Donor Advised Funds Explained

People who would like to include ongoing charitable contributions as a part of their legacy are making an admirable choice, but how do you go about doing that? Who is going to have the time to manage a fund and decide who to donate money to each year? The family foundations of the ultra-wealthy serve this purpose, but they are costly to administer and simply inappropriate for most of us. So what is the solution, how do you arrange to make ongoing charitable contributions without creating your own foundation and paying a fortune in administrative costs?

Here is the short three word answer: donor advised funds. The way that these funds work is that you assign assets to a public charitable foundation. This donation is totally tax deductible, and furthermore, any securities that you place into the fund are not subject to capital gains taxes. The public foundation within which the funds are housed then bestows grants using your recommendations as its guide. It is they who have the ultimate legal decision-making authority over how to grant the funds, but your advice is of course going to carry a great deal of weight as the donor.

Donor advised funds are especially useful for the diversion of appreciated securities, and they also provide efficiency and convenience in a general manner. Imagine looking at the calendar and recognizing that you would do well to make a charitable donation before the year expires for the purpose of tax efficiency. Rather that trying to make a lot of decisions under the deadline, you can simply add the assets to the donor advised fund and make recommendations concerning how they should be granted at your convenience.

Donor advised funds are the ideal vehicle for contributing to the common good in an ongoing manner while simultaneously addressing the tax implications of capital gains in a very efficient manner.

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Anthony Moccia

Anthony Moccia is an attorney and partner at The Law Offices of Kobrick & Moccia.His practice focuses on estate planning and elder law.He is a member of the New York State and Nassau County Bar Associations.He frequently presents free seminars on wills & living trusts to area residents and his seminars are said to be “informative, entertaining & easy to understand.”

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