A donor-advised funds, also known as a DAF, is the fastest-growing and most popular charitable giving option today. With a donor-advised fund, money is deposited into an account that can grow in value, and funds that are deposited into a donor-advised fund are granted out to charities. Donors are able to make gifts directly to a sponsoring charity that maintains their donor-advised fund account, receive an immediate charitable deduction for their donations and then – in exchange for their irrevocable gift to the sponsoring charity – the donors receive advisory privileges to recommend grants to qualified charities and advise on how the gift is invested.
In technical terms, each donor-advised fund is a segregated fund maintained by a qualified public charity which is created when a donor makes a gift of cash or assets. This gift allows the donor to receive an immediate income tax deduction, avoid the capital gains tax on appreciated assets and have the ability to make grant recommendations to charities at any time for the life of the donor. Future generations can be appointed to make the recommendations for the rest of their lives.
The donor-advised fund is a valuable charitable service that organizations can offer to its clients. Any organization interested in offering donor-advised funds under its own branding can consider partnering with a white-label donor-advised fund provider.
Using a donor-advised fund to avoid capital gains taxes and establish an immediate income strategy can assist donors in achieving various tax reduction goals. There are also donor-advised funds tax deduction benefits based on the asset you’re donating.
If you donate cash you will generally be eligible for an income tax deduction of up to 60% of your adjusted gross income.
If you donate long-term appreciated securities directly to the charity you can be eligible for an income tax deduction of the full fair-market value of the asset, up to 30% of your adjusted gross income. You will also eliminate the capital gains tax on the assets, provided they’re held for more than a year.
You may grow your donor-advised fund contributions over time, allowing you to build more funds to make more donations. Your sponsoring charity will provide several investment strategies you can choose from based on how you want to invest your funds and secure tax-free growth for your account.
A donor can recommend that their financial advisor manage the assets of their donor-advised fund in a wide range of investment options. You are also allowed to contribute a wide range of assets, including, but not limited to:
Donor-advised funds are a wonderful tool for use in establishing a legacy of giving. You have the option of supporting multiple charities through a bequest in your will to the donor-advised fund sponsor. This can help reduce the burden of estate tax for your heirs.
Heirs and loved ones can be part of the process of distributing grants to charity, and can even be named successor grant advisors to allow the donor-advised fund to last beyond a single lifetime and continue for generations to come.
If a donor-advised fund is the right fit for you, Ren can get you started. First, we’ll help you make an irrevocable tax-deductible donation of cash, stocks, or non-publicly traded assets. These funds cannot be returned to you or used for any purpose other than grantmaking to charities.
After your donor-advised fund is funded, you can use our donor portal to recommend grants to your favorite charities. After specifying the charity, the amount, and any special instructions for the grant (like remaining anonymous or giving in the gift in memory of someone), our team springs into action. Internally, we vet the charity to verify that it is an IRS recognized 501(c)(3) charity eligible to receive grants from a donor-advised fund. If all is well, we send the funds directly to the charity.
As a donor, you may choose to make grants immediately from your account or delay your giving. Also, you have the ability to set-up recurring grants, which is a favorite feature of donors who use their donor-advised fund to tithe. If you choose to have your family involved, we can also ensure they have advisory privileges so that your donor-advised fund can continue as your long-lasting philanthropic legacy.
Reference Guide for donor-advised funds
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A donor-advised fund can be a great solution for anyone who is subject to paying capital gains taxes on appreciated assets, whose estate is subject to taxes, who wants to benefit charity, and who wants to involve their family in philanthropy.
Our questionnaire can help you discover if a donor-advised fund is right for you. Click the button below to fill out the questionnaire, or keep reading for more helpful information.
Foundations, trusts, partnerships, corporations, and individuals.
We find that donor-advised funds are good fits for individuals, corporations, foundations and trusts. Other donors may be better suited for a different means of giving.
You can donate either liquid or illiquid assets (such as real estate, buildings, antiques, and equipment).
While there is usually a minimum requirement for an initial contribution to open a donor-advised fund, the exact amount will vary per program. Once the account has been established, subsequent contributions can be made in any amount.
Donor-advised funds can exist in perpetuity if you have named an individual, a charity, or combination of either as a successor. Successor advisors are granted advisory privileges on accounts created out of your account assets. If no successors are named, then upon your death the remaining balance of the donor-advised fund will be granted out.
If your selected charity is a nonprofit organization, then you may have the option to nominate your financial advisor to manage the investment of your charitable funds. If it is for a financial services company, then there is no choice, as your financial advisor is going to manage the investments.
Private foundations are separate legal entities that are subject to more stringent tax laws and regulations in comparison to public charities. Private foundations do provide donors with greater administrative control over assets and grantmaking, such as being allowed to support organizations that are not IRS-qualified, 501(c)(3).
We work with donors like you to set up the best charitable giving program to achieve your philanthropic goals. Are you ready to have a conversation about charitable giving? Fill out our contact form today.
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