Philanthropy Made Easy: 3 Do’s and Don’ts for Your Donor Advised Fund
A donor advised fund is one of many types of giving vehicles you can establish at Greater Houston Community Foundation (Foundation). Field of interest funds, designated funds, unrestricted funds, and scholarship funds are also popular and can make a big difference in the community while also fulfilling your goals for tax and charitable planning.
Imagine being able to support your favorite charities and causes with ease, while also enjoying significant tax benefits. That’s the power of a donor advised fund (DAF). A DAF is a simple and flexible way to give to charity, allowing you to make a tax-deductible contribution of assets including cash, publicly traded stocks, bonds, other securities, securities, business interests, life insurance policies, real estate, and many other appreciated assets. With your DAF, you can then recommend grants to your favorite charities, helping them meet pressing community needs as they arise.
Your gifts to your donor advised fund are tax deductible transfers to the Foundation, which is a charitable organization recognized under Internal Revenue Code Section 501(c)(3). Greater Houston Community Foundation follows the Internal Revenue Service’s requirements that disbursements from your DAF meet certain important qualifications to preserve that charitable tax status–for everyone’s benefit. It is always advisable to consult with a qualified tax professional who can offer personalized guidance tailored to your specific circumstances and objectives.
Continue reading: What is a donor advised fund?
3 crucial tips for success with your donor advised fund
- DON’T: Use your donor advised fund to satisfy a personal pledge to a charitable organization, such as to a capital campaign.
DO: Develop a strategy with one of the Foundation’s philanthropic advisors so you can achieve your intentions to support your favorite organization’s fundraising goals.
- DON’T: Use your donor advised fund to support a private family foundation. Donor advised funds at the Foundation fall under a different (and more favorable) set of IRS rules than private foundations.
DO: Reach out to our team of philanthropic advisors to learn how your DAF and private family foundation can work together to achieve your charitable goals. Some fund holders even decide to close their private foundation and consolidate their giving with the Foundation to achieve greater impact, save on expenses, and achieve better tax results.
- DON’T: Use your donor advised fund to buy tickets to fundraising events, such as galas and golf tournaments, where the cost of the ticket is not fully tax deductible (also known as a bifurcated gift).The reason for this is that the IRS views the taxpayer as receiving benefits from the event (food, drinks, swag), and this “private benefit” muddies the waters of tax deductibility. Even if a portion of the ticket is deductible according to the charity, it’s still not a permissible distribution from a donor advised fund.
DO: Reach out to the Foundation if you’re asked to sponsor a fundraiser. We are happy to discuss solutions to achieve both your charitable goals and goals for getting involved with the event.
Your Philanthropic Partner
Whether you’re a financial advisor looking to partner on your high-net-worth client’s philanthropic and estate planning, or you’re a philanthropist looking to establish a donor advised fund to enhance your giving strategy, engaging with the Foundation can be a powerful thing.
When you partner with the Foundation, you’re gaining a trusted ally in your philanthropic journey. Our team of knowledgeable philanthropic advisors provide personalized guidance and support, leveraging their extensive network and expertise to help you achieve your charitable goals.
Ready to start your journey? Reach out to learn more about how we can help you achieve your philanthropic vision.
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