Having the will to do something philanthropic is the first step in giving back to the community. The next step is to decide what philanthropic vehicle may be best for you. This is where "knowing thyself" comes in. If your personality and life circumstances are such that you are willing and able to spend time and money administering your philanthropy, setting up a private foundation can be the best option for you.
This means that you will have to spend money to have an attorney develop Articles of Incorporation and By-Laws to form the structure of your foundation. You will also have to develop Guidelines for focusing your grants to worthy causes. It also means that you will have the responsibility to handle the essential accounting matters involved. That is, it will be necessary to arrange and pay for an annual independent audit done by a reputable CPA of how your philanthropic funds have been spent. Likewise, your CPA will have to fill out and file the required Form 990-PF annually to fulfill the IRS's requirement for a public accounting on how the tax-exempt funds in your foundation have been used to promote the public interest in some manner. These also need to be filed with the State Attorney General's office in the state in which you reside. Furthermore, you will be required by the IRS to spend 5% of your foundation's assets each year in grant-related activity.
Furthermore, you will need a Board of Directors to help guide your foundation, and meet one or more times a year for the allocation of the grants you and your Board decide to make. If your foundation is of a very substantial size, you will probably need to employ some level of staffing to handle the daily administration of your foundation. None of this is bad. I merely mention these above points to illustrate the fact that establishing an independent private foundation involves a serious commitment of time as well as funds and other resources.
Another option for accomplishing your philantrohopic interests is to consider setting up an endowed Donor Advised Fund at a local community foundation. This vehicle is designed for people who do not have the inclination nor the personal time to devote to administering their philanthropic interests.
Community foundations are a special kind of public charity vehicle designed to make philanthropy hassle-free whether the amount of funds you are donating is large or even very small. With this option, the community foundation has a very simple procedure with very little paperwork involved for establishing your endowed Donor Advised Fund. Once established with a usual minimum of $10,000 or $20,000 (and no maximum), for a very small fee (often in the 1% to 1.5% of assets range), the community foundation will handle any and all necessary required legal, accounting, and reporting. Presently, there is no requirement by the IRS to spend 5% annually of your Donor Advised Fund's assets for grant-related activity. Neither is there a need for staffing your Donor Advised Fund. Furthermore, there is no Board of Directors required. You can make all the decisions yourself on which organizations should receive the largesse that you have placed in the Donor Advised Fund by simply submitting a form to the community foundation's staff stating where you would like a donation from your Donor Advised Fund to go. It is that easy!
So, think about it. Know thyself. How involved can you be or do you want to be in the actual administration of your philanthropy. The choice is up to you. No matter your choice, there are options available to you to fit your choice.