Updated: Feb 1
Its that time of year. I get to see all my clients (seemingly almost all at once) and most of them are very charitable. Large donations to church, but a lot of time also to other charities.
What is one of the number one problems with making a larger donation to any charity besides your church? Junk mail requests. Many are designed with a slick sales pitch. “Give now or these people will die!” “Give now and we will match your donation.” “These people are suffering; can you help now?” etc. etc. etc.
Here's a great idea that allows you to make anonymous gifts to charities and avoid the follow-up junk mail. (Of course, you may enjoy getting all that junk mail, in which case you can stop reading any further.)
The tool is called “Donor-Advised Fund” or DAF for short. Basically, you donate a lump sum to a branch of a financial institution, which manages the fund. In return, you can claim a current charitable deduction. Then you designate those charities you deem to be worthy of your generosity. Although the financial institution legally controls the money, you essentially decide who gets what, when, where and how.
Many financial institutions require an upfront gift of at least $5,000, some may go as high as $25,000. They will charge a fee (normally from 0.5% to 1% of the fund assets).
When you give to a DAF, you get an immediate charitable donation. Remember in one of my prior columns I talked about bunching up Itemized Deductions into one of a two year period. Using a DAF is one of the ways to accomplish that. The only downside is that the new $300 charity deduction if you don’t itemize is not counted with a DAF contribution.
Its actually quite easy to set up a DAF. Many known organizations have setup such funds. One well known in our area is The Community Foundation of Western Nevada. (www.nevadafund.org) You can also go to well known financial entities like Fidelity, Charles Schwab and Vanguard.
A good DAF fund sponsor will help you vet charities if you don’t have a specific organization in mind, but do want to support a particular type of activity. Example. You want to help out orphaned children in Northern Nevada. Which charities are best at serving that need?
When you make a donation to a DAV, those funds are out of your estate. So, if you are in the final stretch of life and don’t have charities named in your will or trust, but want to see a large portion of your estate going to charity rather than your squabbling heirs, you can contribute any amount you with to a DAV with instructions on certain charitable services to give to.
One limitation. You can not benefit from your own donations. Nor can the funds be used for Political purposes.
Did you hear? Prov 22:9 says, “He who has a generous eye will be blessed; for he shares his food with the poor.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.