A donor-advised fund is a powerful way to make your charitable gifts in a tax-efficient way that also has some unique benefits that many of our clients find appealing.

How does it work?

A donor-advised fund is an account, sponsored by a charity, that allows you to contribute (usually non-cash assets) to that charity and then recommend grants be made from your account over time to other IRS-qualified 501(c)3 charities¹.

When you make your gift to your donor-advised fund, you will get a tax deduction for the fair market value of that gift. You can then recommend grants be made right away for the total you deposited, or invest within your fund and recommend grants over time.

Why use a donor-advised fund?

The main reason to use a donor-advised fund is to be able to gift non-cash assets. There are numerous non-cash assets that can be gifted, but the most popular are stocks, mutual funds, real estate and private business interests.

When gifting non-cash assets there are possible tax benefits. If the asset is a long-term appreciated asset (held at least a year and worth more than the purchase cost), donating this asset directly to charity allows you to avoid paying capital gains while getting the income tax deduction for the fair-market value on the date of the gift.

Other benefits to a donor-advised fund include:

• Ability to gift non-cash assets to smaller charities that are not able to accept non-cash gifts directly. The grants recommended in your donor-advised fund is always sent to the charity as a check.
• Simplified record keeping – if you only gift through your donor-advised fund, you will only have one charitable gift receipt regardless of how many grants you make throughout the year.
• The ability to invest and grow your gift within your donor-advised fund until you are ready to make grants.
• The ability to make anonymous grants.
• Easily set up recurring grants – recurring gifts are great for charities to be able to get regular income, however donors normally would only be able to set this up with cash donations, with the donor-advised fund your non-cash asset can fund a recurring grant.

¹Some faith-based providers of donor-advised funds will not allow gifts to IRS-qualified charities that do not pass their granting standards.
²The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
A donor-advised fund is a tax-advantaged charitable giving vehicle that offers individuals maximum flexibility to take tax deductions and recommend grants to charitable organizations. Donations made are irrevocable and funds are not guaranteed or insured by any governmental body. Donations are invested and investing involves risk. The value of an invested donation will fluctuate over time and may gain or lose money.
Contact your advisor for more complete information on this strategy and its risks prior to making any financial decisions.