Volunteering is an excellent way to give back to their communities; however, finding an afternoon to volunteer can be difficult for older adults who are busy maintaining their own homes. Donor advised funds are an easy way older adults can support their favorite local charities.
For us, this approach to our annual giving has lifted a burden, assuring our future giving with no hassle, and protecting us from both error and the IRS, wrote Kendal at Home members Mary and John in the Spring 2013 issue of LeChat, the Kendal at Home member publication. We now have a gero-mantra: It is simplify! Simplify! Simplify!
Read on to discover if a donor advised fund could be the right giving option for you!
What is a Donor Advised Fund?
According to the Internal Revenue Service (IRS), a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, called a sponsoring organization. Donor advised funds can be created from gifts of cash, stocks, bonds, life insurance, real estate, or other tax-deductible assets. Minimum contributions are usually $5,000.
Once a donor makes a contribution, the sponsoring organization has legal control of the assets; however, the donor can advise the sponsoring charity on how it should invest the assets.
Why Choose a Donor Advised Fund?
Donor advised funds are designed to be an accessible, simple, and less expensive alternative to private foundations, according to About.com Nonprofit Charitable Orgs. Donor advised funds are tax-deductible, but their main draw is that the sponsoring organization provides fund management and administrative support, taking care of account, auditing, IRS reporting, and fiscal management, making the entire process easy for you.
Additionally, unlike private foundations, sponsoring organizations can protect a donor's identity if requested.
How Can I Get Started?
Before establishing a donor advised fund, consult with your financial and legal advisors for help devising an estate plan appropriate for you. If you determine you want to pursue a donor advised fund, you must then determine the people you want to have advisory privileges with respect to the distributions of funds and the investments of assets in the account. This may include your spouse or children and your personal financial and legal advisors and will include the sponsoring organization.
Finally, you must determine which sponsoring organization you want to invest with. You can establish funds with large global investment management firms like Fidelity and Vanguard Group or opt to work with local nonprofits, such as the Community West Foundation in Western Cuyahoga County.
Our free guide Tax Relief for Older Adults: A Basic Guide to Benefits provides a basic overview of how you can benefit from charitable contributions when filing. Download it to get a jump on next year's tax season!