Wednesday, December 10, 2014


Here is a year-end tax tip.

If you need an additional contribution deduction for 2014, but do not want to actually make the donation to the church or charity until 2015, or are not sure to whom you want to give, you can use a “Donor-Advised Fund”.

The Internal Revenue Service tells us -

Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.”

The National Philanthropic Trust, nation's largest independent provider of Donor-Advised Funds, puts it this way -

An easy way to think about a donor-advised fund is like a charitable savings account: a donor contributes to the fund as frequently as they like and then recommends grants to their favorite charity when they are ready.”

And explains how it works -

“1 You make an irrevocable contribution of personal assets.

2. You immediately receive the maximum tax deduction that the IRS allows.

3. You name your donor-advised fund account, advisors, and any successors or charitable beneficiaries.

4. Your contribution is placed into a donor-advised fund account where it can be invested and grow tax free.

5. At any time afterward, you can recommend grants from your account to qualified charities.”

You can contribute $5,000 to a “Donor Advised Fund” today and get a $5,000 2014 tax deduction, but you do not have to send the money to the charity until 2015.

Most mutual fund houses offer a Donor-Advised Fund – for example the Fidelity Charitable Gift Fund, the Schwab Charitable, and the Vanguard Charitable Endowment Program.     .  

You can also establish a Donor-Advised Fund at a local community foundation.  The Council on Foundations' Community Foundation Locator can help you find community foundations in your area.


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