Using Donor Advised Funds To Make Charitable Donations

Improving financial markets have created a renewed interest in charitable gifting.  One particular tool that can be very effective in helping you achieve your charitable objectives is a donor-advised fund.

What are donor-advised funds?

Donor-advised funds are accounts that can be funded with appreciated stock, real estate, cash or other assets.  They can be established directly through charities or community foundations, as well as many mutual fund companies or brokerage firms.  Contributions made to donor-advised funds are invested and remain in the fund until you determine which individual charity to send a contribution.

What are the benefits of using donor-advised funds?

Besides the non-financial benefit of helping a worthy charity, there are many benefits of utilizing donor-advised funds to help facilitate your charitable intentions including:

  • The grantor receives a tax deduction for the entire value of the contribution (with some limits) in the year the contribution is made, but the gifts to the individual charities can be spread out over several years.
  • You have control of the name of your donor-advised fund.  In other words, you can name your fund The John Smith Memorial Fund (to honor a deceased family member).  This aspect of donor-advised funds can also help facilitate anonymous gifting.
  • Most donor-advised funds allow the original donor to name a “successor” donor.  This can enable other family members to become involved in the gifting process.
  • Gifts can be made to local charities (churches, animal shelters, etc.) or national charities (Red Cross, Salvation Army, etc.).
  • Donor-advised funds are simple to establish and have relatively low minimum contribution levels ($5,000) compared to other charitable gifting techniques.

The use of donor-advised funds can be an important component of your charitable gifting strategy and should certainly be considered as an effective tool when making year-end gifts.

About the author

Chip Hymiller, CFP®

Chip is a principal of Beacon Financial Strategies and serves as the firm’s investment portfolio manager. He earned his business management degree from North Carolina State University and a Masters in Business Administration from East Carolina University.

Chip is a Certified Financial Planner™ practitioner and works closely with clients in the areas of overall financial planning, asset allocation and risk management strategies. As the firm’s investment portfolio manager, he is responsible for developing and maintaining Beacon’s model portfolios.

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