Since 1930s, donor advised funds have been available and offered by community foundations and more recently have become available through sponsored charitable gift funds.
One of the main benefits of a donor advised fund is that it allows individuals with philanthropic intent to have their charitable assets professionally managed and distributed to desired causes at a fraction of the cost of a private foundation.
Here are a few reasons why you should consider a Donor Advised Funds (DAF)
Charities shouldn't lose 3% (or more) to transaction fees.
Giving online comes with fees. While Huguenot Fellowship offers simple ways to setup a reoccuring donation using a credit card or a bank transfer, with less fees, all of these methods come with fees. Using a Donor Advised Fund, you can give cash or stock without any fees and 100% goes to the charities that matter to you if you chose the right DAF.
Give more by saving 20% or more on taxes.
The tax deductibility of contributions made to a donor advised fund can also be leveraged. This leverage is achieved by contributing highly appreciated assets. By using a donor advised fund, you can transfer your stock securities directly to the DAF without selling them. Then they, acting on your wishes, will sell these assets under a 501c3 with no taxability and then issue the gift to the organization of your choice. This means if you have owned a stock security with significant gains, you can avoid capital gains taxes on the sale of that stock by giving it directly, effectively increasing your donation to the charitable organization of your choice, while allowing the deduction for the full amount on your taxes. The US is one of the most philanthropic countries in the world and government incentives like this will help others give more than otherwise possible.
Timing flexibility
Perhaps the biggest advantage is the ability to make donations to the account and receive immediate tax benefits for doing so, while also being allowed to disburse the money from the accounts according to your own timetable. In other words, you can choose to pay out a donation to an approved charity right away or invest the money in the advised fund account and let it grow tax-free until you’ve designated the charity of your choice. This allows you to make a decision to give and separate that from the receiving entity immediately allowing you to make the donation at the right time or change your giving priorities based on greatest need.
Here are some examples of Donor Advised funds that you may consider partnering with: CharityVest, National Christian Foundation, Fidelity Charitable administers a donor-advised fund for Fidelity, Schwab Charitable administers the Schwab Charitable Fund, and Vanguard Charitable administers a donor-advised fund for Vanguard. (National and local organizations not connected with financial institutions also administer donor-advised funds; these funds are often set up to benefit a specific charity or region.)
Each of these funds have different fee structures and benefits. Some of the more recognizable funds take a small fee, but allow in-kind gifts like Real Estate and allow you to transfer assets to the DAF and invest them in the interim while you decide the organization to give towards.
Other funds, like CharityVest, sell your assets immediately on receipt, but have less restrictions on the charities you donate towards and charge no fees at all. This can be useful if you are simply donating stock and have already a charity in mind you’d like to give towards.
We hope this is helpful!