Donor-advised funds: A solution for streamlining your charitable giving
November 30, 2018
Believe it or not, the holidays are approaching. Time with family inspires conversations about giving. And as the year end approaches, people often consider tidying up their financial picture before the end of the tax year. These are the two big topics that, every year, bring people to BCF to find out about donor-advised funds, the go-to giving strategy for year-end.
BCF has decades of experience with donor-advised funds and today manages more than 400 of these flexible giving vehicles. Donor-advised funds are the perfect instrument for end-of-year charitable giving, because you can contribute to the fund right up to December 31 to secure a charitable tax deduction, and decide now or later about distributions to specific charities.
Given new tax regulations, some financial advisors are recommending that clients contribute to a donor-advised fund in one year a large enough sum to qualify for itemization and the charitable tax deduction, then using that fund to make distributions to charities over two or more years.
Donor-advised funds are used by individuals, by families, by businesses and even by private or family foundations. A donor-advised fund also makes a great gift – or a stand-in for a gift registry on a special occasion.
Here are some of the top situations where a donor-advised fund is useful.
Breaking up stock
Using appreciated stock for charitable donations is frequently recommended by financial advisors. But it can be challenging to give appreciated stock to multiple charities because of the time involved in breaking up the stock. Here is another place where donor-advised funds shine. You can donate the entire block of stock to a donor-advised fund in a single transaction. BCF then sells the stock (and, because BCF is a charitable organization, the transaction is not subject to capital gains tax) and the total value of the stock is credited to your donor-advised fund. Subsequently, you can easily recommend grants from your fund to however many organizations you wish. BCF will take care of all the administration of those donations.
When a person receives a windfall, like an inheritance or a large salary bonus, donating a portion of the windfall to charity can help offset taxes. But what if the amount you want to donate is beyond the level of your usual charitable giving? You might need time to plan which charities you want to benefit, and how much each should receive, and when. Through a donor-advised fund, you can “buy time” to do this.
Occasionally, a family foundation might need to make an additional distribution at the end of the year to fulfill its 5% required annual payout. A donor-advised fund can provide a way in which the family foundation can make a qualified distribution, because a donor-advised fund is part of BCF, a charitable organization. The family foundation trustees can later consider what grants to recommend from their donor-advised fund, either supplementing their existing giving program, or branching out in a new direction.
What else does a donor-advised fund at BCF offer to a donor, aside from ease of use and tax-advantages? BCF has an experienced staff able to provide personal service. We know Baltimore and can help donors explore new areas of interest and identify the charitable organizations where they can make the most impact. And, with Donor Central, BCF’s online donor portal, a donor can review their fund history and recommend grants at any time, day or night, from their computer, tablet or smartphone.
Have other questions for us? Call 410-332-4171 or email: email@example.com
Find out more about opening a charitable fund at BCF.