Q: My friend told me that he is now doing his charitable giving through a donor-advised fund. Can I contribute to Heaven's Family through a donor-advised fund? And what are the advantages?
A: Yes, you can make contributions to Heaven's Family through a donor-advised fund. In fact, we are seeing an increase in this type of contribution.
A donor-advised fund (DAF) is similar to a private foundation because it provides an immediate charitable tax deduction while offering flexibility in the timing of your gifts to your favorite charities. For example, let's say you receive an unexpected windfall of income at the end of the year. You can quickly make a contribution to either a foundation or DAF and gain an offsetting charitable tax deduction for the same year in which the income is reported. You now have the flexibility of deciding which charities to support from that contribution whenever your heart desires—even years later.
The advantage of a donor-advised fund over a private foundation is that it is far less expensive to establish and maintain. A DAF can typically be established with a minimum contribution of $10,000 and generally costs up to 1% of your balance per year to operate.
Another advantage of a donor-advised fund is the ability to make tax-advantaged gifts of non-cash assets such as real estate, business interests, and closely-held stock. Actually, Heaven's Family has established a DAF (Heaven's Family Strategic Stewardship Fund) with the National Christian Foundation to enable us to receive direct contributions of non-cash assets from our contributors. In the arena of non-cash giving, a DAF offers more tax advantages than private foundations.
I know of a couple of families who have begun using a donor-advised fund to consolidate their giving. Rather than receiving contribution statements from a host of charities, they receive all the reporting they need from the foundation that holds their DAF. Their DAF allows them to give anonymously and allows them to set up automatically recurring contributions.
Many large mutual fund companies and community foundations now offer donor-advised fund. Although a DAF may not be practical for everyone, it has certainly become a popular charitable-giving tool.
David Warnock is happy to assist you with your questions regarding strategic stewardship. You can reach him at (412) 833-5826 or email him at DavidW [at] HeavensFamily [dot] org.