Selecting a charity that will use your money wisely and effectively isn’t easy, particularly during this hectic time of year. Donor-advised funds are one solution.
Sometimes you can have your cake and eat it too. However, sometimes you can even have your cake and eat it whenever you feel like it; a definite improvement on an already ideal scenario. When it comes to charitable giving, and making good things happen while working out the right tax implications, having your cake and eating it whenever you want comes in the form of the donor-advised fund.
If you are unfamiliar with the tool, read all about it in a recent Kiplinger article titled “Donor-Advised Funds: Contribute Now, Donate Later.” The process is to set up a donor-advised account at a brokerage such as Fidelity or Schwab. The account is part of a designated “donor-advised fund”. This fund is denominated as a charitable fund from which you can at some time in future designate the transfer of funds to your named charity. Using this devise, You can make a completed charitable contribution to your donor-advised fund this year and secure the tax deduction benefit while you investigate the charity or charities to ultimately receive the contribution even next year or beyond.
Like all things in life, a donor-advised fund is not a perfect solution for a few reasons – the fund makes the decision, ultimately, and the cost of running the fund can eat into donations much like a bureaucracy in a large charity. Nevertheless, this charitable giving option is available and can be very powerful.
Reference: Kiplinger (November 2013) “Donor-Advised Funds: Contribute Now, Donate Later”