Although donor advised funds are a popular manner of giving, you must recognize that the benefits come with the liability of not having total control over all aspects of the operation of your fund. Your role is advisory only. For some that may be sufficient reason to select the option of establishing a private foundation. Let’s look at some key aspects of the donor advised fund.

Starting a Donor Advised Fund
For most donor advised funds there are no costs to establish the fund. Offered through a variety of public charitable organizations, like community foundations, there is a standard fund agreement that defines the function of your fund and the costs associated with its ongoing operation. The fee is generally modest, set by the public charitable organization to cover its costs and charged as a percentage of assets. There are no additional expenses for operation, accounting, audit, tax preparation or other services as the charitable organization generally covers those within their percentage fee charged against the principal.

Donor advised funds usually carry a minimum required donation, which varies from fund to fund. You may open an account with some funds with a modest donation of $10,000, while others may require a more substantial gift of $50,000. The easiest asset to use to establish the fund is cash, but you can also use publicly traded stock, mutual fund shares, bonds and certain restricted stock. And you can make additional contributions to the fund at any time.

Immediate Tax Benefits
A donor advised fund qualifies for the highest level of deductibility based on your individual tax status. Generally, that means cash gifts are deductible at 50 percent of your adjusted gross income. For appreciated assets with long-term capital gains, you can use full fair market value up to 30 percent of your adjusted gross income in any one year.

If you are undecided about which charitable organizations you want to support, the donor advised fund allows you to make the donation now and receive an immediate charitable contribution deduction for tax purposes. Then at a later date you can suggest which organizations you want to benefit. Donor advised funds will usually respect your suggestions.

Distribution Requirements
Minimum grant requirements vary from program to program. Some funds require minimum grants ranging from as little as $250, while some donor advised accounts have no minimum required distributions. Most public charitable organizations encourage you to make grants, however, since the purpose of establishing the fund is to build a stronger community through charitable programs and services, but currently no specific requirement exists.

Risks and Responsibilities
The public charitable organization with which the donor advised fund is associated assumes all liability and risk. Their policies and procedures cover all component funds and any expenses are paid from the fee assessed each component fund.

There are other considerations when choosing a donor advised fund. For example, as a donor advisor you can make distributions anonymously or publicly, or you can make some of each. In addition, a charitable organization will likely have knowledgeable staff to assist you with making grants and choosing programs—usually at no additional cost.

As a donor advisor you can name multiple advisors and contributors to your account, carrying forward a true legacy of charitable giving.

Please call Milton Dare at 830-258-7420, or e-mail us at mdare@petersonrmc.com, for more information.



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