Your fund can be established, and enlarged, with many kinds of assets.

You can fund your DAF from a number of different sources. In fact, certain events, especially potentially taxable ones, such as a sudden inheritance or growth in your stock portfolio, might be a reason to think about sharing your wealth. Donor advised funds offer you a great deal of flexibility in pursuing this goal, because you can put many of your personal assets to work helping your chosen cause, not just cash and securities.

Tax considerations and consequences are paramount when deciding how to bankroll your fund. The tax deductions you are allowed depend on the type of asset that you’ve contributed. And since giving may be an ideal way to soften a tax bite, it’s always a good idea to consult a legal or tax adviser before making any gifts.

Personal assets

Your personal assets, including tangible personal property, generally fall into two categories: liquid and illiquid. Liquid assets include cash, securities, and anything else that can be converted into cash reliably and reasonably quickly. Illiquid assets, such as real estate or fine art, require a lengthy or more complicated process to be converted to cash.

Fund Ingredients

Liquid assets

Liquid assets are the easiest to process, and also provide the greatest tax benefit. Publicly traded appreciated stock that you have held for more than one year, in particular, is ideal because not only do you receive a tax deduction for the amount of the gift, but you avoid paying any capital gains tax. You can transfer publicly traded stock directly to your donor advised fund account, where it is then liquidated by the parent charity.

In some cases, restricted stock and stock in privately held companies can also be transferred to your fund. They are complicated gifts, in part because they may be hard to value and in part because there are often limits on their sale. Processing gifts of this sort can take many months, and there are usually significant fees.

Any mutual funds can also be used to fund a DAF. You must simply complete transfer of ownership forms, which often require a signature guarantee.

Managed Accounts Inna Rosputnia

Want your money to grow?

See how I can help you to make your money work for you

Managed Investment Accounts – unlock the power of professional asset management. Let me make you money while you enjoy your life.

Stock and Futures Market Research – use my technical and fundamental analysis to pick up swing trades with the best risk/reward ratio.

Send Request

Illiquid assets

Some of your assets that would not normally be a viable way to support a charity can sometimes be gifted and sold to benefit your DAF. If the parent charity permits gifts such as real estate, art, jewelry, and other valuables, it will sell them and add the cash proceeds to your fund. The broad flexibility you have in using various asset types to establish your DAF continues throughout the life of the fund. For example, you may open the fund with the donation of a valuable piece of property or the transfer of securities, and make subsequent additions to your account in cash — or vice versa.

Deferred gifts

Some gifts can be given in the future, generally by naming the parent charity of your donor advised fund as the beneficiary of a qualified plan, account, trust, or bequest. Your donor advised fund could even be the beneficiary of an existing charitable remainder trust or charitable lead trust. In the case of a life insurance policy, you may sign over a paid out policy or take out a policy with the parent charity as the owner and beneficiary. And using a will or estate plan, you may be able to endow a charity by giving the money to your DAF, which will pay out the gift upon your death. This will reduce the value of your estate for tax purposes.

Tax matters

Your contribution can be deducted on your federal income tax return for the year in which you make the contribution. It’s important to note that the gift date for tax purposes is determined differently for various types of gifts, including cash, securities, and real estate.

Transferring the goods

Yet another way to contribute to a donor advised fund is to redirect funds from a previously existing DAF, from a private foundation, or from another source, such as a charitable remainder trust.

In the case of a private foundation, the donor advised fund might be a good choice if you’d like to eliminate the costs and time associated with your foundation. But a DAF can also be a useful tool as a complement to an existing foundation: Currently, it’s one way to meet your required 5% annual payout.

Rolling over an existing donor advised fund to a new parent charity is usually as simple as completing the DAF account registration form for the replacement organization and recommending a grant for the balance of your existing original fund to the newly created fund. But not all parent charities permit these transfers.

Valuation and deduction

Each type of asset is valued a different way.

Cash. When you give a cash gift, your donor advised fund will be credited with the total value of the gift.

Securities. Your DAF account will be credited with the net proceeds, minus liquidation costs, from the sale of the securities you contributed. Your deduction is the fair market value on the gift date.

Real estate, art, and collectibles. These assets will be liquidated, and the resulting proceeds will be added to your fund, minus liquidation costs and fees. Your deduction is the appraised value of the gift.

Understanding Donor-advised Fund Assets by Inna Rosputnia

Wishing you a great week!

Want Your Money To Grow?

Subscribe to get free research, trading lessons, and more insights.

(We do not share your data with anybody, and only use it for its intended purpose)