How to Start a Giving Fund

Creating a Personal Giving Fund

Set up an account. Taking the first step toward creating a giving fund is as simple as opening a bank account. You can stay with your own bank where you already do business and just open a separate account. If you believe you will be make regular donations or payments from this account, you may want to make a checking account for flexibility. Otherwise, you can set up a savings account just to hold the money. You don’t actually even need a bank account. If you are working with small amounts of money, you can just set it aside in a safe place. The key is to separate the money that you are able to hold in your giving fund from your own finances.

Decide what you can afford. With a small, personal giving fund, you do not have to bind yourself to any formal rules or donation amounts. However, it will help if you can get yourself into a habit of making regular donations to your fund. For example, it would help if you plan to set aside something like $10 each week or even at the end of each month. The amount of the money is not as important as establishing a regular routine. You should make a point of doing it consistently at the same time.

Make your “gifts” informal. The purpose of a personal giving fund is to allow yourself the opportunity to help people whenever the need might arise. You might want to drop a larger than normal donation in a tip jar at the coffee shop or send a card to a friend who you know is in temporary need of help.

Keep records. If you are creating a giving fund for your own private donations, you probably do not want to concern yourself with any major record-keeping. Even so, you should at least keep a notebook or some type of ledger to record the money you put into the fund and the donations that you make from it. Depending on the amount of the contributions that you make, you may choose to claim the money as charitable tax deductions. If you want to claim deductions for donations that you make, you will probably need to get receipts, depending on the amounts involved. You may want to read Claim a Church Deduction for Federal Taxes or Itemize Charitable Donations for some more information.

Setting up a Group Giving Fund

Encourage a group of friends or coworkers to participate. If you want to operate a giving fund on a somewhat larger scale, you should talk to people you know. Find a group of like-minded people at work or other friends and discuss the idea of creating a group giving fund. With more people involved, you will be able to generate more money and do more good for others. When a small group of people become involved, the title may change to a “giving circle” or a “giving club.” But the principles remain the same.

Set up your goals and structure. As a group, you should decide on some basic issues. While no written by-laws of any type are required, it may be a good idea to write down some key operating details, especially if you want your group to exist over time. Some things to decide early on are: Will you hold regular meetings? If so, when, where and how often? Will regular contributions be required? How much from each member of the group? What is your group’s mission or outreach? Will you have a particular focus? How will your group decide who to give money to?

Open an account. If you create a personal giving fund for yourself, you can mange just setting the money aside in any safe place. However, when you involve a group of people with more money, you should create a separate bank account. You may want to talk with an attorney or tax adviser for advice about naming the account and about any tax issues that may be related to it.

Establish a focus area for your group. This goes along with discussing your group’s mission and outreach. You should determine what types of needs you will seek to address. This will help you make decisions about donations in the future, and it may also help bring some attention to your group and generate additional giving. Some ideas might be to focus on local schools, non-profit arts organizations, assisting underfunded animal shelters, or anything else that interests your group members.

Develop criteria for giving. As a group, you should decide in advance how you will plan to make donations out of your fund. Determine if you will want to have groups apply to you or if you will want to make the donations unilaterally based on members’ suggestions. What criteria will you consider in choosing any one group over another? How formal a process do you want to create? These are all considerations that you should review before beginning your work together.

Keep records of your group’s donations. You should not rely solely on memory for future donations. As you make grants to various individuals or organizations, you should keep records of dates and amounts. These records will help you in the future, if the names come up again. You can decide whether you wish to donate to the same organization multiple times, and in what amounts.

Review your groups activity regularly. Especially in the early stages, you should develop a process of reviewing your group’s operations. Decide if the group is functioning as all the members had wished. If you are not meeting the goals you had set for yourselves, then you should examine why. Make any changes in your operating structure that you feel are necessary to help meet those goals.

Establishing a Public Charitable Fund

Select a name. You will want to choose a name for your fund that will illustrate its purpose or give people an idea of your intentions. There are generally few rules or requirements for selecting the name for such a fund. You do, however, need to avoid certain terms that could imply a legal meaning that you do not intend. Do not use terms like “foundation” or “trust” in the name you choose, because they imply particular legal entities. If you do have a trust, then you may use it in the name. You should check with a lawyer if you are operating a charitable trust or foundation.

Decide the type of fund you want. There are generally two types of funds. One is endowed and the other is non-endowed. With an endowed fund, you need to collect a large enough amount of money that you can make donations from the interest alone, without touching the principal. For a non-endowed fund, you collect money and make donations from the entire fund. To make an endowed fund last, you need to limit the amount of donations to approximately 6% of the fund per year.

Establish a management structure for the fund. If your objective is to create a fund that will last indefinitely and grow substantially, you need to assign someone to manage it. You may choose to manage the fund yourself. Alternatively, in the case of large endowments, you may even establish a board of directors who would make decisions about collections and donations. You should make decisions about the operations of the fund before you create it and begin taking in money.

Decide the expected term of the fund. You may have a short-term, specific purpose for collecting money and making donations. Or you may want to create a charitable fund that will take in donations and make grants almost indefinitely. You should state your intentions before you begin advertising for collections, so potential donors will understand your purpose. An example of a short-term, specific fund would be taking in collections to assist a family whose house and belongings were destroyed by fire. Something like this generally will exist for a short time, taking a single donation from interested parties and then donating the entire collected amount to the affected family.