Donor Advised Funds

As expected during a financial crisis requests for donations are flooding in. 

I enjoy donating to various charities. My apartment building in New York set up a GoFundMe page to create a bonus pool for all the staff. It is not tax deductible but under the circumstances I don’t care. I gave.

I read somewhere that if you don’t have the time to volunteer, writing a check is just as valuable.

I started donating when I could pay my bills and had some money at the end of the year. Sometimes I donated to charity as a holiday gift instead of buying presents.

Regardless the size of my donations, some big and some small, I’m receiving requests from all the charities I have supported over the last 20 years.

If you are in a tax bracket where you itemize your tax return, showing charitable donations every year seems to lessen the impact of hearing how much you still owe. 

Having the financial resources to make charitable donations and receive a tax deduction is a double benefit. Or going through your closet and setting aside a bag or box to donate. Or your bookshelf. Even your kitchen.

The only problem is staying on top of all the receipts. Depending on the charity, I might receive an acknowledgment letter in a few weeks. Or, as has happened to me recently I  spent countless hours trying to pry a receipt out of a charity.

Come tax time I must round up all the receipts. Filed under “C”. Most of the time.

There must be a better way to organize giving. 

One way to donate and do away with collecting receipts is to create a Donor Advised Fund.

The way a DAF works is to combine investing with charitable giving.

When you set up a DAF there is a minimum amount required. Typically, five thousand dollars. You fund your account and immediately receive a tax benefit. Then you can begin to choose from the millions of charities.

Today many of the large investment firms like Schwab and Vanguard offer Donor Advised Funds.

With any DAF there is an administration fee.

If a charity is listed in the DAF program it means the charity is real. You don’t have to figure it out or try to look up the validity of the charity.

When you establish a DAF, you can choose what to invest in. The choices tend to be a limited selection of mutual funds . 

The idea is that your money can continue to grow, increasing the amount of your donations.

One of the downsides is that there is not a time limit as to when funds are dispersed to charities. Money can sit for years. This is an issue that is under review as the intention of a DAF is to establish a program of regular giving.

Donor Advised Funds are a way to make charitable giving part of your long-term financial plan.

If you are not ready to make a big dollar commitment, giving $10 here and $20 there always makes a difference.

If you choose to use a GoFundMe platform make sure you are giving to a charity that has a 501(c)(3) designation for tax deductions [1].

[1]From Wikipedia, the free encyclopedia. A 501(c)(3) organization is a corporation, trust, unincorporated association, or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit organizations in the US.

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