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Donor Advised Funds


Donor Advised Funds  

A charitable giving vehicle which enables a donor to make an outright, irrevocable and anonymous cash contribution through a simple letter of agreement with one non-profit, which may then give the money to another non-profit, which is the donor's real intended recipient.

First, the donor contributes the money to a non-profit group that is a tax-exempt 501(c)(3) organization and signs a letter of agreement with the group that sets up the fund that holds the money.

Second, the group agrees to act as a steward of the contributed money (the fund), and technically may do anything with it they please, but the letter of agreement recognizes that the donor may recommend that the money not be kept, but transferred to another specific 501(c)(3) organization, which, although not stated in the agreement, but is understood by both parties, is the real intended recipient.

Third, when the real intended recipient gets the money, it appears to be a gift from the steward 501(c)(3) group, and the original donor may choose to be identified or to remain anonymous.

According to law, as long as the donor's recommendations are non-binding, the donor will receive an income tax deduction for the monies contributed and remain anonymous. In actual practice, steward organizations almost always give the money to the intended recipient.

The Donor Advised Fund may be temporary or permanent. Permanent funds may include securities which generate dividends, which must be distributed each year, making the permanent Donor Advised Fund much like a small foundation itself.

BENEFITS

The donor may stay actively involved in a permanent Donor Advised Fund, recommending different charities to receive distributions from the Fund each year.

The donor enjoys administrative convenience because the steward non-profit handles all the paperwork and legal  issues of the Fund.

Giving to other charities may be done anonymously.

Donor receives an immediate income tax deduction for the full value of the gift.

Bypasses capital gains taxes on long-term appreciated securities.

A Fund can be established quickly and easily, with a minimum of paperwork.

The final non-profit recipient of the money can prove that it received the donation from another non-profit organization, even though an anonymous individual was the real originator of the donation.

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