Donor-advised fund usage is on the rise. This rise has been noted by The Wall Street Journal and other periodicals. A recent survey by Fidelity noted the same.
It used to be that, when someone started to think about becoming “philanthropic,” that person set up a private foundation, which involved legal costs and filing an annual tax return. Often the process proved cumbersome. Today, the answer has become donor-advised funds for the following 5 big reasons:
1. They’re simple. Donor-advised funds are simple to set up and maintain. You can open up an account online (or call 913-310-0279). You can do all your giving through the fund and get just one tax receipt.
2. Easy administration. With a donor-advised fund, there are no tax returns. You can do your giving online. You make the gift, and you get the deduction.
3. Favorable tax treatment. With a private foundation, you get to deduct only 30% of your income on an annual basis, whereas with a donor advised fund, the allowed deduction is 50% of income. In addition, there are no excise taxes in a donor-advised fund, unlike the private foundation.
4. Lower Costs. In a private foundation, the cost of administration typically has to be borne by the founder. Further, the annual tax returns and recordkeeping typically outweigh the cost of the donor-advised fund. Donors have to ask themselves, “How much is my time worth?” before taking on the cost of private foundation administration.
And finally, what is the fifth, and the big reason that more and more Christians are using donor-advised funds?
5. Community and creativity. By becoming part of a Christian donor-advised fund organization, Christians find the opportunity to celebrate together. They find an opportunity to meet together by way of Generous Giving events. (See www.generousgiving.org.) And when Christians gather together, the creative energy of God’s people leads to new and creative ways to give. This may include giving to individuals through organizations like Helping Hands, www.hhmin.org, or it may simply include innovative ways to give noncash items through www.idonate.com.
Donor-advised funds have been increasingly employed by even the ordinary giver because the accounts can be started for relatively nominal amounts. They’re part of the growing trend of making giving mainstream.
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Published November 1, 2010
Topics: Giving Strategies