Donor Advised Funds: Efficiency Personified

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We have all heard of private charitable family foundations with names like Bill and Melinda Gates and the Ford Foundation coming to mind. These types of foundations are vehicles for charitable giving that provide tax efficiency for families with considerable wealth while centralizing their philanthropic efforts. Private foundations are very useful and even necessary components to some estate plans, but as you might imagine, it can be costly to start a family foundation, and once it is in place there are going to be significant and ongoing administrative costs as well. In short, private family foundations serve their purpose, but they are not for everyone.

People who would like to include charitable giving as part of their estate plan without incurring the expense of starting and maintaining a private family foundation would be well advised to consider a donor advised fund. The way that these funds operate is that the party that would like to start the fund places assets with a public charitable foundation. The public foundation then distributes grants to other charitable organizations under the advisement of the donor. The donor does not have the "final say," as it were, but the wishes of the donor play an important role in the ultimate decision making process in terms of how and to whom grants are allocated.

Donor advised funds are the model of efficient giving because the donor is making a single contribution at a time, but the assets in the fund can be granted to multiple different charities. From a tax perspective, donor advised funds are very efficient because securities placed into the fund are not subject to capital gains taxes, and the market value of the donation is also tax deductible for the year during which the contribution took place.

The simple efficiency provided by these charitable giving vehicles has made them a very popular component of the modern estate plan and their popularity is on the rise. If you are interested in enjoying some of the advantages of a private family foundation without taking on the expenses involved, donor advised funds are a very viable option.

About the Author:
Nirenstein, Horowitz & Associates is a leading provider of expert estate planning guidance in Hartford, CT. For more information on donor advised funds and other estate planning services, visit our website.



Article Originally Published On: http://www.articlesnatch.com


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