If you choose, you can determine to an even greater degree how your gifts are used to help.
When you’ve focused your charitable interest and chosen a charity to support, you may decide to recommend a grant without making any further specifications. This allows your generosity be put to work however the receiving charity sees fit. However, you may also wish to determine to an even greater degree exactly where your gift goes.
Charities not only use donations to fund their programs and initiatives, but also to pay for less glamorous necessities like office space, supplies, postage for direct mail, and staff salaries.
Many charities will give you the option of designating how your gift will be used — to fund mission-specific activities, underwrite a particular event, or as part of a general operating budget. That way, for example, your gift to Hot Lunches for Kids could go directly to buying food for underprivileged children, to support the group’s annual fundraising drive, or instead to keep the lights on in their offices, based upon your wishes and recommendations.
Spend or preserve
Many parent charities will allow you to spend freely from your DAF, using the value as an expendable resource to support charities of your choice, and allowing you to recommend as many grants as you like, of varying amounts (as long as they meet any required minimum) to a variety of charitable organizations. But while some parent charities allow you to use income and principal for recommended gifts, others allow you to spend only income.
Another way of preserving principal is to use your DAF as an endowment fund, that is used to support an organization of your choice in perpetuity.
Only a limited amount of money, often in the range of five percent of the account value, is gifted to the chosen group or groups each year — for example, an annual scholarship at your alma mater. The remainder stays in the fund, invested with the goal of accumulating additional earnings. It is this anticipated growth that will provide the means for an ongoing legacy of charitable giving by you, and by your family and heirs.
Corporate donor advised funds
Donor advised funds are a personal, hand-son way for an individual to give to charity, but they can also be a boon to philanthropic-minded corporations. Companies are often inundated with requests for charitable donations, and handling these solicitations while charting a meaningful and effective philanthropic course can be a full-time job in its own right.
The parent charity that administers a corporate donor advised fund can offer the company guidance and a support network for organizing charitable gifting. This support can include assisting in pinpointing or clarifying an appropriate philanthropic mission, tracking gifts, providing documentation needed for tax purposes, and managing the investment of corporate funds earmarked for giving.
Some common corporate philanthropic goals include supporting the local community and the communities served by the company, as well as involving employees in charitable giving and activities. Frequently companies choose to fund programs in a field that is related to their business, such as a health food company supporting nutritional research, or a technology company underwriting a program that provides inner city kids with computer lessons.
Similar types of funds
A field of interest fund is useful if you want to help in a special area, such as financial literacy, protecting wildlife, or finding the cure for a childhood illness. The parent charity makes grants from your fund to meet current, timely needs in that specific field. Some parent charities designate a limited selection of fields that you can choose from, and others leave it up to your interest and imagination.
Some community foundations offer designated funds that allow you to identify a specific charity or group of charities to receive continuing support from your donor advised fund. If at any point the organization you’ve named closes or changes its mission, the parent charity takes the responsibility for locating a different organization that meets your original philanthropic focus.
A company’s donor advised fund can be a resource for charitable giving at specific times or in certain circumstances. For example, creating or adding to a donor advised fund could be a way to donate stock holdings before going public. A DAF could also serve as a sort of philanthropic reserve fund in years when charitable giving is not feasible financially for the company.
There are tax benefits as well: The tax deduction corporations can take on gifts to a donor advised funds is up to 10% of taxable income. Gifts of appreciated assets the company has held over a long term are deductible for the full fair market or appraised value of the asset, and capital gains tax on the imbedded gain is eliminated.
Targeted Giving. DAF Details by Inna Rosputnia
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