Managing Foundations and Charitable Trusts: Essential Knowledge, Tools, and Techniques for Donors and Advisors

268 Pages·2011·2.37 MB·English

by  Roger D. Silk

Additional Praise for
Managing Foundations and Charitable Trusts
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tobeusefultoattorneys,accountants,andotherswhoseektoadviseclientsregardingprivate
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“Thiswillbeagreatresourceforanyoneinvolvedwithcharitiesincludingfoundations,whether
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“Managing Foundations and Charitable Trusts by Silk and Lintott is an excellent source for
theseasonedprofessionalorthosenewtothisfield.Thebookconciselysetsforththevarious
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clearlyexplainsthecharitablemindset,thetechniquestoreachaparticularclient’sgoalsand
thepossiblepitfallsofonemethodoveranother.”
—BrianKirby,Partner,Bangs,McCullen,Butler,FoyeandSimmons,LLP
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MANAGING
FOUNDATIONS AND
CHARITABLE TRUSTS
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MANAGING
FOUNDATIONS AND
CHARITABLE TRUSTS
Essential Knowledge, Tools, and Techniques
for Donors and Advisors
Roger D. Silk
James W. Lintott
Copyright©2011byRogerD.SilkandJamesW.Lintott.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
PublishedsimultaneouslyinCanada.
ThisbookisarevisededitionofCreatingaPrivateFoundation:TheEssentialGuideforDonorsandTheir
AdviserspublishedbyBloombergPressin2003.
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LibraryofCongressCataloging-in-PublicationData:
Silk,RogerD.
Managingfoundationsandcharitabletrusts:essentialknowledge,tools,andtechniquesfor
donorsandadvisors/RogerD.SilkandJamesW.Lintott.
p. cm.—(Bloombergfinancialseries)
Includesindex.
ISBN978-1-118-03826-0(hardback);ISBN978-1-118-09349-8(ebk);
ISBN978-1-118-09350-4(ebk);ISBN978-1-118-09351-1(ebk)
1. Nonprofitorganizations—Management. 2. Charitableuses,trusts,andfoundations—
Management. I. Lintott,JamesW. II. Title.
HD62.6.S55752011
(cid:2)
658.048—dc22 2011006384
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
ToJanieBlock,z’l, SusanPohl, andSusanMaher.
Contents
Preface xiii
Acknowledgments xvii
CHAPTER1
TheBasicsofCharitableGiving 1
DirectGifts 2
SupportingOrganizations 6
Donor-AdvisedFunds 8
PrivateFoundations 12
Conclusion 18
CHAPTER2
TaxIncentivesandLimitations 21
FourPowerfulTaxIncentives 21
DetailsonTaxDeductionLimits 25
FindingtheBestGivingStrategy 27
The$1.6TrillionLoss 28
EstateTaxes 29
Conclusion 30
CHAPTER3
CharitablePlanningandTaxes 33
GivingApproach 34
TaxPlanningComplexity 37
GuidelinesforAnalyticalExpenditure:OrIsAnalysisWorthIt? 39
WhattoDoWhenTaxRatesAreUncertain 40
TimingofGainRealization 41
CharitableRemainderTrustsandDeferral 42
Conclusion 42
vii
viii Contents
CHAPTER4
PlanningwithCharitableLeadTrustsand
CharitableRemainderTrusts 43
CharitableLeadTrusts 43
CharitableRemainderTrusts 47
FlexibilityandIrrevocability 52
CHAPTER5
FoundationsandChildren 53
Affluenza 54
BringingFamiliesCloser 56
TransmittingValues 56
ProvidingValuableSkills 56
Conclusion 59
CHAPTER6
BenefitsofGivingWhileYou’reStillAlive 61
PersonalSatisfaction 61
CreateaLegacy 62
TheProblemwithWaiting 63
FromtheGrave:Control—ButNotTooMuch 64
WhataboutTooLittleDirection? 66
WhoGetsControl? 68
Conclusion 69
CHAPTER7
EffectiveFoundations:TheBusinessofPhilanthropy 71
TheMissionRevisited 71
GettingStarted 74
KnowYourCharities 75
GoverningforEffectiveness 77
ApproachestoGrantMaking 81
YouGetWhatYouNegotiate 82
StandontheShouldersofOthers 83
OutsideExpertsCanMaketheDifference 84
TypesofSupport:PeriodicversusEndowment,GeneralversusProgram 84
IsMeasurementWorthwhile? 86
EstablishingMeasures 90
ProvideFeedback 91
GiveWisdominAdditiontoWealth 91
GiveStrategically 93
ExerciseofLeverage 95
MakeForeignDonationsDeductible 96
UsePublicRelationsEffectively 97
Contents ix
CreateFinancialLeveragethroughTax-ExemptFinancing 98
LetYourFoundationDotheDirtyWork 98
Conclusion 99
CHAPTER8
TheRoadtoHell:Bewareof
UnintendedConsequences 101
FoodAid 103
PrivateCharityandUnintendedConsequences 105
FungibleMoneyandInadvertentFundingofTerrorism 107
HowtoGiveRestrictedGrants 109
Poverty—Again 110
CHAPTER9
DevelopinganAppropriateFoundation
InvestmentPolicy 113
WhattoIncludeinanInvestmentPolicy 113
Conclusion 121
CHAPTER10
DevelopingandImplementingaFoundationAsset
AllocationPolicy 123
DifferencesbetweenCorporationandFoundationInvestmentPlans 123
TheSevenDeadlySinsofFoundationAssetAllocationPolicy 125
DevelopingaGoodAssetAllocationPolicy 129
ShouldanAssetAllocationPolicyChangeoverTime? 135
CapturingtheRebalancingBonus 136
ActiveManagementversusIndexing 137
WhoIsResponsiblefortheAssetAllocationPolicy? 138
Conclusion 139
CHAPTER11
MainThemesinLegalCompliance 141
SomeComplianceErrorsMaySeemFunny,butThey’reNot 142
AFail-SafeSystem 143
RequiredActivities 144
ProhibitedActivities 147
Conclusion 151
CHAPTER12
Fraud,Inflation,andMarketRisk 153
StanfordCase 157
Enron 160
BaptistFoundationofArizonaCase 162