4 Benefits Of Using Donor Advised Funds
When it comes to charitable giving, cash is the most common strategy. We rarely think twice about donating to the Girl Scouts outside the grocery store or the Santa-clad bell ringers each holiday season. You may even be in the habit of sending Qualified Charitable Distribtuions from your IRA each year. But there are many other ways to fulfill your giving goals in a meaningful and impactful manner.
One of the smoothest options for giving tends to take up the least of the spotlight: Donor Advised Funds. Clients are shocked when this is brought up because it sounds so simple yet they’ve never heard of it before. This vehicle allows for upfront charitable deductions without the headache and yields thoughtful gifting for years or decades to come. Most appreciated assets can be used to fund this charitable vehicle. Assets such as cash, stock, mutual funds, real estate, private company equity, and so much more.
THE BENEFITS
- Timing of tax deductions – An immediate tax deduction can be taken, up to the maximum allowed by law, for the amount donated. Then, grant recommendations to a qualified charity can be made at any time in the future. (Note that the tax deduction comes when the contribution is made into the DAF account, not for the grant out to charity).
- No capital gains tax – If the client contributes long-term appreciated securities to the fund, they can avoid capital gains tax on the appreciated portion and receive an immediate charitable tax deduction for the full fair market value of the gift.
- No estate taxes – Assets donated during the life of the client are no longer part of the client's estate, and therefore, are not subject to probate. The fund can also be named as a beneficiary of a charitable remainder trust, an IRA or other assets.
- Same advantages of a private foundation without the expense - Unlike private foundations, there are no start-up costs, no tax on the fund's investment income, no individual payout requirement, and all record-keeping services are provided.
The donor will be asked to advise in four areas:
- How the money is invested within the options offered by the fund
- Which charities will ultimately receive grants from the fund
- How much will be given to each charity
- Who will make these decisions instead of, or as a successor to, themselves
The rules for using any particular giving strategy can be complex, so it pays to have a knowledgeable guide to help you navigate the details. Here at MissionBridge Wealth, through intentional planning we empower clients to live their life of most significance.
CONNECT TO DISCUSS IF A DONOR ADVISED FUND IS BEST FOR YOU
Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.