Advantages of donor-advised funds

A Donor-Advised Fund can act as a strategic vehicle alongside private foundations. For donors who wish to give anonymously, there is no requirement that a DAF reveal the individual funders. Rose Community Foundation can take care of the paperwork, and ensure that all paperwork, grantmaking, etc. is handled our staff.

Donor-advised funds (DAFs) allow for simplification of your philanthropy. For those with private foundations, pairing a donor-advised fund alongside a private foundation is one option. For those choosing between a donor-advised fund or a private foundation (or even converting their private foundation into a DAF), below are several reasons why the donor-advised fund model may be more advantageous.

Donor-advised funds are more streamlined. The only paperwork required is when the fund is established. There are no start-up costs or federal or state reporting requirements. Conversely, private foundations may incur legal and other fees upon start-up and are required to file an annual Form 990-PF with the IRS, which may necessitate additional annual accounting fees.

Private foundations have a requisite annual payout of approximately 5 percent. A donor-advised fund does not have this requirement, and the fund itself can be the beneficiary of a private foundation’s payout. When initially forming a DAF, a tax deduction for the gift occurs at the time of funding, allowing for strategic tax planning and bundling of charitable contributions. The tax deduction limits for a DAF are arguably more favorable. For gifts of cash, 60 percent of adjusted gross income (versus 30 percent for private foundations) and for gifts of stock or real property, 30 percent of adjusted gross income (compared to 20 percent for private foundations). The valuation of these gifts is more favorable in a DAF as well.

Once formed, there is no time limitation on disbursing funds from a DAF, which allows the fundholder to be more strategic and potentially more thoughtful with their philanthropy. The philanthropic services staff at Rose Community Foundation can provide insight on nonprofit organizations and help steward assets in a meaningful way. There is no geographical limitation on the nonprofits receiving contributions – provided they are a registered 501(c)(3), the donation is at least $250, and there is no benefit to the donor. Our Foundation team has a wealth of expertise in nonprofits and community needs in the greater Denver area, and additionally supports donor-directed giving across the country and even abroad.

With a donor-advised fund at Rose Community Foundation, investments become part of the larger investment pool. Fundholders may either allocate their investments in conjunction with the Foundation’s asset mix of equities, fixed income and money market, or choose their own percentages among these categories. Our investment advisors at JP Morgan take care of the rest.

Finally, an overarching goal of a community foundation is to foster philanthropy in the community. As the recent Giving USA report found, DAFs give away money fairly quickly (38 percent within a year; 74 percent within 5 years). We believe in leveraging philanthropy whenever possible and welcome the opportunity to partner with you to ensure your philanthropic needs are met.

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