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Creating a donor advised fund can be the perfect way to give back to charities. About five years ago, “Giving Tuesday” was created and is celebrated the first Tuesday after Thanksgiving. This day celebrates and encourages giving in both monetary and non-monetary ways. Just on that day alone, approximately $117 million was raised online for charities. The increased awareness for charitable giving is a testament to the good-hearted and selfless nature of many individuals and corporations.Donor Advised Funds - Carnegie Investment Counsel at Ronald McDonald House Cleveland

We here at Carnegie recently spent an afternoon cooking lunch for those in residence at the Ronald McDonald House in Cleveland. Sometimes it’s best to get away from the grind of “every day” life and give back to those in need and less fortunate. As someone who spends the majority of his days in the office, I really enjoyed preparing a meal together for those in need with my fellow co-workers.

One of the ways we have helped encourage charitable giving is through the use of Donor Advised Funds.

What is a Donor Advised Fund?

A Donor Advised Fund can be thought of as a personal charity account in their own name that is funded from either cash, real estate and or appreciated securities. This Fund is used to make grants to charitable organizations. An example of this is if someone is holding appreciated stock in a public company, they can gift the stock into a Donor Advised Fund and receive a charitable deduction for the value of the shares on the day they are gifted into the Fund. They also would avoid paying capital gains on the shares that are gifted into the Fund. Therefore, it is advantageous from a tax perspective to use appreciated securities.

From there, you can direct gifts to 501(c)(3) charities of your choice from the Fund. The tax deduction is received in the year the assets are gifted into the Fund, not when gifts are made out of the Fund to charities. This can be easily facilitated via Donor Advised Funds that can be set up at a very low cost at custodians such as Schwab or Fidelity. Below are some interesting statistics regarding charitable giving:

  • Individuals gave $265 billion to charities in 2015, a 3.8% year-over-year increase
  • Fidelity Charitable has granted over $24 billion to public charities since its inception over 25 years ago
  • Vanguard Charitable since its inception 19 year ago, has granted approximately $6 billion to public charities
  • In 2016 alone, Schwab Charitable granted $1.2 billion worth of charitable gifts and supported over 109,000 different charitable organizations.
  • According to Schwab Charitable, the largest grants by sector in 2016 are Health & Human Services (28%), Religion (26%), Education (16%), Social Services & Benefits (10%), Arts, Culture & Humanities (9%), Environmental Issues & Animal Welfare (8%) and International & Foreign Affairs (5%)

At Carnegie, we have helped facilitate, transfer assets and recommend gifts on behalf of our clients for many years. Instead of having to write checks or gift stock to every charitable organization, a Donor Advised Fund is a low cost, simple way of managing and organizing your charitable giving efforts while at the same time supporting the charities you feel strongest about and receiving a tax deduction for the gifts into the Fund. While there are many ways to give back to the less fortunate, a Donor Advised Fund could be a worthwhile consideration.

Similar article: Giving Tuesday Advice: Give Your Income Taxes to Charity