Charitable Giving Accounts and Donor Advised Funds (DAFs)

In addition to helping people, charitable giving can be an important component of personal wealth management. Charitable giving strategies can help you to not only maximize your giving, but also take advantage of the tax benefits*.

Donor advised funds (DAFs) are increasingly popular vehicles for making charitable contributions. By establishing charitable giving account, you can support multiple charities with a single contribution. Because your donations to this type of accounts are irrevocable, you can take immediate tax deduction even if you are indecisive what charity you would like to support. The funds, which operate as public foundations, allow you to separate the timing of your tax deduction from your charitable support. The donors can defer until later the process of deciding which charities will receive the funds. Donors can select investment options based on available professionally managed programs. Any growth of invested charitable dollar is tax free.

Setting up a private foundation or supporting organization can allow dedicated philanthropists to achieve their generous goals in a tax-advantaged manner. However, these vehicles can be time consuming because they require running a board and engaging in audits. They may require several million dollars to make it worthwhile. Simpler way to achieve much the same effect is DAF.

DAFs have a minimum initial donation, typically between $5,000 and $25,000. You can make subsequent contributions at any time, usually in increments of $1,000. Most DAFs charge an administrative fee ranging from around 0.5% to 2% of the account balance. Some require you to maintain a minimum balance, but many do not. You can donate cash equivalents, publicly traded securities, C-Corp and S-Corp shares and real estate.

DAFs have higher tax deduction limits than the private foundations: cash 50% of adjusted gross income (AGI) and publicly traded securities and other appreciated assets 30% of AGI while private foundations cash 30% of AGI and publicly traded securities and other appreciate assets 20% of AGI.

Please feel free to contact me to find more about charitable giving accounts and other charitable giving strategies.

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* It is not the intent of Dee Turkalj to provide tax advice. Gold Coast Securities, Inc, its affiliates and agents are not in the business of providing tax advice. Please contact your tax advisor with all questions regarding how anything discussed above may affect your tax situation.