A donor advised fund (DAF) is a great way to manage all your charitable
giving in one place, practice generosity, and teach younger generations the importance of philanthropy by involving them in distribution recommendations to charities. A donor advised fund has several advantages including minimal start-up time and costs, donations that are generally deductible at fair market value, and not being subject to capital gains taxes (for gifts of real estate and appreciated securities).
A Donor Advised Fund is Right for You if…
- You want to simplify your giving into one fund instead of making individual donations to various charities
- You have considered creating a private foundation and would like a lower cost alternative
- You have appreciated assets such as real estate, stocks, bonds, etc.
- You want to teach principles of generosity to children or grandchildren by allowing them to assist in charitable distribution recommendations
- You are expecting the sale of a business or property that is not your principal residence
- You receive a non-taxable life insurance death benefit, an inheritance, or a legal settlement
- You want to give now and see how that gift is making a difference while you’re still alive
Jack and his wife Jen held stocks for a number of years and decided to donate the shares to avoid capital gains taxes. The couple transferred $12,000 in stocks to the Foundation in order to create a perpetual endowment donor advised fund. Now, they can annually support multiple United Methodist ministries and charities with this fund, including their church, for years to come.
How a Donor Advised Fund Works
- Create a donor advised fund with the Foundation with a minimum initial contribution of $10,000
- Receive an immediate tax deduction for the value of your gift
- The Foundation invests the funds in a balanced, conservative portfolio that follows Book of Discipline guidelines and your fund assets grow tax-free
- Make initial and annual recommendations of how the funds should be distributed to 501(c)(3) charities (50% of annual distributions must benefit a United Methodist church or ministry)
- At any time you and others can make additional contributions to the fund in any amount
- Receive annual statements of all contributions, distributions, and fund earnings
- Appoint a successor to continue your legacy of generosity when you pass or have the Foundation convert the donor advised fund into a permanent endowment supporting your chosen charities
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