Apparently, you often hear about the donor-advised fund, but you are still wondering what actually donor-advised fund is and how it works. Donor Advised fund, also known as DAF, is more like a saving account that is specifically aimed at making donations. This kind of account is usually owned by individuals, families, and even organizations. Furthermore, Donor-advised funds are maintained by certain community trusts or charitable sponsoring organizations. The sponsoring organizations manage the funds or the accounts to generate optimum and consistent giving. They can cooperate with investment advisors to grow the funds. Obviously, this is beneficial to the donors.
Moreover, now the development of donor-advised fund software allows donors to easily access their accounts from computers or personal gadgets. The sponsoring organizations do the paperwork while the donors will receive the report regularly through donor-advised fund software. It only requires the donors to log in to their accounts. Also, the donors are able to recommend which beneficiaries or charities will be given the grants online. However, the sponsoring organizations have the authority to inform the donors whether the beneficiaries or the grantees meet the qualified procedure.
Where to Set Up your Donor Advised Funds?
One of the charitable sponsoring organizations is the Fidelity Charitable Gift Fund. The Fidelity sponsoring organization has been widely known for its Fidelity donor-advised fund program. It allows the account holders to have favorable tax benefits. The account holders may surrender the ownership of their great assets to their Fidelity donor-advised fund and avoid capital gains taxes. In addition, the account holders are assisted by professional advisors to grow their potential assets through investment. Then at any time, they can recommend to Fidelity to make donations to charities or beneficiaries they appoint. It is optional for the account holders to remain completely anonymous or to be recognized by the grantees.
Another well-known charitable sponsoring organization is the Schwab Charitable. The Schwab donor-advised fund provides almost similar forms and benefits to the aforementioned DAF. In General, the difference between Schwab and the Fidelity DAFs is merely found in the minimum fees and investment limitations. Fidelity has no minimum fee while Schwab charges a $250 minimum fee for each account with a balance below $1000, 000. The Schwab donor-advised fund fee is assessed quarterly and charged in annual administrative fees. Each giving account within the first $500,000 value will be charged 0.60% of the assets administrative fee.
The management of the donor-advised fund is established legally under the law. Therefore, each donor-advised fund program or provider, in this case sponsoring organization, has its own donor-advised fund rules which may vary in detail. The donor-advised fund rules should be referred to before one decides to set up an account. Although the taxation may differ from IRS, generally it does not oppose the government rule. In conclusion, donor-advised charitable funds offer modern and flexible ways of giving. To set up your DAF is to optimize your donation yet to minimize your tax expense.