Donor-Advised Funds Combine Charitable Impact with Tax Benefits

Posted on 10-24-2022

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing how a donor-advised fund might be used to time charitable contributions for tax purposes or to gift appreciated assets:

A donor-advised fund (DAF) is a charitable account offered by sponsors such as financial institutions, community foundations, universities, and fraternal or religious organizations.

Donors who itemize deductions on their federal income tax returns can write off DAF contributions in the year they are made, then gift funds later to the charities they want to support.

DAF contributions are irrevocable, which means the donor gives the sponsor legal control, while retaining advisory privileges with respect to the distribution of funds and the investment of assets.

Donors can take their time vetting unfamiliar charities and exploring philanthropic opportunities. They can wait to take advantage of matching fund campaigns, have money ready to aid victims when disaster strikes, or build up funds over multiple years to make one large grant for a special purpose.

Grants can generally be made to any qualified tax-exempt charitable organization in good standing.

Under current law, there are no rules about how quickly money in DAFs should be granted. However, legislation has been introduced — the Accelerating Charitable Efforts (ACE) Act — that would impose a 15-year limit on the donor’s advisory privileges, among other changes.

You may want to watch for future developments if you are interested in using donor-advised funds to execute a…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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