Donor Advised Funds For Charity

Many brokerage firms, mutual fund companies and community foundations let you open a donor-advised fund, which allows you to pool your money in one place and decide where to donate it later. The amount you need to open the fund varies by provider.  Giving Center requires a $5,000 balance to open your account. Once the fund is created, you can deposit any amount you’d like. 

Do you get a tax break from my contribution?As long as you itemize deductions on your income tax return, you can write off the amount you contribute to the fund as a charitable contribution for the year you make the donation. But you have almost unlimited time to decide which charities to support. In the meantime, the money grows in the account, either in mutual funds or investment pools. You can give cash, stocks, mutual funds or other assets, and some donor-advised funds even accept shares of privately held companies, real estate and other complicated assets. If you plan to sell stock or funds that have increased in value and use that money to give to charity, it’s a good idea to give the appreciated shares to the donor-advised fund rather than selling them first. When you transfer the shares, you avoid paying capital gains taxes on the increase in value since you purchased them; you can deduct the value of the shares on the day you give them away. Many families use these funds to work together toward charitable goals, without the cost and administrative complexity of setting up a family foundation.  Some families, for example, have members of all ages research charities during the year, then get together during the holidays to decide which charities to support. You have pretty much unlimited time to decide which grants to make (you may be required to give a minimum amount every few years from the fund), and you can generally give the money to any 501(c)(3) organization in good standing. The size of the grants varies by administrator but can be as little as $50.

Donor-advised funds are one solution. These funds allow you to make a charitable contribution now and claim the tax deduction on your 2020 tax return, but distribute the money later. The funds are a tax-break twofer. You avoid capital gains taxes, and the donor-advised fund doesn’t have to pay them, either, which means there’s more money available for charity. Giving Center also accepts donations of illiquid assets, such as non-publicly traded securities and real estate.You don’t need to be Bill Gates to contribute to a donor-advised fund. For more information please visit us here http://www.givingcenter.org or call us at 888-228-7320.

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