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Scott Thomas, ChFC®, CAP®, CKA®, RICP®

What Is a Donor-Advised Fund?

Want an easy way to fund your favorite charities and avoid unnecessary taxes? Want more control over your giving? Or do you want a way to donate anonymously and still be able to count it as a tax deduction? Then a donor-advised fund might be the best option for you.

But what is a donor-advised fund?

A donor-advised fund is a charitable investment account that you create that’s specifically for funding your favorite and beloved charities.

I find it fascinating that this is the fastest-growing charitable vehicle in the United States. And the reason it’s growing so popular is that it’s easy to set up, easy to use, and it has some special attributes.

Click here to view an infographic explaining how donor-advised funds work.

Benefits of a Donor-Advised Fund

1. You can bunch deductions.

You can load up your deductions with this fund. And even while the money is in this account, it can continue to grow. In a way, it’s kind of like having your own private foundation. That’s a wise financial strategy!

How it works is that you put the money in and then can immediately get a tax deduction for that amount.

2. You can avoid capital gains treatment.

By this, I mean you can avoid recapture on money you make by selling assets. Let’s say you have a piece of rental property with a 28% recapture tax. You can avoid that completely and get a tax deduction.

Differences Among Donor-Advised Funds

There are many different types of donor-advised funds, so the setup truly depends on the individual’s preferences. Some prefer to make donations anonymously while others don’t mind their name being attached to the donation. Some want donations scheduled while others want to hold on to the money for a bit.

There are donor-advised funds to match any of these preferences. That’s why there are over 1,000 different funds from what I’m told!

Yet each type is unique. Some are straight forward while others handle more complex requests.

If you’re interested in learning how to set up a donor-advised fund for yourself, let me know. You can email me at scott@stewardshipmatters.net.

And if you’re in need of a comprehensive budgeting tool, I’m offering a free one right now. Click here to get your free tool and craft a unique financial plan that works for you!

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