With A Donor-Advised Fund, You Call The Shots
Donor-advised funds are popular vehicles for donors to protect their hard-earned money while giving to charitable causes when they see fit. Donor-advised funds are funds that donors create by depositing cash, appreciated securities or other assets, and then distributing the money to charities over time. Setting up a fund like this is quick and easy.
One reason for their appeal: Individuals can take an immediate tax deduction against the full amount they contribute to a donor-advised fund (DAF), but there are no rules or regulations about how quickly the money actually has to be distributed. And the tax benefits can be significant -- you'll save on taxes in 5 different ways:
Income Tax: You receive an immediate income tax deduction in the year you contribute to your DAF. Since AEF is a public charity, contributions immediately qualify for maximum income tax benefits. The IRS does mandate some limitations, depending upon your adjusted gross income (AGI):
• Deduction for cash – up to 50 % of AGI.
• Deduction for securities and other appreciated assets – up to 30 % of AGI.
• There is a five-year carry-forward for unused deductions.
Capital Gains Tax: You will incur no capital gains tax on gifts of appreciated assets (i.e. securities, real estate, other illiquid assets.)
Estate Tax: Your DAF will not be subject to estate taxes.
Tax-Free Growth: Your investments in a DAF can appreciate tax-free.
Alternative Minimum Tax (AMT): If you are subject to alternative minimum tax (AMT), your contribution will reduce your AMT impact.
Donor-advised funds are a lot like private or personal foundations in the way funds are managed and can grow over time. But with a foundation, donors and distribution information is public -- so anyone can look up where your donations are going, etc. Your financial advisor can explain how each approach might affect you.
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Stocks, real estate and other assets can be part of your donor-advised fund. The ease of donating non-cash assets encourages people to give more generously to charity than they might otherwise because they get the immediate benefit of a hefty tax deduction without a lot of hassle.
When should you consider a donor-advised fund? Many people consider it when getting ready to plan their retirement or the sale of a business. Your tax advisor can suggest the timing of a DAF or private foundation.
Donor-advised funds may be an effective way for you to support the Journey of Grace 150 church renovation campaign while protecting your assets for your family and gaining an immediate tax deduction. You'll still have the ability to contribute to any charity whenever you'd like, and involve your family members in decisions. Please consult a tax advisor about any estate planning decision. If you'd lke more information, please contact us at firstname.lastname@example.org or call (913) 631-5983 and ask for the finance office.
This is provided as information only. Your specific situation may vary. Always consult your CPA or tax advisor for advice.