(MONEY Magazine) – For all the bad news about investment losses and a market that's moving sideways, Americans still give away billions of dollars to causes they care about--more than $150 billion a year at last count. And that's well before the baby boomers reach their peak giving years, a prospect that led Boston College Social Welfare Research Institute to conclude in 1999 that "the golden age of philanthropy is dawning."

The financial services industry is gearing up for that gold rush. "The banks and investment firms don't want to lose this wealth," says Eugene Tempel, executive director of the Center on Philanthropy at Indiana University. "And they're in a position to counsel people on how to use it."

The result is a proliferation of products that allow you to take immediate tax breaks and continue to make donations from that pool for years to come--a particular advantage for people with significant portfolios of appreciated securities who are looking to reduce their estates. Among the choices are donor-advised mutual funds, innovations that make it easier to establish and run private foundations and newly flexible community foundations.

Donor-advised funds

Ten years ago Fidelity Investments became the first commercial powerhouse to offer a donor-advised fund. Since then, assets in the Fidelity Charitable Gift Fund have mushroomed to $2.6 billion, making it one of the nation's fastest-growing charities. In fact, in 2000 only the Salvation Army received more private donations. Now Fidelity has been joined by the likes of Charles Schwab, Vanguard, T. Rowe Price and J.P. Morgan. (See "The Business of Giving" on page 178.)

How they work. The fund itself is a charity that invests donations and distributes funds to other charities for annual fees that run from 0.65% to 3%. You can deduct cash contributions of up to 50% of your adjusted gross income (AGI) and 30% for appreciated securities in a single year. As a donor, you select from the various investment pools offered by the fund and recommend who should get your money and when. (The usual minimum distribution is $250.) The fund does retain the legal right to ignore your recommendation, but that's unlikely to happen unless the recipient you choose is not an IRS-approved nonprofit or the gift can be construed as a personal benefit to you.

Who they're for. Typically, individuals who have $10,000 to $25,000 to give away at one time but want the money to be distributed to recipients over time.

What's new. Many more choices. Nonprofits, community foundations and universities have offered donor-advised funds for years, and now more and more financial institutions are getting into the act.

Private foundations

Private foundations, historically the domain of the country's richest families, offer donors full control--with the approval of the Internal Revenue Service, foundations' bylaws set their own policies for selecting recipients and investments--but they are expensive to fund and complicated to manage.

How they work. To be tax-exempt, foundations must be IRS-approved, pay federal excise taxes of 1% or 2% of their net investment income every year, give away a minimum of 5% of their investment assets each year, and meet various filing requirements. Your tax deductions are limited to 30% of your AGI for cash gifts and 20% for appreciated property, including both securities and real estate. (You can carry forward any excess for five years.)

What's new. In July the 2,700-member Association of Small Foundations (www.smallfoundations.org; 888-212-9922) will release its Foundation in a Box kit for individuals and trust and investment advisers. Priced at less than $500, it will include step-by-step instructions on how to establish a foundation, deal with tax and legal issues, monitor grant requests and handle administrative tasks.

"The purpose of the box is to give people anything and everything they need to know to set up and run a foundation and to contribute back to their community," says Association of Small Foundations CEO Charles Scott.

Meanwhile, a company named Foundation Source has begun marketing administrative services to financial institutions whose clients want to establish a private foundation with a gift of at least $100,000 but don't want to run it.

For a $2,750 start-up fee, which includes IRS and state filing fees, plus an annual management fee (from 1% for assets up to $250,000 to 0.25% for $2 million or more), the firm does the administrative tasks that would otherwise require a staff. "Clients would start foundations with us and have the benefits of a foundation and not have to worry about it," says Douglas Mellinger, CEO of Foundation Source. "That's been one of the biggest inhibitors. People say, I can create one, but who can look after it?"

The foundation's assets are managed by partner firms--to date, TD Waterhouse and Bank One have signed up. The partners have their own minimums and fees ($250,000, with a $1,250 set-up fee and up to 1% to manage assets for Bank One; $100,000 and a $2,000 set-up fee plus annual administrative fees of up to 1% for TD Waterhouse).

Who it's for. The very well heeled. Tom Blaney, C.P.A. at Conroy Smith & Co. in New York City, says he wouldn't recommend that clients start a private foundation unless they have $500,000 or more to give away, but the Foundation Source service may reduce costs enough to make foundations practical for others; after the first year, expenses approach those of donor-advised funds.

Community foundations

Community foundations are set up to distribute funds to nonprofits in a particular location. Compared with private foundations, they provide slightly less control over contributions but are accessible to a wider range of potential donors. "They're good if you want to pool your funds with others in the community," says Sara Engelhardt, president and CEO of the Foundation Center, which tracks 65,000 foundations.

How they work. As with donor-advised funds, you can give up to 50% of AGI in cash and 30% in securities, and take a tax deduction the year you give the donation. You can give the foundation full rein to direct your assets or you can ask that your gift be directed to programs in a field that interests you--say, the environment, the arts or education. You can also choose to put your money in a community foundation donor-advised fund, which gives you more leeway to pick the recipient.

Who they're for. People who want to make a difference locally, may have as little as $5,000 to contribute and want experts to vet the charities.

What's new. Interchange between community foundations that allows you to direct a portion of your donations to charities elsewhere in the country or the world.

For more on community foundations, contact the Council on Foundations (www.cof.org; 202-466-6512).

ADDITIONAL REPORTING BY TARA KALWARSKI