By Steven A. Belson, JD, LL.M

Warren Buffet's spectacular multi-billion dollar gift to the Gates Foundation made headlines worldwide and also trig¬gered growing interest in philanthropy in general. It ties in with recent surveys that show American families are becoming more philanthropic and family foundations are growing in popularity.

If you have an interest in philanthropy and instilling in your children and grandchildren the need for charitable giving, a family foundation may be right for you.

Here are some basics: First, as a general rule, you should not set up a foundation unless you plan to contribute $500,000 or more in assets to it. Second, it will cost you approxi¬mately $5,000 to $6,000 in fees to establish, and annual maintenance costs of $1,500 to $2,000. Also, the foundation is required to make charitable distributions each year of at least 5% of the foundation's assets.

As to its advantages, when you give assets (stocks, bonds, etc.) to the foundation, you can take sizable charitable deductions, up to 30% of your adjusted gross income, and whatever you cannot deduct during the year of the initial gift, you may deduct over the next five years. Often giving stock that has appreciated substantially is an excellent way to fund such a foundation. So basically giving $500,000 in assets to a foundation can save more than $100,000 in taxes. Gifts to a foundation upon death are deductible dollar for dollar.

Once the foundation is set up, you can control where the money goes, as long as the recip¬ients are qualified charities.

Equally important, is that you can set up a foundation board and put your children, grand¬children, other relatives or friends on the board. This gives them an opportunity to become actively involved in the gift-giving process and with the various charities.

The life of the foundation can go on indefinitely and can involve children, grandchildren, great-grandchildren and on and on. This is an important plus if you want to instill in your family through the years a keen and active interest in philanthropy.

If you are not prepared to contribute at least $500,000 to a family foundation, other alternatives exist. Giving directly to religious organizations, educational institutions, and the like, and/or the establishment of a supporting organization or philanthropic fund will pro¬vide you with similar tax benefits and participation to that of a foundation.

Another vehicle that is growing in popularity is the charitable gift annuity. Here, you make an ultimate gift to a charity of your choice, but in the meantime, you get a substantial tax advantage as well as a boost to your annual income (and it can be set up so that your spouse gets the income if you die first).

For those of you who are paying or plan to pay for your child's or grandchild's private school or college education, a recent favorable IRS private letter ruling was issued, holding that no gift tax resulted from pre-paid educational gifts.

If any of the above ideas are of interest to you, please feel free to contact our office for an appointment to discuss any one or more of them at length.