Personal Finance: The deal on pitches by charities

Glenn Schneider knew what he had to do the first time he walked through Loretto Hospital and saw children from Chicago's poorest neighborhoods in need of care.

Schneider wrote a check to the hospital foundation, and then kept writing them year after year. He didn't stop there. As a senior vice president for Illinois-based Discover Financial Services L.L.C., he encourages the 350 people in his department to help, too. He invites business associates to a yearly golf fund-raiser that supports services such as free mammograms for women without insurance and van rides to the hospital for people without cars.

Although Schneider can leverage his gifts through a corporate philanthropy program, his giving is similar to that of millions of Americans: They see a need, and they write a check.

About 65 percent of Americans with incomes less than $100,000 give to charity, and 98 percent of the wealthy do. But this year, because the recession has left more people in need and more people with less to give, requests for aid are packing mailboxes, especially as we approach the holidays. Each request reminds people to do a good deed, plus get a tax deduction before year-end.

"It is hard to say 'no,' because there are so many needs there," said Ken Nopar, director of market development at Strategic Philanthropy, which advises people on giving options. While people might have written checks with little thought before the recession, "they are examining everything more closely. They want to make sure giving has an impact."

The simplest way is writing checks to favorite organizations, or clearing closets and cupboards and delivering excesses to charitable organizations.

Many donations require sweat vs. money. Schneider, like many, works on community projects. Through Discover, his entire department built a baseball field for a school last September.

This can be the time of year, however, when aggressive check-writers ask themselves whether there is a more efficient way to give. For such people, an easy step is to set up a donor-advised fund at a community foundation or through firms such as Vanguard, Fidelity, or Schwab.

The person deposits a lump sum - usually $5,000 or more - before the end of the year, cementing a deduction for the full amount, and then the fund writes checks to multiple charities upon the donor's requests for months or years.

Large gifts through donor-advised funds are popular among people who want to be charitable and shelter income in a high-tax year. An example is an individual who sells a business, said Anita Sarafa, an estate-planning lawyer with JPMorgan Private Bank.

Also, this year, people are converting large IRAs into Roth IRAs, given changes in tax laws. By making a large charitable contribution, the taxpayer can reduce the effect of the conversion on taxes, said Chicago estate-planning lawyer Kim Kamin.

Another popular approach this year: charitable lead trusts - a way to deposit a large sum and give money regularly to charity for years. At the conclusion, remaining money goes to heirs. Unusually low interest rates this year make the approach attractive because of the formula required for giving, Kamin said.

Given the possibility of taxes going up in future years, some people are planning now for donor-advised funds, trusts, or foundations, but they might wait to start next year, Sarafa said. They are watching the tax debate in Congress to identify the best year.

Donor-advised funds are simpler than trusts and family foundations, which require lawyers. The simplicity is attractive to Peter Frankel, of Evanston, Ill., who along with family members is involved in a family foundation that his father, Bud, set up after selling his business in 2000.

Frankel and the rest of his family take pride in the broad range of donations they provide through their foundation.

Families that can start with at least $1 million and want the most control over the money tend to prefer foundations, said Adam Von Poblitz, head of estate planning for Citi Private Bank.