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Donor Advised Funds: How Anyone Can Set Up Their Own Charitable Private Foundation

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Donor Advised Funds: How Anyone Can Set Up Their Own Charitable Private Foundation

As we accumulate wealth, it’s important to use our resources to create opportunities for positive change and shared prosperity in the world. Supporting our favorite nonprofit or causes we believe in deeply does more than make us feel good. It bolsters our communities and sustains good work done by dedicated people to help those in need.

Though we want to make more of an impact than sending end-of-year gifts, most of us aren’t wealthy enough to start our own private foundations.

Or are we?

Let’s take a look at donor advised funds, the easy, affordable way to sustain an ongoing fund that solidifies our legacy of giving. Here are three key advantages they offer.

  1. They are easy to set up and maintain.
    Opening a donor advised fund is a lot like opening an IRA. The minimum initial investment can be as low as $10,000, and it can be set up in a day. For balances under $500,000, investment options are simple and straightforward, from conservative to aggressive. Above $500,000, you can use those same options or nominate your financial advisor to guide investment on your behalf. Then the fund manager handles everything from there, including the actual donations.

  2. They allow you to be more flexible and generous in your giving.
    Because you’re putting everything into a fund, the money is expected to build over time through investment. That means more money could go to the causes you care about the most. You tell the fund manager how much you want to give, to whom and at what times. Individual donation amounts can be as little as $250 at a time, meaning you can support as many causes as you like with a predetermined list of organizations, amounts and a schedule for giving.

  3. They give you a full tax deduction up front instead of itemized across multiple gifts.
    One of the consequences of the larger standard deduction on federal tax returns is that nonprofits are seeing donors who “take a year off” from giving so they can accumulate deductions to itemize every other year. With a donor advised fund, you can put in as much money as you want on the schedule that is most beneficial to you and get the full tax deduction up front. That means you can still take your every-other-year deductions while scheduling donations to go out more regularly every year. It’s good for you, and it’s good for the nonprofit.

While donor advised funds have traditionally been run through nonprofit foundations or big investment houses, smaller firms are gaining that ability through outfits like Raymond James Financial Services, Inc., which operates a public 501(c)(3) charity called Raymond James Charitable. Through its donor advised funds and other investment vehicles, Raymond James has distributed more than $485 million in charitable grants as of Feb. 28, 2019.

That kind of work opens the door to even greater generosity to an even greater number of people. If you’re used to writing a few end-of-year checks to a handful of organizations, donor advised funds like the one we offer through Raymond James could be a way for you to do more with your giving dollars.

 

Gary Collier is the manager of Pinnacle Asset Management. He can be reached by phone at (615) 690-1418 or by email at [email protected].


Raymond James and it advisors do not provide tax or legal advice. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes.

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