There are a number of ways to be philanthropic. What follows is an introduction to the options for private giving that are available to individuals and/or businesses. For more information about any of these options contact an attorney, CPA or other estate-planning professional familiar with foundations, trusts and planned giving.

A. Give to charitable organizations

Gifts to established charities provide direct support to those organizations. These can include, but are not limited to, schools, hospitals, arts and cultural institutions, human service agencies and religious organizations. They may also include federated funds such as United Way or Combined Health Appeals that collect money for these causes. A gift to these nonprofit organizations can be of any size. Cash gifts to charities are deductible at rates of up to 50% of adjusted gross income; gifts of appreciated property, including securities, are deductible at rates up to 30%.

B. Create a private foundation

By creating a private foundation a donor can retain personal control and flexibility over his/her giving programs. Private foundations can be structured as charitable trust funds or nonprofit corporations. According to law, private foundations must annually pay out funds of at least 5% of their assets and pay a 1-to-2% excise tax on the net investment income. Cash gifts to private foundations are deductible at rates up to 30% of adjusted gross income; gifts of appreciated property are deductible at rates up to 20% of adjusted gross income.

C. Give to a community foundation

Community foundations are public charities supported by donations from across their region. Gifts to community foundations can be of any size, from as little as a dollar to thousands -- or millions -- of dollars. By pooling funds, community foundations achieve economies of scale for investing, managing and granting philanthropic dollars. Cash gifts to community foundations are deductible at rates of up to 50% of adjusted gross income; gifts of appreciated property are deductible at rates of up to 30% of adjusted gross income.

A donor to a community foundation may designate his/her gift as:

Unrestricted: which would be used where the foundation's advisors deem it is most needed to meet the needs of the community.

Restricted: which provide options for donors to determine how their contributions will be used. Types of restricted gifts include:

1. Designated funds where donors specify the agency or agencies to receive their support. 2. Field-of-interest funds where donors select the broad charitable purposes they wish to support (e.g., health, education, the arts). 3. Donor-advised funds where donors have the opportunity to make periodic recommendations on which agencies they wish to support, although final decisions rest with the foundation board. 4. Establish a supporting organization where the supporting organization is a legal entity which attaches itself to another public charity and takes on the public charity status of the organization it supports. This structure preserves some of the independence and identification with the donor, without the administration or limitations of a private foundation. The donor or donor designees may serve as board members, but the supported organization must have 50% or more of the board's voting power (or veto power) on the supporting organization. 5. Establish your own giving circle. Many donors are discovering the joys of philanthropy by joining with other like-minded individuals to form giving circles. To form a giving circle, donors pool their funds, invest them, and then make joint decisions about how to distribute the income and /or principal of these funds to other philanthropic or charitable organizations in the form of grants. Donors will often commit to participation in a giving circle for a number of years at an established dollar level. The pooled funds may be held at a public foundation (in the form of a donor-advised fund, for example), at a local bank, or at some other nonprofit or commercial entity that will invest the funds and enable them to earn income. 6. Give to a Charitable Gift Fund. Charitable gift funds are vehicles for giving that are established as charitable affiliates of for-profit financial institutions such as banks and mutual fund companies. These funds are donor-advised funds (see descriptions under community foundations); therefore, distribution is made to nonprofit organizations at the advice of the donor, with final authority in the board of the charitable affiliate. Cash gifts are deductible at rates of up to 50% of adjusted gross income; gifts of appreciated property are deductible at rates of up to 30% of adjusted gross income. 7. Develop a corporate program. A business owner can develop a philanthropic corporate program in the form of either a corporate foundation or a corporate giving program. In both instances the supporting funds come from corporate profits. For most corporate programs philanthropic priorities serve the communities in which their employees live and work. -- Corporate foundations are often started with a single gift, then funded on an annual basis, as profits allow. Legally, these foundations operate as private foundations. Officers are generally the company owners and key executives. -- Corporate giving programs are established as ongoing corporate entities and funded as part of the parent corporation's operating budget. Corporate contributions staff manage the corporate giving budgets, often directed by the company's chief executive officer and other key executives.

Businesses can also offer matching gift programs for employees, matching their gifts to educational, cultural and other 501(c)(3) nonprofit organizations. Companies can also offer in-kind donations of goods and services, as well as organizing workplace volunteer efforts to meet community needs.

Other ways to give

Other ways to be philanthropic are worthy of mention. These programs offer donors the means of retaining income for life and/or control over where the principal will go.

A bequest is a gift named in a person’s will. Wills are necessary to carry out a person’s final wishes regarding the distribution of their property to those they wish to benefit, including to charitable organizations.

With a charitable remainder trust the donor takes a one-time charitable deduction in the year the trust is formed. The donor then receives income from the trust for life. Upon the donor's death, the assets of the trust are distributed to the donor's designated charity or charities.

A charitable lead trust is a variation on the charitable remainder trust. It provides for a fixed amount to be paid annually to the charity or charities of the donor's choice for a specific time. Upon the termination of the trust, the remainder is passed on to the donor's designated heirs.

A qualified terminable interest property (QTIP) trust will provide the donor's spouse the right to income for life. Upon the spouse's death, the trust property will be passed on to a designated charity or charities. This arrangement is more flexible than the charitable remainder trust. Here, the trustee may be given broader powers including the right to invade trust principal for the support and comfort of the surviving spouse.

With a charitable gift annuity, the donor contributes cash or marketable securities in exchange for a contractual promise to pay him/her (and/or another annuitant) a guaranteed income for life. The rate of that income is based on the age(s) of the annuitant(s).

A pooled income fund is a life-income arrangement wherein the income from the donor's gift is paid to the donor (and/or designated friends and family members) for life at the rate earned by the total pool of gifts. Upon the death of the last beneficiary, the remaining funds pass to the charity or charities designated.

A donor can also take out (or transfer) a life insurance policy vesting all ownership rights in the policy to a designated charitable institution. The donor can pay the annual premium with yearly, tax-deductible contributions to the charity. Upon the donor's death, the proceeds of the insurance policy pass to the designated charity or charities, free from estate taxes.

*Reprinted with permission of the Connecticut Council for Philanthropy