Author Topic: Funding a Charity for Eternity  (Read 3241 times)

shotgunwilly

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Funding a Charity for Eternity
« on: May 15, 2015, 02:13:49 PM »
Something I've been thinking about lately. 

Applying the same principles of the SWR for retirement, could it be possible to set aside a certain amount of money in an investment account and designate a charity to withdraw a certain amount (3.5 - 4%) each year, basically forever?

It may be something I consider if it looks like I may die with lots of assets.  Could this be something in the will that could be fulfilled by an organization?  I understand that markets may collapse and drain money (in which case it would just run out), and I understand that charities may dissolve but that could be remedied by having a "lineup" of charities,  so to speak.

Sorry if this has already been discussed. I've never read anything like it.

FranzJoseph

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Re: Funding a Charity for Eternity
« Reply #1 on: May 15, 2015, 04:01:14 PM »
Sounds like you want to set up a charitable trust.  I'm sure the details can be worked out - the person overseeing the trust just cuts a check to the charity every month or quarter.  There is probably a fee involved for the business or person managing it.  The NGO my wife and I run receives such a check every month for our non-profit activities.

Sid Hoffman

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Re: Funding a Charity for Eternity
« Reply #2 on: May 15, 2015, 04:06:58 PM »
Sounds like you want to set up a charitable trust.

Or a private foundation.  According to the Wikipedia page on the topic, about 2/3 of private foundations manage less than a million dollars.  You don't need to be a billionaire to start a foundation.  Most people who FIRE on this forum are likely planning to have over $1M when they retire and probably increase than number as they get older, thus making the typical MMM-er a good candidate for having a private foundation created in their name, or in the name of whatever cause they want to be perpetually giving money.

chasesfish

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Re: Funding a Charity for Eternity
« Reply #3 on: May 15, 2015, 04:21:25 PM »
Actually, what you're looking for is known as a Community Foundation.

They are a separate 501c3 not for profit that you make a donation to, then you have a donor-advised fund agreement that designates what the foundation will do with the money.  They usually take 0.5% to 1.5% for funding the admin of the community foundation then have a SWR of 4-5% per year.   I've been involved with two small ones in my career, they all have their own little quirks in how they operate, but most communities are served by one.  They pool the asset management and administration to drive costs down.

I think they're more effective than trying to setup a private foundation and its better than donating the money directly to an operating charity, which could spend it all instead of living off of the earned income.

You can donate a little money and set everything up and see how it operates, then have your will/estate plans setup to donate the remaining assets into your fund upon not needing them anymore.



Getting there!

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Re: Funding a Charity for Eternity
« Reply #4 on: May 20, 2015, 09:48:31 PM »
About five years ago now, I set up a Donor Advised Fund through a Community Foundation and it's one of the most gratifying things I've ever done.  Through this foundation, once a fund reaches $10,000, then each year an amount is available for gifting through the Foundation.  Until a fund reaches $10,000, it's referred to as an Emerging Fund and I think there's about five years or so to bring the fund to the $10,000 minimum.  I had read an news article about how the average person could leave a lasting legacy, so we researched how to go about doing that in our community.
All the best in exploring options and making a decision!