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Mentor RIA Consulting

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Considering Donor Advised Funds

Posted on December 19, 2018 at 5:34 PM
Currently a very popular charitable giving technique, the donor advised fund makes it easy to fulfill donative intent without a great deal of effort. With the very low contribution thresholds some of the funds allow (Schwab, Fidelity and Vanguard for example), donor advised funds are available to practically any investor for a small initial investment. That investment could be in cash, mutual funds/ETFs, stock and other types of investments. What’s more, the funds offer a wide variety of choices of charitable recipients as well as in the investment allocation of the funds.
Some interesting attributes of these funds include the ability to take the income tax deduction for a charitable donation immediately while deferring the actual distribution to charities for some time. The transfer is of course irrevocable – hence the availability of that immediate deduction –but it permits one to pick and choose the charitable recipients and timing. Of course, it is also important to note that there are administration fees and investment costs associated with the funds and that will effectively reduce the total passing to the ultimate charitable beneficiaries.
If you are considering a donor advised fund, do your homework and understand the costs, limitations and requirements associated with the fund you are considering. Compare this approach to the making of a direct gift to a qualified charity which will be deductible without the additional costs and steps coming with the donor advised fund. For some, the additional control with your own direct gift is more important while others will be very happy with the ease of use and convenience of the donor advised fund. Happy gifting!

Categories: Clients, Investing, Planning

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