Navigate your way to philanthropic peace of mind with these fun facts about charitable-giving accounts. These tips are a powerful compass, charting the way toward greater philanthropic freedom. Get your bearings and start your journey toward simple, secure, tax-advantaged giving.
- A donor-advised fund simplifies giving.
Who needs bear grease when you can wiggle your way out of an administrative headache by opening a donor-advised fund — sometimes called a giving account? The tedious administrative work of confirming a charity’s 501(c)(3) tax status, sending the contribution, and receiving any follow-up correspondence from the charity is all handled by the donor-advised-fund sponsor.
What’s more, account holders don’t have to go fishing for all the charitable receipts they accumulate over the course of a year. Instead, with a giving account, keep track of a single receipt that we send to you before Uncle Sam comes knocking at your door on Tax Day.
- Giving accounts can help you save a significant amount of money in taxes.
Groups that offer donor-advised funds are public charities, conferring the same tax benefits you enjoy from giving to any other 501(c)(3) public charity. What are some of those benefits? Here are just a handful of the tax benefits that come with charitable-giving accounts.
Giving accounts in some ways are far more tax-advantaged than private foundations. When contributing cash to a giving account, for example, many givers are eligible to take a deduction of up to 60% of their adjusted gross income (AGI). Private foundations, by comparison, are limited to 30% of AGI.
Donating real property — such as art, appreciated stock, real estate — is also more tax-advantaged when using a giving account compared to a private foundation, as donors can receive an immediate tax deduction of up to 30% of AGI versus 20% at a private foundation.
- Giving accounts offer flexibility when crafting a legacy plan.
Estate planning can sometimes feel like trying to light a campfire: It’s time-consuming, complex, and downright frustrating. Incorporating a donor-advised-fund account as part of an estate plan, however, makes the charitable portion of estate planning a breeze.
Instead of naming individual charities as beneficiaries in your estate-planning documents, you can create a donor-advised-fund account and name the charity sponsoring the account as the charitable beneficiary of your estate.
Any changes you wish to make to the charitable portion of your estate plan can then be handled simply by memorializing the changes with the sponsoring organization, which can be done without a lawyer or without making modifications to your last will and testament and other testamentary documents, such as trust agreements.
The fund can also serve as the charitable beneficiary for more complex tools such as charitable remainder trusts (CRT), charitable lead trusts (CLT), and even private foundations. All of these tools can work in concert to help you craft your legacy plan.
- Recommend grants anonymously or make your gifts public — it’s up to you.
Some people value the recognition that can come from charitable giving. Others are ambivalent to recognition beyond a polite “Thank you” note. Still others prefer to do their giving privately and without any recognition.
Giving accounts offer you any level of privacy you’d like from the recipient organization. The level of privacy can even change grant to grant. A giver can ask the fund provider to share their full name with one grantee and keep their identity private from another.
Why do some choose to do their giving privately? As with any charitable decision, every person is different. Giving privately helps donors avoid the mountain of solicitations that otherwise accrue over time.
Some givers, meanwhile, have religious reasons for giving anonymously while others may be supporting a sensitive or personal cause that could strain familial relationships or professional harmony.
- Accelerate your giving.
Many people find that a funny thing happens once they begin using a donor-advised fund to manage their giving: They start giving more money to charity. There are three main reasons for this.
First, donors can contribute highly appreciated assets into the account. Rather than give out of cash reserves, you may have more to give when giving from stocks, privately held securities, real estate or cryptocurrency. These are both tax-smart and have the benefit of letting you donate more than you otherwise might.
Second, donors have the option to invest the charitable dollars in their account. Your charitable dollars, if invested, grow tax-free, with the gains credited back to the account, allowing you to make an even greater charitable impact over time.
Finally, many donors report after opening a giving account that they give more money to charity simply because the donor-advised fund gives them a system for their giving.
When needs arise, money is already in the account and ready to deploy to their favorite charities. Year-end statements make it easy to understand the full picture of one’s giving, see patterns and become more strategic.
Open your giving account today
Stop roughing it with charitable giving. Come in from the philanthropic cold with a donor-advised fund and remember that it matters where you pitch your tent. DonorsTrust was built to serve conservative and libertarian donors committed to advancing liberty and civil society with their giving. Reach out to us or visit www.donorstrust.org so we can partner with you as you navigate your way to a new frontier in your charitable journey.
Carolyn Bolton is director of communications and marketing at DonorsTrust, a mission-driven giving-account provider based in Alexandria, VA. You can meet with DonorsTrust representatives and attend their reception at FreedomFest, the world’s largest gathering of free minds, July 12-15 at the Resanant Center in Memphis, Tennessee.