Dimitri Sotis: It is 5:11. There are many generous people who live around here, who give to worthy organizations and support impactful causes. There are also ways to give that can maximize your charitable dollars while being tax smart.
Shawn Anderson: Well joining us live to talk about something called donor-advised funds. Nina Mitchell, co-founder of Her Wealth and Senior Wealth Advisor at The Colony Group in Bethesda. Great to have you back Nina.
Nina Mitchell: Great to be here.
Shawn: So tell us, what is a donor-advised fund?
Nina: Well the best way to think about a donor advice fun or DAF for short, is that they streamline charity savings account. And many financial firms such as Schwab, Fidelity, and Vanguard, sponsor their own 501(c)(3) charitable organization, which makes it very easy to open a DAF account under their charity umbrella and use that sponsor services at a lower cost. And if you opened your own private foundation.
And once you set up your account, you can contribute cash, securities and appreciate assets and take an immediate tax reduction for your donation. But just keep in mind that sponsors vary in terms of required minimum opening amounts, minimum gifts to charities fees and investment options. So make sure those details align with your charitable goals.
Dimitri: So that immediate tax deduction is one benefit, what are other benefits of using DAF?
Nina: Well like you said, there are lots of benefits, and you know, first donors do receive an immediate tax deduction when they contribute to their DAF, even though the gift may not be donated to an actual charity at a later year. And this allows the donor to front-load charitable contributions in a high-income year, so they can itemize their deductions on the tax return and it lets the donors take their time to decide which charities they want to give in the future.
Second, contributions are invested and grow, and many sponsors offer a broad range of investment options.
Third, donor-advised funds handle all the detail tax reporting and administration. So you don't have to deal with that. They also provide great website access and research links for charities and donors can choose their own name for their fund, and they can make separate donations under their name or anonymously or even in memory of someone who's passed.
And then lastly, a lot of families like to establish donor-advice funds as a way to establish a legacy family fund.
Shawn: Now, in our final 30 seconds. Can you gift things other than cash and if you can, how does that work?
Nina: Well, glad you asked. A big yes on that. You can donate long-term appreciate securities and even complex assets, such as partnership and interest, private company stock and real estate and you get a tax deduction at the fair market value, not the cost basis for these assets. And by donating appreciated securities held for more than one year, you can avoid capital gains and potentially take a larger write off. But make sure that you consult with the sponsor in advance of donating these complex assets because not all funds can actually accept them. And then one quick caveat; donors cannot receive any personal benefit, or goods or services when they make their donation and donor-advice funds are not able to purchase tickets for charity golf events or on buy silent auction items.
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