Are you looking for a way to have a higher impact on your parish, a school, or service agency through your gifts? Would you like to see a greater opportunity for tax credits from your gifts? A Donor Advised Fund (DAF) at the Catholic Community Foundation (CCF) may well be the answer.
When setting up a DAF, a donor is employing an efficient, centralized route to charitable giving and tax saving efficiencies. Donations to your DAF allow for a tax savings in that year while grants can be made that year and / or in subsequent years. One of the beauties of a DAF is you can receive an immediate tax benefit while spreading out your charitable giving.
While invested in a portfolio chosen by the donor, the investment will continually grow. Many donors actively use a DAF during their lifetime while building resources, which grow tax-free to create a personal and /or family “legacy”, ensuring your philanthropic values will continue to live beyond your lifetime.
DAF donors recommend grants from their DAF at any time. Grants can be made to any 501 (c) 3 nonprofit provided their mission does not conflict with Catholic teaching and values. It is even possible to make anonymous gifts to charities.
If you have a few charities to whom you like to make annual contributions but do not make large enough gifts to make it worthwhile as charitable tax deductions against your annual income tax return, a donor advised fund may help. It is also an effective way for a family to create a giving cycle that could become a legacy. Let’s look at a couple of examples.
Tom likes to make annual contributions to five different charities each year but, his gifts do not really make a significant impact as charitable tax deductions on his annual tax return. Tom decides to open a Donor Advised Fund (DAF) at the Catholic Community Foundation. His initial contribution of $50,000 allows him to take that amount as a charitable tax deduction for the year he opened the DAF.
While these funds are invested by the Catholic Community Foundation, Tom can “advise” annual gifts be made to his five charities from this fund each year. And, if he should decide he wants to increase the size of the fund and secure a charitable tax deduction in a later year, he simply makes an additional contribution to the fund in the year he wants to claim the next deduction.
Another example of a DAF:
Jim and Mary like to make annual charitable gifts to charitable organizations including the two colleges from which they received their degrees. They would like to see their children learn this philanthropic virtue.
A family DAF with the Catholic Community Foundation creates a wonderful way to involve Jim and May’s children in their giving and encourage these young people to identify whom they would like to support with similar gifts. Now the family has an annual giving tool that will allow them to consider gifts to each of their favorite charities. This is not only brining the family closer together in a meaningful activity it is also building a legacy of family giving for years to come.
Making a gift to your DAF, you can take a tax deduction for a charitable contribution in the year of the gift. Then, you can request gifts to your favorite charities be made from that fund in the same and/or future years as you deem appropriate. Also, you can add to your DAF if and when you see another opportunity for an additional large charitable donation with the same tax deductibility.
DAFs are a great alternative to creating a family, private foundation. It not only enables donors to achieve estate planning objectives without the administration, legal, and tax costs of creating a private foundation, it actually creates a more “private” way of administering your philanthropy.
To start your own DAF, please reach out to us to share your thoughts on the subject and consider how the fund(s) might be started.