What is a Donor-Advised Fund (DAF)?
A Donor-Advised Fund (DAF) is a charitable giving account that allows you to support your favorite causes in a flexible, tax-efficient way. It’s like having your own mini foundation, but without the administrative hassle. You make an irrevocable gift to your DAF (owned by a sponsoring organization), receive an immediate tax deduction during the year in which the gift was made, and then recommend grants to 501(c)(3) charities over time.
5 Reasons to Open a Donor-Advised Fund Today:
1. Tax Efficiency:
Contribute cash, low-basis stock positions, or other assets to your DAF and enjoy an immediate tax deduction. Plus, any growth in the account is tax-free, maximizing your impact. This can also be a great way to divest from a highly appreciated stock position and avoid paying long-term capital gains taxes, or even avoid taxes due on capital gains distributions, if timed properly. Note, no additional tax deduction can be taken upon successful grant recommendations.
2. Simplified Giving without a Maximum:
The option to consolidate all of your charitable donations into one account, makes it easier to track your contributions and manage your philanthropic goals. There is also no IRS-mandated maximum contribution amount, however some custodians may have a minimum. Also, keep in mind these IRS limits: up to 60% of adjusted growth income is eligible for a deduction when cash donations are made, and up to 30% when securities and other appreciated assets (i.e. closely held stock, real estate, illiquid assets) are donated.
3. Strategic Impact:
Take your time to research and select the causes you want to support, without the pressure of year-end deadlines. Find joy in knowing your impact will be realized during your lifetime, as opposed to leaving a testamentary gift upon your death.
“Do your givin’ while you’re livin’, so you’re knowin’ where it’s goin’!” Anonymous
4. Family Involvement:
Engage your family in charitable giving by involving them in the decision-making process, fostering a culture of generosity across generations. Unsure where to start with getting the family on board? We’re here to help! Collin Miller, CFP® recently shared tips for how to host a successful family meeting, check out his blog article here.
5. Legacy Building:
Leave a lasting philanthropic legacy by naming your DAF as a beneficiary in your estate plan or funding it with appreciated assets. DAFs are a way to ensure you are leaving the legacy you want.
“The greatest legacy one can pass on to one’s children and grandchildren is not money or other material things, but rather a legacy of character and faith.” Billy Graham
Start making a difference today—open a Donor-Advised Fund and expand your capacity for meaningful giving. If you are not currently working with an advisor, get in touch with our team by filling out our Discovery Questionnaire to schedule a 30-minute discovery call. We would love to discuss your legacy, values, and goals to determine if Harvest Point® would be a good fit to help you accomplish them. Happy giving!
Sources:
RENinc.com
Disclosures:
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Harvest Point® Wealth Management and LPL Financial do not provide specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.