Philanthropy 101: Donor-Advised Funds

November 2003
Journal of Financial Planning;Nov2003, Vol. 16 Issue 11, p66
Academic Journal
The article describes the ways in which donor-advised funds can be set up, where to find sponsoring organizations for a fund and the advantages and disadvantages that clients should consider before deciding if a donor-advised funds meets their philanthropic objectives. Financial planners often avoid discussing this topic with clients because of the complexities that can be associated with a charitable-giving program. The donor receives up to three tax benefits from making the donation: an immediate income tax deduction, avoiding capital gains taxes if the gift is appreciated property and a reduction of the gross estate by the amount of the excluded asset. Typically, the donor recommends which charitable organization will receive grants, when such grants will be distributed and the amounts. The distinguishing characteristic of an endowment is planned longevity of the fund. The donor contributes the assets to a donor-advised fund and grants to the charities as much or as little as the donor wants each year. The fund can last for a short or a long time and the donor can sprinkle grants to many causes or focus on one cause. If donors expect to operate a donor-advised fund for years or over generations, they usually care about how the money will be invested.


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