The recent article “Pros and Cons of a Donor-Advised Fund” in the Wall Street Journal offers a helpful primer for those considering a donor-advised fund. Donor-advised funds help donors simplify their philanthropy while reaping the advantage of tax benefits. These benefits are generally better than utilizing a private foundation, plus donor-advised funds offer flexibility for strategic giving—more so than the flexibility (or lack thereof) one gets with checkbook giving.
As Tom Herman, author and former tax columnist for the Journal, notes, donors have more options than ever for choosing a fund provider. Several of the national funds affiliated with commercial banks are better known, but that doesn’t mean they’re a fit for every donor.
Herman says, “Before making your choice, do some basic homework about the fund, its policies and background. Check the fine print for details on fees and other important details that can vary widely from fund to fund.”
What questions should you ask? Herman offers a helpful run-down of such questions. Let’s look at the answers for those contemplating a charitable investment account with DonorsTrust:
Does the fund have a minimum initial investment requirement? If so, how much?
Opening an account requires a minimum initial contribution of $10,000.
For donors under age 40, our Novus Society program allows givers to open a fund for as little as $1,000 and then gain full functionality of the fund when it hits $5,000.
For legacy accounts through our Whitney Ball Legacy Society, there is no initial gift required. Simply complete the legacy application and designate assets in your will or from retirement accounts to fund the account at your death.
If there is a minimum initial investment requirement, what is the fund’s policy if your fund dips below the minimum?
Once opened, there is no required minimum balance that accountholders must maintain. Our hope is that donors will continue to grow and utilize the fund for many years. However, if at some point the fund is no longer a fit, the donor can grant out the remaining balance.
Does the fund have a minimum-size grant? If so, how much?
Minimum grant recommendation is $100.
What are the investment options?
DonorsTrust offers a dozen different investment options, which you can find here. These include three managed funds and nine ETFs of various types. Two of those ETFs are issue-driven funds from 2nd Vote Advisors that may be of interest to those who want to ensure their investments align with their values. More information on those two funds, centered on alignment with pro-life issues and second amendment, can be found here.
Accounts over $1 million have the option to request use of an outside advisor to manage funds that are in the account.
What types of assets will the fund allow you to contribute? Do you have any assets you want to donate that are highly complex and hard to evaluate?
The donor-advised fund is a terrific vehicle for donating complex assets. The most commonly accepted assets at DonorsTrust are cash and appreciated stock. However, we regularly receive gifts of real estate, closely held stock, and cryptocurrency.
We can also accept art and other real property. Complex assets, however, require particular due diligence and appraisal. So, if you wish to donate such things, we will have a confidential conversation to make sure the transfer gets done right. Bottom line: if you’re not sure, just call us.
How much help and advice, if any, would you like to have in researching which charities deserve your support?
This point is one many people don’t think about. Donors with a particular focus area to their philanthropy might find added value in partnering with a donor-advised fund that has specialized knowledge in a certain area.
At DonorsTrust, we know the liberty movement. We understand the landscape of nonprofits that help reduce the size of government, grow individual freedom, and protect our nation’s founding principles. We often talk with our donors about groups that advance these ideas – which we can do because we often talk with the groups engaged in these efforts.
Beyond offering thoughts and advice, though, we place a value in understanding our donors’ goals because we place a premium on preserving donor intent. So, let’s add another question to the WSJ’s list – perhaps the most important one of all:
Will your donor-advised-fund provider honor your wishes should something happen to you, or would the funds in your account drift to causes outside of your own interests?
Your charitable dollars are just that – yours. Working with a donor-advised fund provider that shares your goals can help you increase your impact and put your philanthropic capital toward doing the most good in the world.