Donor Advised Funds: Getting Started
A donor advised fund is a separately identified fund or account that is maintained and operated by a non profit organization. You can open one with a written agreement between you and the organization that gives you (or other family members) the right to recommend that distributions (i.e., grants) be made from your fund to CC.
One caveat: You cannot direct distributions. You have the right only to make recommendations regarding how much, how often and to which charities. Most donor advised funds will follow your advice if it is consistent with the fund's objectives and the selected charities are qualified charities.
How It Works
Once you have created a donor advised fund, you can:
- At any time, make contributions to your fund, which are invested by the sponsoring charitable organization, which then provides a regular accounting to you.
- Recommend that various amounts be distributed to qualified charitable organizations of your choice.
- Receive an income tax charitable deduction for gifts to your donor advised fund. You receive no further tax advantage, however, when grants are made from the fund to other charitable organizations.
Though similar to a private foundation in some respects, a donor advised fund is often preferred by donors because of its simplicity. There are no setup fees or excise taxes, nor are there any annual filing and compliance requirements. Plus, donor advised funds receive more favorable tax treatment than private foundations.
Your Major Benefits
- Convenience and timing: You can take a tax deduction now—when you make a gift to the fund—without immediately having to choose the charities you want to support.
- Simplicity: You can support a number of charitable organizations and centralize your giving without having to retain records for separate contributions.
- Expertise: You can take advantage of the staff's expertise to research which programs you want to support.
- Family philanthropy: Families can build a tradition of giving and teach their children the value of philanthropy by involving them in the decisions about which grants to recommend. Plus, you can name your children as the next generation of fund advisors to carry forward a true legacy of giving.
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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.