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Last month's column addressed the
topic of charitable giving and offered some suggestions for what to look for
when considering where and how to make deductible donations. As a
follow up to that piece, I'd like to cover one innovative approach to contributing
that helps ensure the seeds you plant today can be harvested for maximum
benefit in the future. As we begin a new year, you may want to consider
alternative approaches for making charitable contributions throughout the
year.
Community foundations are tax-exempt charities through which individuals,
families, businesses and organizations can create permanent charitable funds,
administered by the foundations. The funds are often designed to identify
emerging issues and foster resources specifically geared toward addressing
arts and culture, environment, community development, health, education and
human services needs in specific geographic regions. In our state we
have 23 such community foundations and are fortunate to have the Racine
Community Foundation dedicated to our county.
The Racine Community Foundation, which was founded in 1975, currently
administers over $25 million of funds for the charitable intent of their
donors. During each of the past three years, the Racine Community
Foundation distributed grants of over $1.5 million. The Foundation's mission
is "to serve all of Racine County by actively seeking, receiving
and administering philanthropic funds to meet changing community needs and to
serve the charitable interests of donors".
Grants to many of our community treasures, such as
Health Care Network, the Racine Zoo, and local parks were made from the
permanent funds established by donors. The types of funds the Foundation
administers for individuals include named, donor advised, designated, field
of interest and scholarship funds. For organizations, the Foundation provides
administration for endowment funds. The minimums to open one of these
funds range from $5,000 to $20,000.
Before you conclude that making a contribution to a community foundation is
only for the wealthy donor, you should look closely at creative options such
as the Racine Community Foundation's Acorn Fund. This fund allows a donor to
start with as little as a tax deductible $50 per month ($600 a year) which
continues to build tax-free toward the eventual minimum of one of the
permanent funds. This means you don't have to have $20,000 or even $5,000 to
plant a seed that grows over time to provide wide-reaching benefits.
According to John Crimmings, president of the
Racine Community Foundation, one of the Foundation's objectives is to
increase participation by small donors by providing an affordable option for
donors who may not have a large lump sum to contribute all at one time.
The Racine Community Foundation offers the following example on their website
to help explain how the Acorn Fund works.
Let's suppose you started an Acorn Fund 10 years ago
with annual contributions of $1,000. You decided your fund would start making
grants when it reached $25,000 in value. Today, your annual contributions
would total $10,000 and due to compounded investments returns, your fund has
actually grown to your $25,000 goal. Now the fund is a grant-making permanent
fund within the Racine Community Foundation. The fund continues to grow
even while providing grants based on your stated intentions. Ten years
from now, assuming investment returns of 10% and normal grant allocations
formulas used by the Foundation, it has generated more than $14,000 in grants
and its value has risen to more than $41,000.
To learn more about the Racine Community Foundation, the variety of
individual funds and the Acorn Fund, visit www.racinecf.org.
As the New Year begins, it's an excellent time to evaluate your financial
planning objectives, including your charitable intents for the coming year.
There's no need to wait until December or until you have a large sum to
donate to plant seeds from the heart today.
Michael Haubrich, CFP, is president of Financial
Service Group, Inc., a registered investment advisory firm in Racine , website address www.toyourwealth.com.
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