Charitable Giving Made Easy

A donor-advised fund offers an easy way for a donor to make significant charitable gifts over a long period of time. It’s similar to a private foundation but requires less money, time, legal assistance, and administration to establish and maintain. A donor-advised fund also enjoys greater tax advantages than a private foundation.

What is a donor-advised fund?

Technically, a donor-advised fund is an agreement between a donor and a host organization (the fund) that gives the donor the right to advise the fund on how the donor’s contributions will be invested and how grants to charities (grantees) will be made. Though they can bear the donor’s name, donor-advised funds are not operated as separate entities like private foundations are, but are merely accounts held by the fund.

How does a donor-advised fund work?

It’s easy to set up a fund account. The donor first signs a letter of understanding with the fund, establishes an account, names the account, and recommends an investment strategy. Then, the donor makes required minimum contributions of assets, which may include cash, marketable securities, and other types of assets, depending on the fund. The required minimum contributions vary from fund to fund, but are usually $5,000 or less.

Income taxes

A donor can generally take an immediate income tax deduction on his or her federal income tax return for contributions of money or property. The amount of the deduction depends on several factors, including the amount of the contribution, the type of property donated, and the donor’s adjusted gross income (AGI). Generally, deductions are limited to 50 percent of the donor’s AGI. If the donor makes a gift of long-term capital gain property, the deduction is limited to 30 percent of the donor’s AGI. The fair market value of the property on the date of the donation is used to determine the amount of the charitable deduction. Any amount that cannot be deducted in the current year can be carried over and deducted for up to five succeeding years.

Disclosures: This blog is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice. Please contact Independence Advisors, your accountant and/or attorney for advice appropriate to your specific situation.

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About Mark Rioboli

Mark A. Rioboli, CFP®, CFS is Director of Wealth Management for Independence Advisors, bringing over 25 years of experience in the wealth management industry. Have a question for Mark? CLICK HERE TO ASK MARK

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