“If you’re wealthy, you set up your own private foundation… You get a deduction now, but you don’t have to give it all away right away. You can do it in a much more leisurely way.”
It’s hard to comment on the recent outpouring of information about presidential hopeful Mitt Romney and his tax records.
First, since he is a potential presidential candidate, there are political ramifications, as he is a wealthy individual there are ideological (if not also political) ramifications, and as he is a Mormon who practices tithing there are theological ramifications. That said, and whatever your opinions on the man are, it’s hard to deny that he is a very real life example of some serious charitable giving at work.
As reported by BusinessWeek (and a thousand other places besides), the Romneys gave about $7 Million dollars to charitable causes over the past two years. Interestingly, their giving wasn’t just a matter of simply writing a check (although, granted, a great deal of it was by cash donation). No, the Romneys make use of their own charitable organization. If you, too, are a serious donor, then this may be a worthwhile strategy to consider.
As an individual giving to charity you are somewhat limited, especially when it comes to the tax year and claiming deductions. By using a charitable organization as a conduit you can give during a given tax year, take the deduction from your personal taxes, and then, as a leader in the charitable organization, still work to grow that gift and take the time to make it do the most good. Likewise, you can lead others and implore them to your causes. (Think Bill and Melinda Gates Foundation.)
Of course, starting a foundation and maintaining it are often difficult tasks, even though they don’t have to work on such a grand scale as the famous examples. As far as tax advantages, a similar benefit can still be wrought from a form of pooled charity trust, set up by a charity or investment company and able to grant you a tax deduction on your gift in the current year while waiting to pool resources and do the most good.
Still both approaches are elaborate ways of practicing your charitable giving and either may just be the right method for you. Be sure to consult with appropriate legal and tax counsel to determine the appropriate method for your objectives.
You can learn more about charitable planning in the Charitable Planning Practice Center on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.
Reference: BusinessWeek (January 24, 2012) “Romney Tax Returns Show $7 Million in Donations Over 2 Years”