What are Donor Advised Funds?
Donor advised funds are charitable-giving vehicles that provide simple, tax-smart and meaningful ways to make charitable giving easier. The donor enjoys immediate and maximum tax advantages but can make grants on a flexible timetable. Similar to a charitable investment account, donor advised funds are sometimes called charitable gift funds.
How do Donor Advised Funds Work?
Donor advised funds are much easier to establish than other planned giving vehicles such as private foundations, charitable trusts and supporting organizations. The process for establishing a Donor Advised Fund is outlined below:
- Contact a donor advised fund sponsor such as iGiftFund to set up a fund.
- Contribute assets to the fund using a wide range of assets including cash, stock or real estate. In return for your contribution, you will receive immediate and maximum tax benefits.
- Donors can recommend their financial advisor to manage investments in the fund.
- Donors can recommend grants on a flexible timetable.
- Donors can pass along their family values to future generations by involving children and grandchildren in the granting processing.
What are the benefits of Donor Advised Funds?
Donor advised funds, or charitable gift funds, provide numerous benefits to the donor:
- Donors enjoy the maximum income tax deduction.
- Donors avoid capital gains and estate taxes and, assets grow tax-free.
- Donors can manage their charitable giving similar to a private foundation but without all the cost, regulatory headaches and paperwork.
- The fund handles oversight and administration including gift acceptance, grant processing, recordkeeping, compliance and tax reporting.
- The donor decides whether to keep their charitable giving private or allow it to be acknowledged.
Who should open a Donor Advised Fund?
A Donor Advised Fund can be a solution for anyone who:
- Is experiencing an extraordinarily high-income year.
- Will be selling a highly appreciated asset in the near future (publicly traded securities, complex assets like C-corp and S-corp shares, real estate, etc.).
- Wants to support several charities through one substantial gift.
- Wants maximum flexibility to change the charitable beneficiaries over time.
- Wants to involve a spouse, children and grandchildren in charitable giving.
- Makes cash gifts to numerous charities but would benefit by giving appreciated assets.
- Experiences fluctuating income but wants to maintain a steady level of giving.
- Is concerned about the complexity of a private foundation and lack of privacy.
- Wants to support a charity but is not confident with the organization’s investment management capability.
- Wants to keep his or her charitable giving confidential.
- Wishes to support a particular charity but wants to ensure that the gift is used as he or she intended.
- Wants to make year-end tax planning and charitable giving easy.
Who can open a donor advised fund?
Individuals, families, companies, foundations, trusts, and other entities can start a donor advised fund account by completing a simple application and contributing assets. Many people open charitable gift funds for their year-end tax planning and charitable gift-giving.
What are the minimums to open a Donor advised Fund?
To start a donor advised fund with iGiftFund, you’ll need to make a contribution of $5,000 or more. Once your account is established, you and others can make subsequent contributions of $1,000 or more. Please note, you may set up a donor advised fund now but fund it later; for example, as part of your overall estate plan.
Must I maintain a minimum balance?
There is no minimum balance for a donor advised fund. However, there is a minimum administrative fee of $600.
Can I name my Donor advised Fund?
Yes. You have maximum flexibility in naming your fund. Most donors choose a name that reflects the family name, such as “The Jones Family Charitable Fund” or “The Jones Family Foundation.” You may also select a name that enables you and your family to remain anonymous.
How quickly can I create a Donor advised Fund?
At iGiftFund, most funds can be established in a day. Once you submit a completed donor application and contribution form, your account is established and ready to receive contributions. Many donors send a check along with the application. If you want your financial advisor to be involved, have the advisor contact us to coordinate the gift acceptance, asset transfer process and investments.
Can my children be involved in my Donor advised Fund?
Yes. You can name them as an advisor, contingent advisor, or successor advisor to your fund. We are somewhat unique in allowing children and grandchildren as young as eight years, to participate “under your direction.” This is an excellent way to teach children family values and prepare them to become successful, responsible and caring adults.
Can my Donor Advised Fund have multiple successors?
Yes. Your account assets can be split between multiple successors. Or, you can have your successors share in the advising responsibilities. Your successor advisors can also name their own successor advisors. We offer several creative ways in which your donor advised fund can continue in perpetuity.
How are the assets in my Donor Advised Fund account invested?
You create an investment program that’s tailored to your individual goals and objectives. iGiftFund works with all custodial platforms. Each investment account is separate and can be individually managed on your familiar investment platform. You may recommend your trusted financial advisor to manage investments, in open architecture, either on a brokerage (transactional) basis or on a managed account (fee) basis, subject to iGiftFund’s flexible investment guidelines.
What types of assets can I contribute to my Donor Advised Fund?
iGiftFund can accept a wide range of assets. These include:
- Cash
- Publicly traded securities including stocks, bonds, mutual fund shares
- Restricted and controlled stock
- Privately-held securities (C-corp or S-corp shares, LLCs, LPs)
- Real estate
- Life insurance policies
- Private foundation grants or terminations
- Bequests
- The named beneficiary of a charitable remainder trust or a charitable lead trust
- The named beneficiary of an IRA, 401(k), or other retirement account
- Tangible and intangible personal property
Tax regulations vary by the type of asset, and are subject to change. Call us if we can help in the initial planning of your contribution. We will work with you and your trusted advisors. Our experience (particularly with accepting and holding complex and hard-to-value assets) is among the longest in the industry.
What types of statements will I receive?
At iGiftFund, statements will be posted in your DonorView portal with email notification.
- We will issue you quarterly statements that summarize the activity and balance of your fund.
- You will receive an acknowledgement for all contributions made to your account. This letter also serves as your receipt for tax purposes.
- You will receive a copy of each grant transmittal letter that accompanies the grant check we mail to the charity.