A donor-advised fund (DAF) enables 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 investing and when you are ready to start making gifts, you recommend grants from your fund at Legacy to be made to your favorite charities. This can be done using your name, or anonymously if you wish.
Think of your DAF (and by the way, you can create any kind of name for it that you like) as an investment account that grows the corpus and also organizes your personal charitable giving. Instead of writing lots of checks to multiple individual nonprofits, you can make one or more larger contributions to your DAF. Then, whenever you want to give to the nonprofits you want to support, you contact Legacy to coordinate the gifts coming from your DAF. Legacy will ensure that the organization(s) are in good standing and qualify as an IRS-designated charity.
How does it work?
Community Foundations have the ability to effectively manage DAFs in ways important for donors’ comfort and ease of giving. The income stream generated from all of Legacy’s invested assets allows for DAF growth. It is the donor’s choice as to whether to only gift the amount realized from the DAF’s invested growth, or to spend it down over a period of time.
For example, a donor creates The Robert Janssen Donor Advised Fund at Legacy with an initial contribution of $25,000. Robert’s charitable tax deduction is $25,000 that year. However, Robert wants to keep adding money to the DAF for several more years until it reaches $50,000. His generous, annual contributions adding to the DAF, along with Legacy’s investment performance, means that he’s likely to reach that $50,000 goal in just a few years.
With excitement, two years later, his favorite charity announces a new building campaign starting that Robert wants to donate towards. His choice is to pledge a significant gift over a number of years so he can see whether they are reaching their promised milestones. He recommends to Legacy a $10,000 grant from his DAF which is approved and sent to the charity, restricted to the campaign. Robert makes the same recommendation for three of the following years and he fulfills his building pledge. In addition to fulfilling his pledge, monies left over in the DAF have grown from its’ invested performance; he now has an additional $5,000 in the DAF which he can add an extra gift/grant to the building fund, or let it sit and grow for his future giving to other organizations.
Creating a Donor Advised Fund at a Community Foundation has the benefit of choosing to spend it down or to keep it going with the never-ending perpetual nature of the original gift generating additional monies from the investment corpus. Since Community Foundations provide no programs or services of their own and have extremely low administrative costs, they are donor-centered managing the outflow of support to external organizations. They are a tremendous safety net for their ability to provide the strongest, most ethical, long-term repository for investing in a way that benefits donor’s charitable interest. Since it operates solely to provide an annual monetary outcome to help donors who want to help nonprofits deliver valuable programs and services, it has a singular interest in that objective only. And should a nonprofit’s programs or services no longer align with the donor’s original intentions, the Foundation’s board of directors and/or staff will apply all resources necessary to find the next best and most closely aligned replacement.
By partnering with Legacy, DAF funds are not only “at the ready” for deployment by the donor, but they continue to grow beyond the original corpus, as well as offering extreme ease in having Legacy administer the process of gift-giving.
Legacy Endowment is a North County San Diego regional resource for helping people create giving plans to benefit beloved charities, pet passions, community projects, or to distribute scholarships and advance special projects. We invite you to learn more about our highly personalized approach to planning your future charitable intentions. Together, we can create a lasting legacy customized to your wishes.
There are many benefits of establishing a fund at Legacy Endowment. Learn about the funds we support, the approach we take and how that aligns with your legacy planning.
Your Legacy Starts HereContact us today to set up your own personal or family fund to support your favorite non-profits.⠀
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