Think back to the last time you test drove a car. If your experience was like mine, it was probably awkward.
My wife and I ventured into the SUV market when she was 8-months pregnant with baby number two. Suffice it to say, it was a strange, uncomfortable, and downright weird experience. It’s hard to tell which was worse – the salesman with no filter or the one who sat in the back and refused to speak.
We tested six cars, and as peculiar as those experiences were, we needed that short time behind the wheel to know if this was a car that would work for us. We discovered the brand we’d been loyal to for years really didn’t give us the comfortable experience we needed, and that the brand we knew little about actually fit us perfectly.
Test drives and trial periods lighten the mental load of making some of these big life purchases. In our financial and charitable lives, though, the barriers to testing seem bigger.
The Donor-Advised Fund Test Drive
Donor-advised funds can offer you a way to “get behind the wheel” of a strategic giving vehicle in a relatively low-impact way. If you plan to donate to charity anyway, and you have wondered if using one of the various structured giving vehicles out there would be a fit for you, then opening a donor-advised account offers an easy and short-term test.
With a donor-advised fund, you make a contribution to the sponsoring organization, immediately receive your tax benefit, and then have a designated account from which you can recommend grants to your favorite charities. Opening an account requires minimal paperwork, and at DonorsTrust, as with most other sponsors, there is no required time frame for having your account exist.
That means it’s simple to open an account and explore if the donor-advised fund is the right fit. If it is, then you have a new partner in and new vehicle for your giving. If it isn’t, you can simply make the grants you would have made anyway and close the account.
Here are three more reasons to kick the tires on a donor-advised fund:
Enjoy a more comfortable ride for your year-end giving journey
The end of the year is a wonderful time for celebration, family togetherness, and trying to get too many charitable gifts postmarked by December 31. Many of us wait until the end of the year to do our charitable giving, sometimes because year-end bonuses help determine how philanthropic we can be.
With a donor-advised fund, you can write a single charitable check, and those dollars are then available in your account for grant making. You can still make your slate of year-end gifts, but instead of writing a dozen individual checks or clicking from website to website, you simply send an email or use your provider’s online platform, turning the work of check-writing over to your donor-advised fund staff.
Or, if you need more weeks or even months to determine where to make gifts, you can take that time. Meeting that year-end deadline is no longer necessary, allowing you to focus on impact.
Get directions from someone you can count on
In testing a donor-advised fund, you can go beyond the mere experience of ensuring the mechanics run smoothly. A good donor-advised fund will be able to work with you to understand your interests and serve as a resource to you for expanding your charitable giving.
Different donor-advised fund sponsoring organizations specialize in different areas. At DonorsTrust, our focus is on advancing liberty, free enterprise, and limited government. We regularly have clients ask us for more information about groups they hear about or who ask us if other groups do similar work in issue areas they support. It’s a two-way conversation.
A donor-advised fund shouldn’t simply make it easier to give. It should also help you be more strategic in your giving by answering questions and sharing analysis that enables you to have a deeper charitable impact.
Explore new charitable roads
When you set aside money exclusively for charitable purposes, you can much more easily say yes to new opportunities that you otherwise might skip. In fact, if you’re goal is to increase your charitable giving, a donor-advised fund encourages that. Research by Fidelity Charitable has consistently shown that about two-thirds of donor-advised fund account holders give more to charity than they would have given without such an account.
You have already done the cognitively hard work of “giving it away,” since the funds in your donor-advised account must be used for charity. Making grants is simply an allocation question. When that unexpected but intriguing request comes along, then, it is easier to say yes and test out a new organization just as you are testing out the donor-advised fund.
Go on, jump behind the wheel of your own donor-advised account and see how your own charitable giving account can benefit your philanthropic efforts. You don’t even have to have a salesman in the back seat! If it isn’t for you, you’ll still have supported charities you care about and received the same tax deduction. And if it is a tool that works for you, it is there for as long as you and your family need it.
Would you like more information on how a DonorsTrust donor-advised account could help your charitable efforts? Click here to request a prospectus.