In the past, private foundations provided a strategy for channeling your charitable donations among several of your favorite organizations. The complexity and costs of establishing and maintaining a private foundation, however, have given way to a simpler, more cost-effective method of giving that produces similar results.
Donor advised funds are provided through a variety of public charitable organizations and are the fastest growing form of philanthropy, yet you must recognize that the benefits come with the liability of not having total control over all aspects of the operation of your fund. Let's look at some key aspects of the donor advised fund.
Starting a Donor Advised Fund
For most donor advised funds there are no costs to establish the fund. Offered through a variety of public charitable organizations, a standard fund agreement defines the function of your fund and the costs associated with its ongoing operation. The fee is generally modest, set by the public charitable organization to cover its costs and charged as a percentage of assets. There are no additional expenses as the charitable organization generally covers those within their percentage fee charged against the principal.
Donor advised funds usually carry a minimum required donation, which varies. The easiest asset to use to establish the fund is cash, but you can also use publicly traded stock, mutual fund shares, bonds and certain restricted stock.
Immediate Tax Benefits
A donor advised fund qualifies for the highest level of deductibility based on your individual tax status. Generally, that means cash gifts are deductible up to 50 percent of your adjusted gross income (AGI). For appreciated assets with long-term capital gains, you can use full fair market value up to 30 percent of your AGI in any one year.
If you are undecided about which charitable organizations you want to support, the donor advised fund allows you to make the donation now and receive an immediate charitable deduction for tax purposes. Then at a later date you can suggest which organizations you want to benefit.
Distribution Requirements
Minimum grant requirements vary from program to program. Most public charitable organizations encourage you to make grants, however, because the purpose of establishing the fund is to build a stronger community through charitable programs and services.
Risks and Responsibilities
The public charitable organization with which the donor advised fund is associated assumes all liability and risk. Their policies and procedures cover all component funds and any expenses are paid from the fee assessed each component fund.
There are other considerations when choosing a donor advised fund. For example, as a donor advisor you can make distributions anonymously or publicly, or you can make some of each. In addition, a charitable organization will likely have knowledgeable staff to assist you with making grants and choosing programs.
As a donor advisor you can name multiple advisors and contributors to your account, carrying forward a true legacy of charitable giving.
Please contact Development Office at 323-761-8704 or development@jewishfoundationla.org, for more information.
Contact Us
We would be happy to assist you in your charitable planning. Contact our Development Office at 323-761-8704 or development@jewishfoundationla.org to learn more about options that may work for you.