Should I Use a Donor-Advised Fund for My Charitable Giving?

Donor-advised funds can be a wise way to make charitable contributions.

You are wanting to give money to charity.

Wonderful!

But how can you do it in the most tax-efficient and practical manner?

According to a recent Kiplinger’s article titled “Are Donor-Advised Funds the Best Charitable Giving Vehicle for You?,” donor-advised funds (DAFs) are a popular charitable planning tool.

Why?

A donor-advised fund can give the donor enhanced control over the distribution of the charitable contributions, but even more important, the timing of those distributions.

Also, the IRS does not require any minimum annual distributions from DAFs as with private foundations.

What exactly are donor-advised funds?

Typically, these funds are managed by major financial institutions that take care of the investing, tax-reporting and record keeping on your behalf for a fee.

When you make a contribution to your fund, you have options regarding the fund investments which then grow tax-free.

How does the giving work?

The IRS treats direct securities donations as if you were giving cash.

The charity you select must be capable of receiving private or publically-traded securities.

The tax code limits deductions on securities and appreciated asset donations to 30 percent of adjusted gross income, while cash donations are limited to 50 percent.

 

Are there payout requirements for timing or funding?

Nope.

Could there be any other benefits?

Actually, yes.

With DAFs your giving can be as public or as private as you desire.

In fact, we established our own donor-advised fund with the National Christian Foundation in 2009.

Since then, virtually all of our charitable giving has been done through this fund.

Not only is the record keeping nice and clean, but we enjoy the ability to give anonymously (we gave the fund a name unrelated to our own) to causes important to us.

In addition, we like the flexibility of making a charitable contribution on December 31, and then having time make the distributions without pressure on or after January 1.

If you are interested in using a DAF for your charitable giving, work with an experienced estate planning attorney and financial advisor to determine if it works in conjunction with your goals.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Kiplinger (November 2016) “Are Donor-Advised Funds the Best Charitable Giving Vehicle for You?”