Create Your Legacy With Charitable Giving
“To give away money is an easy matter... and in any man's power. But to decide to whom to give it, and how large and when, for what purpose and how, is neither in every man's power nor an easy matter. Hence it is that such excellence is rare, praiseworthy and noble.” - Aristotle
Charitable giving is a noble gesture and the generosity of donors can often have a major impact on the individuals and causes supported by a charity. But, with so many charitable giving options available today, it can be difficult to know how to best use your charitable dollars to ensure charities reap the full benefit of your donations.
While a donation can be as easy as writing a cheque once a year, a number of new charitable giving strategies have emerged over the past decade for those who wish to provide ongoing support to a charity, including Donor Advised Funds.
Donor Advised Funds are one of the most effective ways to provide long-term support to charity, while also allowing donors to benefit from the tax advantages of charitable donations.
What Is A Donor Advised Fund?
A Donor Advised Fund is a simple, convenient and cost-effective way to support the causes that matter to you. It provides many of the same advantages of a private foundation without its inherent costs and complex administrative and management responsibilities, and allows donors to build a legacy, starting with a much lower minimum donation contribution.
Some Donor Advised Funds are intended to provide the donor with a long-term philanthropic legacy and are generally held as an endowment for no less than 10 years, with a portion of the funds paid out to charities every year.
How Does A Donor Advised Fund Work?
A Donor Advised Fund can be established in four easy steps:
1) The Giving Process
You can start a Donor Advised Fund through your Investment Advisor with an irrevocable contribution to a charitable foundation. The minimum donation ranges from $10,000 to $250,000 depending on the charitable giving program you select. Eligible donations include cash, stocks, bonds, mutual funds, and, in some cases, life insurance policies. A tax receipt will be issued at the time of the donation.
2) Establishing The Donor Advised Fund
Your Investment Advisor will set up a Donor Advised Fund account with the charitable foundation on your behalf. You may choose to personalize your Donor Advised Fund by naming the account or choose to remain anonymous.
3) Selecting Investment Options
Funds contributed will be held in the Donor Advised Fund account and invested in eligible investment options, as determined by the charitable foundation. Generally speaking, the investment portfolio is made up of a combination of investment funds that generate income, preserve capital and provide growth. Many charitable foundations allow you and your Investment Advisor to recommend an investment strategy for your Donor Advised Fund and be directly involved in the fund’s investments, with approval by the foundation. Your contributions grow tax-free within the account, generating additional funds available for distribution to charity.
4) Grant Recommendation
You may recommend which charities are to receive a grant from your Donor Advised Fund, by providing a standing grant recommendation or making a grant recommendation each year. The amount available for distribution to charities is determined by the charitable foundation. To receive a grant from a Donor Advised Fund, a charity must either be a registered charity or an organization listed as a “qualified donee” under the Income Tax Act.
Once the Donor Advised Fund account has been set up, you can continue to contribute to the Donor Advised Fund at anytime, or even make a bequest to the Donor Advised Fund through your Will. If you are unable to manage the Donor Advised Fund account, you can name a successor to provide ongoing grant recommendations.
Benefits of Donor Advised Fund
- You have the opportunity to build your own charitable giving legacy without the cost of establishing a private foundation, which can include administration, staffing and legal fees.
- Assets grow tax-free within the Donor Advised Fund, providing additional funds available to be donated to charities in future years.
- Grants are generated every year from the Donor Advised Fund, establishing a long lasting legacy of giving.
- You receive immediate recognition for your generosity: a tax receipt is issued at the time of the donation to the Donor Advised Fund for the full fair market value of your contribution. You can use the tax receipt immediately; you do not have to wiat until funds are paid out of the Donor Advised Fund to a charity.
- You can donate certain capital assets in kind and realize the full value as charitable donation, and pay no tax on any capital gains.
- All the administration, legal and accounting work is done on your behalf.
- You have the opportunity to be involved in the investment decisions for your Donor Advised Fund.
- You have the option of naming your Donor Advised Fund (e.g., The Smith Family Foundation), allowing you to personalize your legacy.
- You have input into decisions about which charities will receive grants from your Donor Advised Fund.
- Your Donor Advised Fund can form a part of your estate plan (i.e., you may designate your Donor Advised Fund as a beneficiary in your Will).
If you are interested in setting up a Donor Advised Fund, speak to your Investment Advisor to determine if this option is suitable for your current financial situation and your philanthropic goals.
Planning your charitable giving strategy is a complex process requiring profession expertise. We can help you achieve your dream of making a difference in a simple and effective way.
For more information or to start planning your own event, please contact:
Director of Development
1-800-267-4257 x 205
Michael Appt, BBA, CFP, CIM, TEP
The Tepner Team