Starting a charity fund or endowment is a way many people use to give something back to their communities. If you would like to start a charity fund, it may surprise you to know you need only a few thousand dollars to do so--you don’t have to be Bill Gates or Warren Buffet. In fact, there are investment companies and non-profit organizations that can help you and take care of the administrative details if you want to start a charity fund and make sure you do so within Internal Revenue Service rules.
Evaluate your personal financial position. The sums of money required to start a charity fund are substantial for most people—$5,000 to $10,000 depending on the type of fund. Once money is put into a charitable fund, you do not have the option of changing your mind. Review your financial position carefully before you make the commitment to be sure you are ready to do so.
Consider a donor advised mutual fund. Several investment firms offer this option. You can start a fund under your name or that of a loved one for as little as $10,000. The company takes care of the details of paperwork and managing investments. The three leading firms that have donor advised mutual funds are Fidelity Charitable Gift Fund, the Vanguard Charitable Endowment Programs and the Schwab Fund for Charitable Giving.
Make an initial contribution to start a charity fund. Once you’ve chosen a company to handle the fund, the money will be invested in any of several programs that you can choose from. You can deduct all the contributions you make. In addition, you choose which charities receive donations, how much and for what purpose, as long as they qualify as charities under IRS rules.
Take an alternative route to start a charity fund through a community foundation. Community foundations generally allow you to start a fund for as little as $5,000. Like donor advised mutual funds, the day-to-day administration of your charity fund is taken care of. These funds are usually set up to fund local or community projects or organizations, but you aren’t restricted in your choices in giving, nor do you have to live in the particular location. The community fund also has an advantage; you can place securities directly into the fund. This can give you a better tax break since it avoids capital gains on appreciated securities and you still get to take deductions for charitable donations.
When you start a charity fund, it need not be limited to contributions only from you. Most fund organizations can help you set up options that will allow your fund to take donations from other people as well.