Did you know that donor-advised funds offer great flexibility, generous tax benefits and an easier way to manage your charitable giving?
You probably did. If you’ve been around this blog at all, you’ve certainly heard us repeat that refrain many times (but if you are brand new to donor-advised funds, here is a great resource to introduce you to the key benefits).
Ever since I came to DonorsTrust, though, I have been fascinated by the variety of ways in which our clients use their accounts. Here are three of those that might give you an idea how you also could benefit from this great tool.
Use excess income to easily become more charitable
Are you required to withdraw funds from your IRA that you don’t particularly need? Did you write a book that continues to kick back royalties every few months? Do you sell Amway, Avon, or Norwex just for fun and want to use that extra money for charity?
For those lesser amounts of money that aren’t essential for you to pay the monthly bills, a donor-advised account offers you an easy place to squirrel funds away for charitable purposes. While the income would be taxable, because it goes straight into your charitable fund, you can write off those dollars as a charitable gift.
Designate a donor-advised fund as your charitable beneficiary on a trust
Charitable lead trusts (CLTs) and charitable remainder trusts (CRTs) offer many great benefits for your estate tax plans. I won’t get into the intricacies of these tools now (though our CFO Jeff Zysik has authored helpful posts on CLTs and CRTs that you might find helpful). One thing common to both tools, though, is the requirement for a designated charitable beneficiary.
Traditionally, one might choose a single organization as the beneficiary. Many of us support a variety of charities, though, and might want a trust to do the same. A donor-advised fund allows a donor to specify his or her fund as the charitable beneficiary. Once in the donor-advised account, those dollars are available to be granted to multiple charities. Suddenly those dollars can be leveraged to help lots of organizations instead of just one.
Offer your children a path to wise charitable giving
As with so many things in life, cultivating a charitable giving practice is best learned by doing. Consider establishing a donor-advised account for your children – making them the advisor – to give them the freedom to learn the act of philanthropy. Though you might seed the account initially, over time they would hopefully come to value the ability to give and begin investing their own charitable capital.
Using a mission-driven donor-advised fund such as DonorsTrust offers a way to put light guardrails around the giving. While you want to encourage your kids to investigate organizations and give as they see fit, if it is your money, you wouldn’t want to resources going to groups antithetical to your principles.
People use donor-advised accounts in an assortment of ways. That flexibility is one of the great benefit of these funds. With a donor-advised account, donors can fund the charitable efforts in which they believe in ways that work with their lifestyle.