Donor-advised funds, thanks to their tax advantages, flexibility, and low costs, provide an excellent vehicle for individuals and families interested in charitable giving.
Overview
Donor-advised funds, thanks to their flexibility, low costs, and tax advantages, provide an attractive vehicle for individuals and families to establish giving strategies in pursuit of their charitable objectives. Fiduciary Trust Charitable's donor-advised fund offering provides unique benefits.
Charitable giving in the U.S. has grown substantially in recent years. As giving has increased, the ways through which people give have also multiplied. One of the more notable vehicles is the donor-advised fund (DAF), which has grown in popularity over the past decade and now accounts for over 12% of all U.S. charitable giving. The enthusiastic adoption of donor-advised funds is likely due to a number of factors, including their flexibility and tax advantages. For many families, they also help instill values across generations. For those unfamiliar with this vehicle, a donor-advised fund is sponsored by a public charity, such as Fiduciary Trust Charitable, through which an individual or family (the donor) establishes a fund for charitable gift purposes. The donor receives an immediate income tax deduction for contributions to the fund and can recommend that grants be made from the fund to IRS-qualified charities at any time. Once the donor gifts assets to the fund, the donor no longer has legal control of the assets. The fund can generally be invested in a manner consistent with the donor’s philanthropic goals and investment preferences.
The Benefits of Donor-Advised Funds
Philanthropic initiatives can be accomplished through many different channels, so why choose a donor-advised fund? The following are some key benefits: Tax Savings
Immediate income tax deduction for contributions, subject to IRS limits
No capital gains tax on appreciated securities donated to the DAF if they’ve been held for more than one year
No tax on income or capital gains on investments in the DAF
Flexibility and Convenience
The donor can request a grant to any IRS-qualified public charity, at any time
Grants may be anonymous, if the donor desires, or given in the fund name the donor requests
The donor can designate individuals to request current or future grants, even beyond the donor’s lifetime
Investments can be managed considering donor goals and recommendations to the extent possible, given the sponsoring organization’s overall investment policy
Contributions can be made to a specific DAF at any time, by anyone, including individuals, trusts and private foundations
Cost Efficiency
Typically significantly lower cost than establishing a private foundation
The opinions expressed in this article are as of the date issued and subject to change at any time. Nothing contained herein is intended to constitute investment, legal, tax or accounting advice, and clients should discuss any proposed arrangement or transaction with their investment, legal or tax advisers.