Teaching Charity Values to Family
Beyond the tax benefits and the knowledge that you are supporting needy causes, investors are also turning to donor-advised funds because their flexibility and low donation thresholds make them ideal for involving one’s whole family in the philanthropic process. AiP’s Syverson, who has 75 of his clients utilizing DAFs, maintains his own fund for this purpose. "Do you know what I ask my kids for for Christmas? A donation to my donor-advised fund. Do I need any more ties, socks or pajamas?" Each year the Syverson family gathers to decide whom the latest holiday donations will benefit — this year it’s a charity for a needy family in Romania. Since the donation and the disbursement don’t have to happen at the same time, the family meets each July, having taken a few months to research potential recipients. "This is the most appreciated gift," Syverson adds. Other people involve their children and grandchildren by making a DAF donation on their behalf (often in amounts that are multiples of a child's age) and letting them decide what charity should receive the funds.
"Do you know what I ask my kids for for Christmas? A donation to my donor-advised fund. Do I need any more ties, socks or pajamas?"
— Johnne Syverson, President of the International Association of Advisors in Philanthropy
A Legacy Through Estate Planning
More-sophisticated investors utilize donor-advised funds in their estate planning as well, using them to establish a charitable fund that will span generations. DAFs can also be the beneficiary of charitable remainder trusts, qualified plans and retirement fund assets. Syverson sees many clients opting to form a charitable remainder trust in which the DAF sits empty until receiving the proceeds of the trust upon death. Investors who pursue this option receive an immediate tax deduction based on the value of the donation to the trust while collecting a stream of income during their lifetime. Those with fewer assets who want to leave a legacy pursue a life insurance strategy to fund the DAF. Donors give ownership of a life insurance policy to the fund, making it the beneficiary of the death benefit (which it receives tax-free), in addition to any dividends the policy may generate. Donors get deductions on the adjusted value of the policy at donation and the premiums they pay.
In cases where a DAF is intended to leave a charitable legacy, it is important to discuss your intentions with the heirs who will receive the granting rights in the DAF, so that they can meet your wishes but also use the flexibility of the DAF to adjust gifts to the changing times. Says Syverson: "The ultimate advantage of donoradvised funds is flexibility."
Sarah C. Libbey, President Fidelity Charitable Gift Fund
At a time when donors want to maximize the use of their philanthropic dollars, donor-advised funds (DAFs) have become a valuable tool for achieving charitable objectives. DAFs are now a popular alternative to private foundations because they offer many of the same benefits without the expense and paperwork.
To set up a DAF account, you make a donation to the charity sponsoring the program and claim an income tax deduction
for your irrevocable contribution. Instead of writing a check to each charity you want to support, you can recommend which charitable organizations should receive grants from the DAF account — this year or some time in the future. You can choose to be acknowledged or remain anonymous when recommending these grants.
Regardless of the assets used to make their contributions, Fidelity Charitable Gift Fund donors can recommend a variety of investment
approaches to provide the potential for the account assets to grow.
Although most donors make their contributions with cash and marketable securities, the Fidelity® Charitable Gift Fund, an independent public charity with the largest donor-advised fund program in the U.S., has considerable experience accepting gifts of special assets. These include certain privately held C-corporation and S-corporation shares, interests in limited partnerships, and residential real estate. The Fidelity Charitable Gift Fund will sell the property and fund the DAF with the proceeds of the sale minus expenses, if any.
Regardless of the assets used to make their contributions, Fidelity Charitable Gift Fund donors can recommend a variety of investment approaches to provide the potential for the account assets to grow. The choices include many asset allocation and individual investment pools to match donors’ investment horizons with their giving goals.
People who routinely support charitable causes often find that a DAF account makes their giving simpler and more efficient. With the Fidelity Charitable Gift Fund, donors can use a single account to support multiple nonprofits, recommending grants to any IRS-qualified public charities. There are no limitations on grant making as there are with DAFs sponsored by certain religious entities, academic institutions or community foundations, for example. Many donors take advantage of the Fidelity Charitable Gift Fund’s comprehensive Web site to research charities and make their grant recommendations online.
Some families use DAFs to help future generations learn about philanthropy. You can do this by naming children and grandchildren as co-advisers on an account, or by involving family members in the process of recommending grants. By appointing a successor, or making the sponsoring charity a beneficiary of a lifetime charitable trust or your estate plan, you can use a DAF to support your charitable legacy.
charitablegift.org
The Fidelity® Charitable Gift Fund ("Gift Fund") is an independent public charity with a donor-advised fund program. Various Fidelity companies provide nondiscretionary investment management and administrative services to the Gift Fund. "Giving Account" is a registered service mark of the Trustees of the Fidelity Investments® Charitable Gift Fund. Fidelity and Fidelity Investments are registered service marks of FMR LLC, used by the Gift Fund under license.
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