Q & A

Q In your column of June 5, your source sought to dissuade the letter writer from setting up a personal foundation that he could use to convey financial gifts to his church or other recipients. But why not use a gift fund, such as the Fidelity Charitable Gift Fund? There are no start-up legal or accounting fees. All administrative services are provided by the fund. You also get a tax benefit. We have used the Fidelity fund for two years and are extremely pleased.

M.J. and R.R., via e-mail

A You raise a good point. The Fidelity Charitable Gift Fund can be reached at 800-682-4438. The fund has assets of $1.2 billion. The fund, however, requires a minimum initial contribution of $10,000, which may be more than some people can afford. But according to a Fidelity spokesman, some folks pool their resources with friends or relatives to get to the required amount. Vanguard also has a gift fund, the Vanguard Charitable Endowment Program, at 888-383-4483. Their initial contribution must be at least $25,000. With either fund, you can provide gifts to the recipients of your choice. Fidelity has a listing of some 750,000 potential recipient organizations, Vanguard, about 500,000 organizations, according to spokespersons.

Q 401(k) plans have become very popular. But what about insurance protection on these plans, such as FDIC insurance for bank accounts? Are not 401(k) plans basically uninsured? Most people have no idea that their retirement plans are on the "edge" if the economy goes haywire.

Name withheld, via e-mail

A Mutual funds in a 401(k) plan are not generally insured, although some specific products within a fund may carry some protection, such as Treasury securities in a US government bond fund. Stock and non-government bond funds are not insured against market losses. Still, only a handful of mutual funds have collapsed since World War II, says the Investment Company Institute. Floundering funds are usually absorbed by a more successful one within the same fund family. When funds are closed - that is, funds which have no sibling funds to be merged into, or funds with few assets left - the fund company will liquidate all securities and distribute the remaining assets to shareholders. Also, assets within a mutual fund are usually held by a third party, such as a bank. So the risk of graft is minimal.

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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