Skip To Content
Exciting updates about Merrill. Learn more
< Back to all posts

Keep the Joy of Giving Alive Year-Round with a Donor-Advised Fund

December 21, 2018

GIVING TO THE CAUSES YOU CARE ABOUT may be top of mind for you during the holidays, if for no other reason than charities and non-profits up their appeals at year-end. But as you write out checks or donate online, don’t you often wish there were a more organized and thoughtful way to make a difference year-round? A way to plan ahead and have a more powerful and long-lasting impact?

If so, you may be ready to consider a donor-advised fund (DAF). It’s a more structured way of giving that’s receiving increasing consideration. “Donors contributed $29.23 billion to donor-advised funds and used them to recommend $19.08 billion in grants to qualified charities in 2017”—record highs in both categories, notes the National Philanthropic Trust in its 2018 Donor Advised Fund Report. DAFS are “a one-stop shop, offering you an immediate income tax deduction and gift receipt upon donation, as well as the opportunity to make grant recommendations to the charities you support over time,” says Cale Turner, senior vice president and Charitable Gift Fund manager at U.S. Trust.

 

The minimum deposit varies depending upon the fund. Your donation can be in the form of cash, stock, mutual fund and ETF shares, even real estate and other nonfinancial assets, without incurring capital gains taxes. To add to the convenience, a DAF is easy to set up and maintain, and you can manage all of your giving activities online.

 

A donor-advised fund gives you the ability to invest your contributions by choosing from model portfolios. And what that does is to potentially give you more dollars to support the charities that you want. —Cale Turner, senior vice president and Charitable Gift Fund manager at U.S. Trust

Donor-advised funds do come with some limitations—for example, your gift is irrevocable; you give up ownership of any assets you contribute. But, all things considered, DAFs compare favorably with other structured ways to organize your giving. For instance, with a DAF, you can avoid the higher costs, administrative hurdles and annual distribution minimums of a private foundation.

 

Below, Turner points to three ways a donor-advised fund could help you simplify your giving all year-round—and for years to come.

 

DAFs offer immediate tax benefits.

It works like this: You can put a lump sum into a DAF and then have the fund distribute cash to organizations of your choice at your own pace.  Says Turner, “You get the maximum income tax deduction immediately, even if the assets aren’t distributed right away.” You’ll also receive income tax-free growth of the assets in the fund, as well as the ability to carry forward any unused charitable income tax deduction for up to five years. In exchange, you relinquish ownership of the assets you donate, but you retain the right to advise how those assets should be distributed.

 

“Tax payers looking for ways to exceed the higher standard deduction set by the 2017 tax law might consider pooling several years’ worth of charitable donations into a single contribution to a DAF,” suggests tax authority Andrew Friedman, principal and founder of The Washington Update.

 

DAFs organize your giving in one place.

Rather than practicing “checkbook philanthropy” by making donations to individual charities and requesting receipts from each, you can take much of paperwork out of the process through a DAF. As Turner notes, “Those things are taken care of—the system allows you to hold on to all those documents in a safe and secure location.”

 

DAFs allow your contributions to grow.

“A donor-advised fund gives you the ability to invest your contributions by choosing from model portfolios,” Turner says. That means the assets you’ve placed in the fund are professionally managed and have the potential to continue growing. “And what that does,” Turner adds, “is to potentially give you more dollars to support the charities that you want.”

 

Ask your financial advisor for more information on how a donor-advised fund works, and whether the Bank of America Charitable Gift Fund might help you meet your giving goals.

 

For more insights, read the Bank of America Charitable Gift Fund Overview.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice.  You should consult your legal and/or tax advisors before making any financial decisions.

A Merrill Lynch Contribution
< Previous
5 Questions to Ask Your Financial Advisor in 2019
Next >
Selling Stocks? 3 Ways You Might Minimize Your Capital Gains Taxes
< Back to all posts

Learn what it’s like to work with a Merrill Lynch financial advisor

Our financial advisors are committed to putting your investing needs, wants and priorities first. Here’s how you can get started with an advisor.

Search by location

Contact us

1.866.706.8321
X

You need to answer some questions first

Then we can provide you with relevant answers.

Get started