Top 3 Things to Know About Donor Advised Funds, #73
Are you receiving the maximum financial benefit from your charitable donations? Are you giving your hard-earned money to the IRS when you could be giving it to charities you’re passionate about? The answer to either question could be burning a hole in your wallet. That’s why it’s important to familiarize yourself with donor-advised funds (DAFs)! Join me as I give an overview of this generosity-focused investment account to help you manage your wealth while making a difference.
You will want to hear this episode if you are interested in...
Charitable giving stats you should be aware of [1:19]
What is a donor advised fund? [2:31]
How do donor advised funds work? [6:45]
Making a donor advised fund work for you [9:39]
Understanding donor advised funds
Typically, donating to charity is a one-to-one interaction where the donor needs to know which charity they are giving to and the exact amount at the time of the gift. While that is certainly one way to be generous, it may not be the best way. Using a donor-advised fund could be a game-changer for your wealth management. Donating to this type of investment account allows you to designate cash or securities for charitable use at a later date while receiving an immediate tax benefit. Here are the top three donor-advised fund providers:
Fidelity Charitable Fund
Minimum fund donation: $5,000
Minimum charitable contribution: $50
Additional contributions: N/A
Charles Schwab Charitable Fund
Minimum fund donation: $5,000
Minimum charitable contribution: $50
Additional contributions: $500
Vanguard Charitable Fund
Minimum fund donation: $25,000
Minimum charitable contribution: $500
Additional contributions: $5,000
Make your donations work for you
The 2021 tax year is a great opportunity to start using a donor-advised fund for your charitable contributions. Take advantage of the ability to deduct 100% of your adjusted gross income (AGI) in cash donations before that percentage drops to 60% in 2022. Another benefit of DAFs is the ability to deduct up to 30% of your AGI from donating publicly traded stock, real estate, limited partnership interests, private C-Corp stock and S-Corp stock, and other privately held assets.
When managed correctly, donor-advised funds will offset your tax costs while ensuring that money goes to your favorite 501-C3 charitable causes. It can also be a generosity-building activity for the whole family. Sitting down to decide which causes to donate to can become a yearly tradition that makes the world a better place, even after you’re gone. A donor-advised fund may not be the right solution for everyone, but it could help you leave behind a beautiful legacy while taking advantage of tax breaks right now.
Resources Mentioned
Best Charities for 2022 (WalletHub)
Is a Donor-Advised Fund Right for You? (Morningstar)
Connect With Morrissey Wealth Management
www.MorrisseyWealthManagement.com/contact