Your browser does not support JavaScript
 

Blog & News

Donor Advised Fund. What is it and how does it work?
Posted By:  Rob Lemmons CFP®, CPA, AIF®, CEPA
Friday, September 20, 2019

Donor-Advised FundA donor-advised fund offers an easy way for a donor to make significant charitable gifts over a long period of time. A donor-advised fund is similar to a private foundation but requires less money, time, legal assistance, and administration to establish and maintain.

What is a donor-advised fund?

Technically, a donor-advised fund is an agreement between a donor and a host organization (the fund) that gives the donor the right to advise the fund on how the donor's contributions will be invested and how grants to charities (grantees) will be made. Contributions may be tax deductible in the year they are paid to the fund, subject to the usual limitations. Though they can bear the donor's name, donor-advised funds are not operated as separate entities like private foundations are, but are merely accounts held by the fund.

How does a donor-advised fund work?

The donor establishes an account, names the account, and recommends an investment strategy. Then, the donor makes required minimum contributions of assets, which may include cash, marketable securities, and other types of assets, depending on the fund.

During life, the donor (or the donor's designee) can make ongoing, non-binding recommendations to the fund as to how much, when, and to which charities grants from the fund should be made. The donor may suggest that, upon death, grants be made to charities named in his or her will or other legal instrument such as a revocable living trust. Or, the donor may designate a surviving family member(s) to recommend grants.

Endowed funds vs. non-endowed funds

Endowed funds only distribute income, not principal. Because they are permanent, endowed funds provide a lasting memory of the donor's philanthropic nature.

Non-endowed funds permit a donor to make ongoing recommendations for grants up to the entire fund balance (principal and income).

Income taxes

A donor can generally take an immediate income tax deduction for contributions of money or property to a donor-advised fund if the donor itemizes deductions on his or her federal income tax return. The amount of the deduction depends on several factors, including the amount of the contribution, the type of property donated, and the donor's adjusted gross income (AGI). Any amount that cannot be deducted in the current year can be carried over and deducted for up to five succeeding years.

Total Wealth Tip:

Consider bunching several years' worth of annual charitable gifts into one year and completing a Roth conversion at the same time. Due to the 2018 income tax law changes many Americans are no longer itemizing, this type of strategy can take significant advantage of these changes.

The charitable planning strategies involved with this type of planning are complex and requires the guidance of a trusted and experience advisor, such as a fee-only Certified Financial Planner™ (CFP®) and CPA, who plans comprehensively, and with a complete understanding of your particular concerns and goals in life. At Total Wealth Planning we focus on minimizing your tax liability over your lifetime and the next generation's lifetime.

For more information about the charitable planning strategies we utilize, please contact Rob Lemmons, CFP®, CPA, AIF at 513-984-6696.





 
 
Subscribe To Our Blog

Blog Categories

  • In the News
  • Business Owners
  • Charitable Planning
    • 09/20/2019 - Donor Advised Fund. What is i
    • 10/18/2018 - Charitable giving under the ne
  • Client Experience
  • College Planning
  • Estate Planning
  • Executive Compensation
  • Firm Updates
  • Investments & Market Updates
  • Retirement Planning
  • Security & Privacy
  • Taxes
  • Net Worth
 

INVESTMENT
MANAGEMENT

Your investment philosophy should be grounded in academic research and financial science. Our team will build you an investment portfolio that aims to give you the highest probability of achieving your goals with the least amount of risk.

Learn More
 

RETIREMENT AND
TAX PLANNING

Figuring out how to recreate your paycheck or developing a spending policy should not be an overwhelming exercise. Our team has the expertise to help with retirement portfolio, tax strategies, distribution planning, social security maximization strategies and more.

Learn More
 

HOLISTIC/COMPREHENSIVE
PLANNING

We’ll have discovery conversations, gather and organize your data, then craft comprehensive plans to achieve your life and financial goals. As our ongoing commitment, we consistently monitor and tweak your plan to ensure you’re on track and surprises are minimized.

Learn More

WE'VE BEEN LISTENING
FOR OVER 25 YEARS

Life brings many transitions. Find the right advisor to fit your needs on a fee-only basis, and take the first step in the journey. Total Wealth Planning's team of Certified Financial Planners® guides Cincinnati families and associates through transition.


Total Wealth Planning Associations
WE ARE PROUDLY ASSOCIATED WITH

CONTACT INFO


 

WHAT'S NEW AT TWP


       
CORPORATE EXECUTIVES

WEALTH-BUILDING FAMILIES

RETIREES

BUSINESS OWNERS
ECONOMIC OUTLOOK

BLOG & NEWS

VIDEO LIBRARY

   
4665 Cornell Rd. Suite 160, Cincinnati, OH 45241 4665 Cornell Rd. Suite 160, Cincinnati, OH 45241
513-984-6696 513-984-6696
info@twpteam.com info@twpteam.com
Less Cash in Your Portfolio Yields More Money in Your Pocket
Tuesday, December 3, 2019


SEE MORE >

Follow us on Google+
Blog & News
Follow us on Twitter
Find us on Facebook
DISCLOSURES | COPYRIGHT © 2019. TOTAL WEALTH PLANNING. ALL RIGHTS RESERVED.
GET STARTED
READY TO
GET STARTED?