If you’re looking for an easy way to organize your legacy, donor-advised funds (DAFs) can be the best option for you if you’re looking for an easy way to organize your legacy.
Donor-advised funds can be a useful tool for legacy planning, enabling you to make donations to charity and suggest grants to other organizations over time.
What are Donor-Advised Funds?
A donor-advised fund (DAF) is a type of charitable giving account that enables you to contribute to a public charity and recommend grants to additional charities over time.
Once the contribution is made, the funds are invested and can grow tax-free, allowing you to recommend grants to other charities over time. You can contribute cash, securities, or other assets to a DAF, and you can recommend grants to any IRS-qualified public charity.
There are different types of DAFs, including those offered by community foundations, religious institutions, and financial institutions. Each type of DAF has its own set of rules and fees, so it’s important to research your options before making a decision.
Advantages of Having a Donor-Advised Fund Early
By making a contribution to a DAF, you can receive an immediate tax deduction and grow your funds tax-free, allowing you to recommend grants to other charities when the time is right including those that may not accept direct donations from individuals. This can allow you to support a wide range of causes and organizations that are important to you.
Another advantage of having a DAF early is that it can simplify your record-keeping and administrative tasks. Since the DAF sponsor is responsible for tracking your contributions and grants, you don’t have to worry about keeping track of receipts or paperwork.
Having a DAF can also make it easier to involve your family in charitable giving, as you can name your children or other family members as advisors to the fund.
How is a Donor-Advised Fund Different from a Private Foundation?
Although private foundations and DAFs both serve as platforms for charitable giving, there are some significant distinctions between the two. The degree of involvement and control you have over each choice is one of the key differences.
With a private foundation, you have exclusive control over the investments and grants the foundation makes. This may be both a blessing and a burden because it enables you to be very involved but also comes with a lot of administrative work and responsibility.
On the other hand, with a DAF, you make a contribution to a public charity that manages the fund on your behalf. While you have the ability to recommend grants to other charities, you don’t have direct control over the investments or grants made by the DAF sponsor.
Another significant difference between DAFs and private foundations is the cost. Private foundations typically have higher administrative fees and require more legal and accounting work to set up and maintain.
Meanwhile, DAFs have lower fees and are generally easier to set up and manage.
Work with a Financial Advisor
If you’re interested in setting up a donor-advised fund as part of your legacy planning, you should consider working with a financial advisor who can help you navigate the options and make informed decisions.
A financial advisor can help you determine the right type of DAF for your needs, select the investments for your fund, and recommend grants to charities that align with your values.
At Robert Emmer with Silversage, our team of experienced financial advisors can help you create a comprehensive legacy plan that includes a donor-advised fund. We can help you set up the fund, select the right investments, and recommend grants to charities that align with your values and goals.
Contact us today to schedule a consultation and learn more about how we can help you harness the power of DAFs for your legacy.
DISCLAIMER:
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. For version 8.1 only, please add: The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ-100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.