The insider's guide to charitable organizations for donors and their advisors Do you know when to use a private foundation, a donor-advised fund, or a charitable remainder trust or other charitable vehicle? Do you know the different tax benefits, limitations, and control rules for each alternative? Do you have an appropriate investment policy for your endowed charities? Do you have a rubric for avoiding fraud? Do you know what to look for to make sure that your charitable donations don't do the opposite of what you intend?
In Managing Foundations and Charitable Trusts, Roger D. Silk and James W. Lintott provide a comprehensive guide for charitable donors and their advisers. Additional topics include:
- Foundation Governance
- When to seek additional professional help
- When and how to turn a CRT interest into cash
- Key tax issues
- Creating a legacy
- Why tax planning is so difficult, and how to approach it
Straightforward and authoritative, Managing Foundations and Charitable Trusts is a handy, easy-to-read guide that all donors and their advisors will want to keep on hand.
Table of Contents:
Preface xiii
Acknowledgments xvii
CHAPTER 1 The Basics of Charitable Giving 1
Direct Gifts 2
Supporting Organizations 6
Donor-Advised Funds 8
Private Foundations 12
Conclusion 18
CHAPTER 2 Tax Incentives and Limitations 21
Four Powerful Tax Incentives 21
Details on Tax Deduction Limits 25
Finding the Best Giving Strategy 27
The $1.6 Trillion Loss 28
Estate Taxes 29
Conclusion 30
CHAPTER 3 Charitable Planning and Taxes 33
Giving Approach 34
Tax Planning Complexity 37
Guidelines for Analytical Expenditure: Or Is Analysis Worth It? 39
What to Do When Tax Rates Are Uncertain 40
Timing of Gain Realization 41
Charitable Remainder Trusts and Deferral 42
Conclusion 42
CHAPTER 4 Planning with Charitable Lead Trusts and Charitable Remainder Trusts 43
Charitable Lead Trusts 43
Charitable Remainder Trusts 47
Flexibility and Irrevocability 52
CHAPTER 5 Foundations and Children 53
Affluenza 54
Bringing Families Closer 56
Transmitting Values 56
Providing Valuable Skills 56
Conclusion 59
CHAPTER 6 Benefits of Giving While You’re Still Alive 61
Personal Satisfaction 61
Create a Legacy 62
The Problem with Waiting 63
From the Grave: Control—But Not Too Much 64
What about Too Little Direction? 66
Who Gets Control? 68
Conclusion 69
CHAPTER 7 Effective Foundations: The Business of Philanthropy 71
The Mission Revisited 71
Getting Started 74
Know Your Charities 75
Governing for Effectiveness 77
Approaches to Grant Making 81
You Get What You Negotiate 82
Stand on the Shoulders of Others 83
Outside Experts Can Make the Difference 84
Types of Support: Periodic versus Endowment, General versus Program 84
Is Measurement Worthwhile? 86
Establishing Measures 90
Provide Feedback 91
Give Wisdom in Addition to Wealth 91
Give Strategically 93
Exercise of Leverage 95
Make Foreign Donations Deductible 96
Use Public Relations Effectively 97
Create Financial Leverage through Tax-Exempt Financing 98
Let Your Foundation Do the Dirty Work 98
Conclusion 99
CHAPTER 8 The Road to Hell: Beware of Unintended Consequences 101
Food Aid 103
Private Charity and Unintended Consequences 105
Fungible Money and Inadvertent Funding of Terrorism 107
How to Give Restricted Grants 109
Poverty—Again 110
CHAPTER 9 Developing an Appropriate Foundation Investment Policy 113
What to Include in an Investment Policy 113
Conclusion 121
CHAPTER 10 Developing and Implementing a Foundation Asset Allocation Policy 123
Differences between Corporation and Foundation Investment Plans 123
The Seven Deadly Sins of Foundation Asset Allocation Policy 125
Developing a Good Asset Allocation Policy 129
Should an Asset Allocation Policy Change over Time? 135
Capturing the Rebalancing Bonus 136
Active Management versus Indexing 137
Who Is Responsible for the Asset Allocation Policy? 138
Conclusion 139
CHAPTER 11 Main Themes in Legal Compliance 141
Some Compliance Errors May Seem Funny, but They’re Not 142
A Fail-Safe System 143
Required Activities 144
Prohibited Activities 147
Conclusion 151
CHAPTER 12 Fraud, Inflation, and Market Risk 153
Stanford Case 157
Enron 160
Baptist Foundation of Arizona Case 162
The Bre-X Fraud 163
Allied Capital 166
Fraudulent or Not? You Decide 167
What Is XYZ? 169
How Will Social Security End? 170
Promised Benefits 170
Real Terms 171
Inflation: A Brief History 174
Inflation Indexing 176
Foundations and Endowments Are Highly Exposed to Inflation 180
Avoiding Fraud 180
CHAPTER 13 Other Planned Giving Vehicles 183
Charitable Gift Annuity 183
Gift Annuities versus Regular Annuities 184
Partial Exclusion of Annuity Payments from Income Tax 185
Bargain Sale 186
Charitable Gift Annuity versus CRT 189
Remainder Gifts with Retained Life Estate 190
Pooled Income Funds 192
CHAPTER 14 Donor-Advised Funds 195
History 196
Guidelines—Highlights 196
Fees and Costs 199
CHAPTER 15 Building Assets with Charitable Planning 201
Professionally Managed, Turnkey Private Foundations 205
Foundation Manager’s Role 206
Conclusion 207
CHAPTER 16 How to Select a Foundation Manager 209
Choosing a Full-Service Manager 209
Conclusion 212
CHAPTER 17 What Can You Donate to Charity? 213
Publicly Traded Securities 213
Nonpublicly Traded Business Interests 215
Tangible Personal Property 216
Intangible Personal Property 218
Qualified Retirement Plans 221
Real Estate 223
Conclusion 225
CHAPTER 18 When the Shoe No Longer Fits 227
Private Foundations 227
Charitable Remainder Trusts 231
Getting Rid of Other Charitable Vehicles 243
Conclusion 245
Selected Resources 247
About the Authors 249
Index 251
About the Author :
ROGER D. SILK, CEO of Sterling Foundation Management, is widely recognized as a leading expert in the field of private foundations and charitable trusts. As a founder and board member of several nonprofit organizations, former bond trader at the World Bank, and Stanford-trained PhD economist, Dr. Silk possesses a unique blend of experience, practical knowledge, and theoretical insight that has enabled him to help build Sterling Foundation Management into the market leader that it is today.
JAMES W. LINTOTT is Chairman of Sterling Foundation Management and a board member of Dean and Deluca and several private investment companies. He has over two decades of experience working with wealthy individuals and families. In addition, Mr. Lintott serves on the boards of a number of nationally recognized charities, including the Freer/Sackler Galleries of the Smithsonian Institution, the U.S.-Japan Foundation, and Best Buddies International.
