Why Donor-Advised Funds Could Be Your Clients’ Charity ‘Vehicle’ of Choice

Unique Charitable Giving Accommodations

Donor-advised funds benefit from ease of use coupled with powerful charitable, financial and tax planning advantages.

Minimum financial obligations with no upper limit. Minimum gifts to create a fund are as low as $2,500. Grant minimums to charity from funds are as low as $50. 

Most of the largest, and even smaller fund administrators, require minimum annual grants to charity total an average of 5% of assets. Despite this, most donor-advised funds grant an average closer to 15% to 20%, so for most charitably inclined clients this is not an issue. Highly asset- and tax-efficient. Gifts to donor-advised funds are tax deductible in the year of contribution. Clients can deduct up to 50% of adjusted gross income (AGI) for cash gifts and up to 30% of AGI for gifts of appreciated securities held at least a year, real estate and other assets. 

Charitable choice and planning benefits. Clients can advise grants to more than one million IRS qualified 501(c)3 charities. That includes most well-known and many lesser known, but deserving, nonprofit organizations. Clients can maximize time and efficiency by making grant advisements in advance and can schedule recurring grants to charity.

Almost no maintenance and minimal paperwork. Gifts to donor-advised funds are tax deductible and clients should keep those records. Those are the only donation records clients need – whether the client's fund makes 10 or 10,000 grants to charity. This simplifies tax preparation paperwork, and there is almost no other administrative maintenance. 

Work well on their own and with other charitable vehicles. Funds work well as standalone charitable vehicles, with private foundations and with charitable trusts. Many clients with foundations also have donor-advised funds. Clients can make donor-advised funds successors to charitable trusts and IRAs.

There is a reason that donor-advised funds are the fastest growing charitable vehicle. Everyone from farmers to Facebook founder Mark Zukerberg use them. They work extremely well for donors and charities. 

Donor-advise funds' low cost of entry – as low as $2,500 – means clients can easily take a test drive to see how they enjoy the charitable, tax and financial planning benefits. Clients are likely to find – like many others with donor-advised funds – that this charitable vehicle offers tremendous control, great flexibility and great performance.