Do you give $10,000 or more to charity each year? Do you plan on making a sizeable donation in a single year? Would you like to leave a legacy? Do you want to give to charity but are concerned about outliving your assets or leaving enough for your heirs? Do you want to involve your children in making philanthropic decisions?
If any of the above are true then you may benefit from advanced charitable planning techniques such as donor-advised funds, private family foundations, charitable lead trusts and charitable remainder trusts. Here we explore how one technique, the donor-advised fund, can help you reach your goals.
A donor-advised fund (DAF) is a type of account that is available through many large charities and brokerages, including Fidelity. Any deposit to the account is actually a donation to a public charity and is deductible (within limits) in the year the contribution is made. However you still control how it is invested, and when and to whom it is distributed. Many types of property can be donated to DAFs besides cash (appreciated stock is a particularly tax-efficient choice).
With a DAF you can:
- choose the name of your DAF, for example “The Johnson Family Fund”
- immediately deduct the full amount of your contribution, subject to IRS limitations
- distribute the funds to charities over the number of years you feel is appropriate
- choose how your assets are invested
- determine which charitable organizations to benefit
- receive an annual summary statement of your donations to the DAF; no more worrying about finding receipts when preparing tax returns
- get your family involved in making contributions and distributions
Because of the ability to invest the funds and spread out the distributions from the DAF, a DAF allows you to build substantial assets for your charitable giving plans. The ability to include your family and trusted advisors enables you to pass on your philanthropic legacy to future generations.
We hope you found this informative. As always, we welcome your feedback.