May 2022
Tax Planning

A DONOR-ADVISED FUND, or DAF, is a giving account established at a public charity. It allows donors to make a charitable contribution, receive an immediate tax deduction and then recommend grants from the fund over time.  Donors can contribute to the fund as frequently as they like, and then recommend grants to their favorite charitable organizations whenever it makes sense for them.

How Donor-Advised Funds Work

  1. Contribute assets - To establish your donor-advised fund, you make an irrevocable contribution of personal assets—which could include cash, stock, real estate and more.

  2. Receive an immediate tax deduction - When you contribute to your donor-advised fund, you may be eligible to claim an itemized tax deduction for federal and/or state income tax purposes. The amount of the deduction will depend on several factors, including the type of asset donated and how long you have owned it. This arrangement allows you to plan your gift so that you can take the tax deduction when it makes sense for you and to recommend grants to your favorite charitable organizations at any point in the future. 

  3. Personalize your DAF account As you establish your donor-advised fund account, you can structure it in a way that best meets your charitable goals. You can name your donor-advised fund (DAF) anything you would like; appoint friends and family members to help you manage the responsibilities of a DAF; and design a Legacy Plan to determine what will be done with your DAF assets beyond your lifetime, which may include appointing successors or charitable beneficiaries.

  4. Support your favorite charities, now or in the future As soon as your donor-advised fund is established and funded, you can recommend grants to the charitable organizations closest to your heart. You can make single or recurring grants, either with recognition or with total anonymity.

Benefits of a Donor-Advised Fund  DAFs have become popular in part because of their versatility, allowing donors to give when, what, how, and where is most favorable for them. There are many reasons why donors choose a donor-advised fund as a philanthropic giving vehicle. Charitable giving with a donor-advised fund can be a tax-efficient way to build a charitable legacy. Here are the benefits of a donor-advised fund:

  • Maximize tax benefits

  • Contribute immediately, build a philanthropic strategy and donate when you’re ready

  • Grow your contributions over time, making more charitable dollars available to nonprofits

  • Guarantee philanthropic dollars reach the causes you care about with an irrevocable contribution

  • Simplify organization and administration

  • Create a charitable legacy

  • Choose how you are acknowledged

  • Develop a philanthropic vision and philosophy

  • Reach international charities and NGOs while still receiving federal tax credit

What is your gifting approach now?  Do you have a desire to leave a financial legacy when you are gone?  Let’s talk about this during our next planning meeting!

If you have questions, please contact us.

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