Let’s start with a bold statement. Whether you like our current government or not, there has always been one positive thing positive to be said for two centuries of U.S. history: those who are generous in their charitable giving are and have always been provided favorable tax deductions and/or offered various solutions to reduce or completely eliminate capital gains. Of course, it can also be said some layers of complexity have been added over the decades. But in essence, the greater good of such historical nonpartisanship still favors those who are charitably minded by offering wonderful tax advantages while helping important causes.

Donor-advised funds (DAFs) can enable you to make tax-deductible charitable contributions immediately to receive a current-year tax deduction, but without having to identify nonprofit beneficiaries you want to give to right away or even in that current year. Instead, your gifts are invested so that they may grow with performance-based investing and when you are ready to start making gifts, you recommend grants from your DAF using your name or anonymously if you wish.

Many of us remember walking door to door collecting dimes or helping to fill a community chest for a special project. We were instilled with personal and family values about helping others which do not generally change much over the years. While we may be influenced to give contributions due to medical issues such as cancer or heart disorders, or perhaps by wanting to help veterans and seniors, our decisions about how much we can give will sometimes change. Perhaps a favorite organization is no longer offering a specific service or program. Or perhaps they are undergoing leadership or organizational changes and you want to see how it all shakes out. By creating a DAF with a community foundation, donations are invested built on the principle of protecting and growing the corpus until you’re ready to make decisions. Instead of writing lots of checks to multiple individual nonprofits, you can make one or more larger contributions to your named DAF. Then, whenever you want to give to a nonprofit organization, you contact the community foundation to coordinate the gifts coming from your DAF. The foundation will ensure the organization(s) you’ve recommended are in good standing with and qualify as an IRS-designated charity and an added plus, you can do all of this anonymously. Organizations are sent the grant/gift but your contact information can be held back, adding a layer of anonymity for those who don’t want pestering calls or mail.

Community Foundations have the ability to effectively manage DAFs in ways important for donors’ comfort and ease of giving. The income stream generated from invested assets allows for DAF growth. It is the donor’s choice as to whether to only give the amount realized from the DAF’s invested growth each year, spend it down over a period of time, or a combination of both. Instead of banking the money for 1-4% in a money market account and paying taxes on the interest earned, contributions into DAFs provide a tax deduction and the investment can steadily grow at 6% per year.

Creating a Donor Advised Fund at a community foundation is a tremendous safety net for its ability to provide one of the strongest, most ethical, long-term repository for investing in a way that benefits a donor’s charitable interests. Legacy Endowment Community Foundation is a regional resource for Fallbrook, Bonsall, Rainbow and De Luz helping people create giving plans to benefit beloved charities, pet passions, community projects, distribute scholarships to help sustain and improve the quality of life for those living nearby.

This is a reprint of Jean Larsen’s article in the Village News on July 6, 2023.

This is the first of a series of articles written to share important information about charitable giving and the various ways you can easily support your favorite charities and community.