Setting up a foundation can be a costly move

Q Until recently, I almost never gave to charity. Now, with a soon-to-be new wife, and a church that I attend regularly, we're set up for a large amount of contributions. My thought was to create a small "charitable foundation" with a gift of some appreciated stock, then write the weekly tithes out of that foundation's accounts. Thus, instead of giving today's dollars, I'm giving dollars that have capital gains attached. My fiance thinks it's a scam in the making. Is it?

J.M., via e-mail

A "Why do you need a foundation? Are you a 'Rockefeller'? Unless you are giving away a king's ransom, there is no tax benefit that you could get with a foundation that you couldn't also gain with just a cash gift," says Ed Slott, a tax expert in Rockville Centre, N.Y.

"If you want to give, just give - cash, or appreciated stocks," says Mr. Slott. "The 'scam' involved in setting up a foundation is that you will have to pay expensive lawyers and tax people to set it up, and besides, you'll always be facing the threat of tax audits."

Q We have a fixed-rate mortgage. The monthly payment is $843. I also kick in an additional $57 prepayment amount each month, thus sending in a total of $900. The mortgage company figures that the loan will be paid off in roughly 21 years, not counting my prepayment. But they recently sent me an offer to reduce the payoff time to a little more than 17 years, by paying $15 more per month for the next 25 months. Would it be worth it for me to take them up on their offer and pay only $857 a month?

J.D., via e-mail

A "The numbers you cite, that is, prepaying $15 a month to reduce the term of your mortgage by some four years, do not sound right," says Gary Schatsky, a fee-only financial planner in New York. "But even if they are true, why do it, when you are already prepaying a larger amount, that is, $57 a month?"

Those prepayments have already shortened the length of your loan.

Mr. Schatsky wonders if there was by any chance a large up-front fee associated with the prepayment offer. He is especially wary of prepayment fees which, he says, tend mainly to benefit lenders, not borrowers.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com

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