Many families give to charity, but most feel they could be doing more to maximize the impact of their gifts. In fact, only 20% of respondents to a 2014 UBS Investor Watch survey felt that their philanthropy was highly effective.
One way to improve charitable giving is to formalize the process in line with your needs. “Charitable-giving vehicles help you align your giving with your long-term investment strategy,” says Michael Crook, Head of Portfolio & Planning Research at UBS.
- Only 20% of those surveyed by UBS felt their charity was effective.
- Formalizing your charity process can help.
- Donor-advised funds offer ease of set up and privacy.
- Private foundations offer flexibility and the possibility of long-term family legacy.
- Your Financial Advisor can help you determine which option might work better for you.
Defining two options
Two of the most popular charitable-giving vehicles are donor-advised funds (DAFs) and private foundations.
- DAFs are charitable giving accounts established with and managed by public charities. Donors can receive a tax deduction for their contributions to the account and then recommend grants they wish to make with those funds.
- Private foundations are nonprofit corporations or charitable trusts typically established with funding from one family. The foundation must apply for tax-exempt status and manage its own legal and governance responsibilities. It then enjoys full control over investing and grant-making decisions.