you looking for an effective way to donate to
your favorite charity while maximizing tax benefits?
Consider a donor-advised fund that provides an
attractive way to give to your favorite charity.
What is a donor-advised fund? A
donor-advised fund is a charitable giving vehicle
that allows an individual or family to make an
irrevocable contribution of personal assets to
a public charity, and at any time afterward to
recommend grants to charitable organizations.
Donor-advised funds are administered through a
public charity that pools donor's contributions,
invests them and makes grants to charitable organizations
upon the recommendations of donors.
Donor-advised funds provide highly attractive
tax benefits, and individuals face none of the
administrative responsibilities that other forms
of charitable giving entail, such as annual IRS
Donations to donor-advised funds earn an immediate
federal income tax deduction for the entire contribution
(subject to any applicable limitations on charitable
contributions). Donors can then recommend grants
to charitable organizations on their own timetable.
It's that simple—make the donation, take
the tax deduction and recommend grants whenever.
This approach eliminates the year-end pressure
to select a charity and make a donation.
Here's how it works. A donor:
- Makes an irrevocable contribution of personal
assets (cash, stocks, bonds and mutual funds).
- Takes an immediate tax deduction for the
- Recommends an investment strategy for the
- Recommends grants to charitable organizations.
Contributions to a Donor Advised Fund are irrevocable,
and tax deductible on the date the charitable
contribution leaves the donor's control. The fund
manages the assets in the fund, which grow tax
free, and potentially can result in greater grants
Understanding the tax benefits: Donor advised
funds offer many tax advantages. In addition to
receiving an immediate tax deduction, donors have
the flexibility to designate grants whenever it
best suits them and the convenience of being able
to more easily track and plan charitable activities
for future years.
A donor's contribution to the fund is an irrevocable
charitable donation, fully deductible on the date
it's received by the foundation, subject to any
applicable limitations on charitable contributions.
The extent of the deduction depends on the type
of asset being contributed, as well as the donor's
particular tax situation.
Investors should be aware that there are risks
inherent in all investments, such as fluctuations
in investment principal. With any investment vehicle,
past performance is not a guarantee of future
results. Material discussed herewith is
meant for general
illustration and/or informational purposes only.
Please note that individual situations can vary.
Therefore, the information should be relied upon
when coordinated with individual professional
You should always consult your legal and tax
advisors to discuss the personal circumstances
regarding your income and estate taxes.
Types of Contributions
- Publicly traded securities
- Restricted, closely held or non publicly
- Appreciated real estate
- Art or other collectibles
- Deferred contributions
All contributions to a donor advised fund are
separate from the donor's estate and therefore
are generally not subject to estate tax or probate.
Any income to a client's donor-advised fund account
resulting from investment growth is neither taxed
to the donor nor is deductible as an additional
One of the most rewarding benefits of donor-advised
funds is the ability to contribute appreciated
assets without incurring capital gains tax liability.
Advantages of donating appreciated securities
Donor advised funds may provide a more efficient
way to contribute appreciated assets to charity.
When you contribute them to your account, you
can deduct their fair market value without incurring
any capital gains liability—so you can give
more, at less cost to you.
Consider this example--A charitably minded individual
invested $10,000 in stock several years ago. Today
the shares are worth $100,000. This individual
would like to use the shares to establish a scholarship
program at his alma mater to give less fortunate
students the chance to earn an education. He has
two options: he can sell all his stock and donate
the cash proceeds to the university or he can
contribute the securities to a donor advised fund.
If he sells the stock, his contribution would
be reduced by $13,500 (assuming a tax rate of
15%) because his long-term capital gain is $90,000.
In losing $13,500 to capital gains tax, his total
contribution to the university would be $86,500,
On the other hand, if he were to contribute the
securities to donor advised fund, the earnings
on his appreciated stock would not be subject
to capital gains tax—so he could give the
full $100,000 to the university. His contribution
would also have the potential to grow tax-free,
making it possible for him to potentially give
more over time.