Donor-advised funds (DAFs) are gaining popularity for the advantages they bring to individuals who donate regularly to charitable organizations. Here are some reasons why they could be a worthy tool for you.
Greater tax deductions. When you create and contribute assets to a DAF, you receive an immediate income tax deduction in the year the contribution is made — assuming you itemize your deductions. DAF donors can take a federal income tax charitable deduction of up to 60 percent adjusted gross income on cash gifts and up to 30 percent on stock or other appreciated assets. Additionally, assets in the fund will grow tax-free.
The flexibility to contribute different types of assets. DAFs can accept privately held stock, real estate, alternative investments and other complex assets.
Easy setup. Starting a donor-advised fund involves minimal costs and can happen quickly. The fund is managed by a sponsoring organization.
Simplified recordkeeping and organization. A DAF allows the donor to make all contributions from one place, with one tax form to document all gifts.
Recognition or anonymity. DAF gifts can be disclosed to the charity of your choice, or names may be withheld at the donor’s discretion.
There are a few catches to starting a donor-advised fund: First, a minimum balance is often required, ranging from $2,500 to $5,000. Second, there are account administration and investment fees that vary among DAF providers. And last, the DAF provider may require regular giving, such as at least one transaction per year.
To learn more about DAFs, contact your financial advisor, email us at firstname.lastname@example.org or call our office at 608.266.6318.