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Give in the name of a loved one
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September 21, 2001: 4:46 p.m. ET
Memorial funds honor the deceased and give to those in need
By Staff Writer Annelena Lobb
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NEW YORK (CNNfn) - When grieving for a lost loved one, many people wish that some good could come of their loss. Memorial funds, in which donations made in the deceased's name go to good causes, are one way to accomplish that.
"People want to memorialize their loved ones," says John Carmon, president of the National Funeral Directors' Association. "People need to make sure that their memory does not die with them."
There are a couple of options, but the most common and easiest to create is called a donor-advised fund. Friends and family donate to it, and the fund's sponsor -- usually a community foundation or a church or synagogue -- makes contributions to charities in the deceased's name. Donations are tax deductible.
"If someone wants to establish a fund through us, all they have to do is come in and tell us where in the community they want the funds to go," says Rabbi Serge Lim, of the Brooklyn Heights Synagogue in Brooklyn, NY. "People would give the money directly to the house of worship. Almost every one has its own bank account and status as a not-for-profit institution. The house of worship would then open up a segregated sub-account in their bank account for the donor-advised fund."
The family doesn't have absolute say over where the money goes -- but they do have a lot of say. "Donors do get to give advice that is generally taken very seriously, if not to the letter," says Dan Moisand, a certified financial planner and president of Optimum Financial Group, a financial planning and investment management firm in Melbourne, FL.
Private foundations
More involved is creating a private foundation in the deceased's name. To create such an organization, you will need to contact your lawyer.
With a private foundation, you can be its self-appointed president and have sole discretion over any donations -- but there are a few stipulations, according to Irving Sitnick, a partner at Moses and Singer, LLP, a New York City law firm that works with trusts and estate planning.
You must file a written document for approval from the IRS, explaining how money will be used. If you plan on investing the money before making donations, there will be a 2 percent excise tax on earnings. And you can't pay yourself to work for the foundation or sell property to it.
"Private foundations are an area where there are lots of abuses, so it's hedged by restrictions," Sitnick says. "You can't set up a private foundation to pay for your son's college education, for example, but if you want to create a fund to help victims of September 11 pay for a college education, chances are that the IRS will consider it a charitable purpose." 
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