Donor-advised funds—a term that you may have heard popping up as of late. Though this type of charitable giving vehicle has been around since the 1930s, it has only recently experienced a boom in growth. Between 2013 and 2018, contributions to donor-advised funds increased by 86 percent. The year 2018 saw $37.12 billion in contributions to these kinds of funds.
Donor-advised funds have become popular because they give donors maximum flexibility and offer enticing tax benefits. However, it’s important to remember a few things about donor-advised funds:
They allow you to donate assets other than cash to the charity of your choice.
Although you can contribute cash and cash equivalents to donor-advised funds, other options include the ability to contribute private stocks, publicly-traded stocks, and cryptocurrency, as well to donor-advised funds.
The tax benefits are both immediate and long-term.
When you set up your donor-advised fund, you often receive an immediate tax deduction for the donation. Also, as your assets grow in the fund, the appreciation inside the fund will not be subject to capital gains tax, which in turn leaves more money for the nonprofit organizations that are chosen to receive the benefits of your gift.
Your assets can grow in a donor-advised fund.
In other forms of charitable giving, stocks and cryptocurrency given to a nonprofit organization would have to be liquidated by the nonprofit before the nonprofit would recognize the full monetary value of the gift. Donor-advised funds allow the gift to continue to grow while you decide which charities will benefit from your donation. As the asset value grows over time, your donation has the opportunity to potentially provide even more money to the charities of your choice.
You can determine who benefits from your assets, now and in the future.
When you contribute to a donor-advised fund, your contribution is irrevocable, meaning it cannot be returned to you. However, you can establish your preferences on which charity, or class of charities, will receive the benefits of your donation. You can also make provisions for the timing and duration of how the assets you contribute are maintained and disbursed to the charities you prefer. The fund in which you have invested will generally ensure that your wishes are upheld and that the charities benefiting are qualified under IRS guidelines.
If contributing to a donor-advised fund seems like it would be a good fit for your charitable giving goals, be sure to contact one of CRI’s professionals today for more information.