When it comes to giving, the #1 question I get is “what’s the right amount to give?” A less frequent question but almost important decision is “what’s the right way to give?” In addition to being able to give by cash, check or credit card, there is a powerful tool known as the Donor Advised Fund (DAF) that you should be aware of if you’re not already.
A DAF takes the concept of a foundation and makes it available to normal folks like you and me. You might be familiar with private foundations such as the Bill and Melinda Gates foundation. Unfortunately, private foundations often take several millions of dollars to make practical sense.
A DAF, on the other hand, is associated with a public foundation such as the National Christian Foundation (www.ncfgiving.com). The public foundation has separate accounts (or “funds”) which are established by individual donors. The donors then direct the proceeds to charities they want to support. For a low monthly fee, you can have your own fund that operates much like a private foundation.
A donor advised fund works much like a bill-pay account for charitable giving. The first step is to open a giving fund. You can choose the name, whether it’s the Terry Family Giving Fund, or the Go-Heels-I-Love-Roy Fund. Just keep in mind that when charities receive grants from your fund, that’s the name (unless you choose to give anonymously) that will appear on the check.
You then make a charitable gift of cash or appreciated investments into your fund. When you make contributions to your account, you get an immediate tax deduction. Once the funds are in your DAF, you can leave them in a money market account, or invest them to grow over time.
When you’re ready to give to charity, you can make one-time or recurring grants to your favorite charities. You can usually give to any 501c(3) organization, and even support individual missionaries.
There are many benefits to a Donor Advised Fund, but here are a few of my favorites:
So if you have appreciated investments, give to a variety of organizations, get bonuses, or want to be more tactical with your giving, a DAF could make a lot of sense for you. Check out this great video from National Christian Foundation for a great summary.
If you’d like to incorporate strategic giving into your overall financial plan, give us a call and we’d be happy to help you on your journey of generosity!BACK TO NEWS