A Donor-Advised Fund can help those with charitable hearts distribute donations.
Many who do have money choose to give to others.
One way is by giving to loved ones.
Another way is to donate to a charitable organization.
According to a recent Fort Worth Magazine article titled “Choosing Charity: How Donor-Advised Funds Benefit Your Contributions,” a Donor-Advised Fund (DAF) can help both you and your charity of choice.
A DAF allows you to donate cash or other assets to an account at a sponsoring organization.
Each sponsoring organization sets the minimum amount required to open an account.
Once you have made the donation, the asset no longer belongs to you.
Does this mean you relinquish all control?
With a DAF, you can select the charities and designate when the distributions are made.
Are there parameters governing when distributions must be distributed?
You can let the funds sit for a period of time before making a charitable distribution while you receive an immediate tax write-off upon making the contribution.
This can give you time to research charitable entities before committing your money to fund their causes.
You also can retain a voice regarding how the donation is invested, the overall investment strategy, and the level of risk.
If you choose to have active involvement as an advisor, some Donor-Advised Funds provide this feature.
In fact, the DAF that Gretchen and I established more than a decade ago through the National Christian Foundation even permits our daughters to continue as advisors after we are gone.
Literally, a DAF can be a gift that keeps on giving for generations.
In addition, a DAF can be a beneficiary under your estate plan as well as for current lifetime giving.
A DAF provides anonymity to those who choose to not be known as the donor.
In that case, the sponsoring organization becomes the donor of record.
Using a DAF now can be beneficial for a number of reasons.
If you have highly appreciated assets, you also may have significant tax liability if you were to sell them now.
By placing these assets in a DAF, you can avoid a capital gains tax, receive a tax deduction, and ensure the charity fully benefits from the funds.
Using a DAF may not be best for everyone at this time.
Many people took a financial hit during COVID-19.
For those who want to support their favorite charities and have the means to do so, a DAF could provide benefits for both the giver and the recipient.
Reference: Fort Worth Magazine (Feb. 3, 2021) “Choosing Charity: How Donor-Advised Funds Benefit Your Contributions”