NEW YORK -- Forget everything you've heard about charitable foundations being used as philanthropic and tax-savings vehicles only for "old money" families. Gone are the days when family foundations were established exclusively by the very wealthy -- the Rockefellers, the Fords or the Kennedys of the world.

Nowadays, an increasing number of "new money" Americans are starting private foundations of their own. These individuals include investors who have done well in the stock market over the past decade and cash-rich dot-com executives who have made fortunes after their companies went public.Private foundations are now growing at a clip of about 6 percent annually, with more than 2,600 new foundations being started in each of the past two years. There are some 47,000 grant-making foundations in the United States, compared with just 22,000 in 1980, according to the Foundation Center in New York. Of those 47,000 organizations, more than two-thirds are family foundations.

When they are properly established and used in the right way, family foundations offer excellent financial and social benefits. Foundations can help reduce -- or sometimes eliminate -- the 55 percent estate tax. They can significantly lessen an individual's adjusted gross income, thereby reducing income tax liability. And they can help preserve or pass along family wealth.

On a social level, family foundations in the United States provide funds, mostly to local organizations, that reach virtually every cause, from preventing youth drug abuse to preserving the environment.

Robert Seaberg, director of philanthropic services at Salomon Smith Barney in New York, says there are some 590,000 U.S. households worth more than $5 million. And when the baby boomer generation retires, trillions of dollars will be passed along -- much of it ending up in the hands of nonprofits.

Still, establishing a foundation "is not something that one ought to enter into lightly, especially considering the cost of setting it up and running it," says Seaberg.

Some experts say that assets of at least $1 million are required to justify the expense of creating a private foundation. The reason: The Internal Revenue Service requires that a foundation give away at least 5 percent of its assets annually. For a $1 million foundation, annual grants would total at least $50,000.

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Despite the popular wisdom about the $1 million threshold for establishing foundations, only about one-third of all foundations have more than $1 million in assets, according to the Foundation Center's statistics.

Under U.S. tax law, individuals can take sizable tax deductions for contributions made to foundations. If the gift is appreciated property, such as stock, a person can write off a contribution of up to 20 percent of adjusted gross income. Cash gifts can be deducted up to 30 percent of adjusted gross income.

The Council on Foundations, based in Washington, D.C., estimates that family foundations hold assets in excess of $100 billion and make grants of around $6 billion a year. The funds support efforts as diverse as education, the arts and medical research.

Still, even with the rise in family foundations, a good many of today's wealthy Americans haven't made philanthropy a big part of their lives for several reasons, experts say. For instance, some don't consider themselves wealthy enough to donate significantly to charity. Additionally, they may not want to reduce what they have to pass on to children.

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