The Benefits of Donor-Advised Funds
As tax planning season and end-of-year charitable giving begin, it’s a good time to consider the benefits of donor-advised funds. Charitable giving has many facets, most notably as an opportunity for you to support the causes and organizations that reflect your values. But giving is also a significant tax and financial planning opportunity, helping you increase your impact and potentially save on your taxes.
What is a Donor-Advised Fund?
Donor-advised funds offer similar benefits to a private charitable foundation; however, with a different legal structure and simplified administration, it can make sense for more people.
Donor-advised funds are charitable investment accounts you fund with a donation, which you can then invest as you see fit. A financial planner can help you with the planned investments, as well as take advantage of some other valuable assets. Perhaps most importantly, when you contribute to a donor-advised fund, the contribution is tax deductible in the current tax year.
These accounts may also provide additional tax advantages. Assets in donor-advised funds grow tax-free, are outside your estate, and you can donate appreciated assets, helping you avoid capital gains taxes. You can direct gifts from a donor-advised fund to the charities of your choosing at any time.
The Advantages of Donor-Advised Funds
Donor-advised funds provide a lot of flexibility. Here’s a closer look at some of the big advantages they offer:
If you are facing high taxes, estate planning issues, or planning to make charitable giving a part of your financial life, then donor-advised funds can be a useful option with tax advantages and flexibility. Making the most of these funds requires careful planning, especially since gifts are irrevocable. Timing of contributions can have major tax implications, and not all donor-advised funds offer the same costs or services. A financial advisor can help you make the most of these accounts and incorporate a giving strategy into your overall financial plan.