gchopeindex.html), founded in 2004 by four Reston women.
For more about giving circles, contact the Forum of Regional Associations of Grantmakers in DC (202-467-1120; givingforum.org); the Centreville-based Giving Circles Network (703-408-0312; givingcircles.org); or the Association of Baltimore Area Grantmakers’ Giving Circle Connector (410-727-1205; abagmd.org), which has a list of giving circles in DC, Maryland, and Northern Virginia.
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