Top 5 Reasons to use a Donor Advised Fund, in honor of Donor Advised Fund Day

🍁 Let me start by wishing you and your loved ones a lovely upcoming Indigenous People's Day.  If you're in New England, you may get an extra day to relax and honor our early founders and our Earth.

🙏🏼 Ahead of the long weekend, I wanted to give you some food for (charitable) thought. Read on for my top 5 reasons to consider a Donor Advised Fund, in honor of today's Donor Advised Fund day. 

1️⃣ I'm philanthropically inclined - or WANT to be philanthropic.

Donor Advised Funds, or DAFs, provide an easy vehicle to accumulate your donations in one solution, instead of thinking about multiple checks to your various causes of choice.

2️⃣ I know I want to support philanthropies and charities, but would like to take more time to direct my gift wishes.

DAFs allow you to contribute at any point, get the immediate tax deduction, but take your time to direct your wishes.

3️⃣ I'd like to charitable gift-bunch, in order to have a larger positive impact on my taxes.

Very often I see clients making smaller gifts, and writing checks to non-profits, religious, or educational organizations throughout the years. With the current high standard deductions, many of us do not itemize our taxes.

With DAFs, we can decide to gift-bunch, or rather, make one larger contribution to a DAF, allowing us to potentially itemize our deductions, and affording a larger reduction in our taxes.

For my clients, I can run side by side tax projections to illustrate how gift-bunching may help lower their taxes. In the example below, we have a couple who files Married Filing Jointly and receives the standard deduction of $27,700 for 2024. They donate $15,000 each year for 5 years, and have $6,000 of mortgage interest.

When they gift-bunch, or make 5 years of gifts, or $75,000 in one year, they can now itemize their deductions and save more on taxes.

4️⃣ I identify with Kayla or Saoirse as a business owner who has sold my business for a gain.

Kayla sold a business, and wanted to create a DAF in the same year. By creating that DAF in the same year as the windfall from the sale of her business, she was able to take advantage of that tax deduction. She set up a budget for the gifts from her $2 million fund. She is hoping for a 5% return on the assets which means that the DAF growth would be $100,000. So she gives herself $100,000 budget to bequest to her current philanthropies of choice.

Saorise sold a business as well, and set up her DAF, to take her time making her gifts. She prefers to mete out the funds gradually, and anticipates taking 3+ years to completely empty the fund.

5️⃣ I would like to get my children and grandchildren involved in philanthropy.

👵🏽 🧑🏼‍🍼One easy idea is to add your loved ones as an authorized users of your DAF. This way, they can make bequests as they encounter causes they are passionate about.

🦃 Another idea is to engage your family when you're celebrating Thanksgiving together. You can give family members the challenge to come up with their cause of choice. Give them parameters for a presentation to the family explaining why it is important, and how your gift will further the cause.

When they present to you and loved ones, you can vote, or you may decide to make gifts to all of their passions.

✅ One thing to note is that gifts must be made to official 501(c)3 organizations, and not, just as an example, to the neighbor's dog 🐕‍🦺 who needs surgery. Although that is a worthy cause in and of itself! 

In summary, if you have been or want to be philanthropically inclined, you may want to consider a Donor Advised Fund, for the above reasons and many more.

📲 Schedule time if you'd like to discuss your situation.

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. And of course please note that this email is not intended for specific tax advice. Consult your tax and legal advisors.