Do or Don’t – Donor Advised Funds

Do or Don’t – Donor Advised Funds

With the holiday season upon us, many people want to find the best way to give back and donate to charitable causes. A method for giving that is gaining in popularity is donor-advised funds. These are funds created by donors where money, appreciated securities or other assets are deposited, then those funds are distributed to charities over time.

Donor-advised funds are on the upswing. In fact, donor-advised fund contributions make up approximately 7 percent of all individual charitable donations. Donations to these funds increased by nearly 24 percent in 2013, according to CNBC.com.

If you make a donation to a donor-advised fund, you enjoy an immediate tax deduction against the full amount contributed. However, there are no regulations governing how quickly the donation has to be distributed. This provides benefits to both the donor (through the tax deduction) and the fund by allowing it to maximize how, and when, the donated funds are distributed. There are minimal reporting requirements and administration is relatively easy.  Donor advised funds also create an avenue for charities to get larger donations since these funds enable easier transfer of appreciated stock, as opposed to charities soliciting donations via traditional credit card and check donations.

Should You Donate to a Donor-Advised Fund?

It depends. What are your goals and how does the contribution fit into your overall plan? The ease of transferring appreciated stock and gaining an immediate tax deduction is quite attractive. Though, you need to do your due diligence on the fund you donate to and the company that will manage the fund.

For more information on donor-advised funds, check out this video:

https://www.youtube.com/watch?v=za1-4-MQNio