Using Donor Advised Funds

Using Donor Advised Funds

If you regularly make charitable donations, or even just occasionally do, you may find a Donor Advised Fund of interest. You might think of a Donor Advised Fund like a charitable savings account. If the fund is properly formed, you can donate to the account whenever you want and take the appropriate tax deduction at that time. The money is invested in the Donor Advised Fund until you help decide which charities are to receive the funds.   Donor Advised Funds have been around since the 1930s but Congress did not establish formal legal structure for them until 1969. They grew in popularity in the 1990s with the wealth generated by the technology sector. At the end of 2012, Donor Advised Funds managed over 45 billion dollars with more than 3% of all charitable giving in the United States flowing through them.[1]   There are numerous benefits to using Donor Advised Funds for individuals and you do not need to be wealthy to set up one. Here are some key points:

• Consider a Donor Advised Fund if you want to donate to a charity in future years, but need a tax deduction now.
• You select the Donor Advised Fund suited to your needs
• You can contribute cash or appreciated assets to the fund
• You take an immediate tax deduction for the contribution (up to applicable IRS limits)
• Contributions grow tax free
• At any time in the future, you may help direct which qualified charities will receive a donation from your fund
• The Donor Advised Funds take care of all administration and tax filings
• They are less expensive and less cumbersome than establishing and managing a tax exempt foundation
• Many can be funded with as little as $5,000

One of the most attractive features of the donor advised structure is the ability to donate and receive immediate tax deductions without a particular charity in mind. You can then help decide months or years later what charities will receive funds.   The Donor Advised Fund acts as a holding tank allowing you the flexibility of spreading your donations into future years. This can provide you with more influence over charities you may be involved in.   If you plan on making charitable donations, consider the benefits and flexibility of using a Donor Advised Fund. Talk to your financial advisor who can assist you in finding a fund suited to your needs.

The Menashe Morley Group:  David Menashe is a Senior Vice President and Wealth Management Advisor, and Bruce Morley is a First Vice President and Wealth Management Advisor and John Naviaux is a Financial Advisor for Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation. Investment products are not FDIC insured, are not bank guaranteed, may lose value. The Menashe Morley Group can be reached at 858-381-8113.