Expertise Beyond the Numbers

Top Three Reasons for Establishing a Donor Advised Fund [Blog Post]

The following blog post from SC&H Group’s Personal Financial Planning team discusses the top reasons for establishing a donor advised fund, and how these investment vehicles offer powerful tax advantages within a comprehensive retirement plan for charitably inclined families.

A donor advised fund is a charitable giving vehicle that allows donors to make tax-deductible contributions to the fund for an immediate tax deduction, as well as to recommend distributions to qualified charities on their own schedule.

Donor advised funds are becoming a very popular component of retirement plans for families.

According to the National Philanthropic Trust, contributions to donor advised fund accounts hit an all-time high of $19.66 billion in 2014, representing 7.6 percent of total individual giving in the U.S.

When considering this type of investment vehicle, there are some key benefits to note, which are as follows:

  • Immediate Tax Deduction: You can deduct up to 50 percent of adjusted gross income for cash, and 30 percent for appreciated assets.
  • Capital Gains Tax Elimination: It is possible to eliminate capital gains tax for gifts of long-term appreciated securities.
  • Professional Investment Management: Through the right professional investment management, it is possible your donor advised fund can continue to grow.
  • Continued Family Involvement: It is possible to split account assets between multiple successors, which allows for long-term family involvement.

Following are the top three reasons for establishing a donor advised fund:

  1. Take The Deduction This Year and Donate Later: This tactic is highly advantageous for individuals with fluctuating income. Take the charitable contribution in a year of high income, and then you can distribute the proceeds in future years.
  2. Stop Being the Indecisive Philanthropist: Do you want to give to charity but don’t know which one? The beauty of a donor advised fund is that an individual can select the charity at a later date. This way, an individual can donate without the initial obligation of selecting beneficiaries.
  3. Contribute Little, Donate Plenty: The donor’s contributions have the potential to build in value over time. A charity can receive more from donor advised funds than simple cash donations.

For more information on how you can take advantage of donor advised funds, please contact SC&H Group’s Personal Financial Planning team. 

Advisory Services offered through SC&H Financial Advisors, Inc.