Bear Mountain Capital Inc.

Donor Advised Funds (DAF)

| March 27, 2013

Giving | Planning Perspectives

Have you ever thought about making a charitable donation but want to give to several different charities?  Navigating the paper work for each individual charity and its restrictions on what can be donated can prove to be no small task.  What if you could donate to a single fund and then have it gifted out to all of the charities you choose in a streamlined fashion at the time and in the amount of your choice?  And, what if you could take your tax deduction now, but invest the fund and allow the fund to appreciate before you distribute it to the charities?  Well if this appeals to you then a DAF may be the answer.  Here are some key characteristics to note about these funds:

  • Generally $5-10k minimum donation
  • Tax deductible at time of donation (contribution to fund)
  • Donations are irrevocable 
  • Can donate cash, securities, shares of funds etc.
  • No capital gains tax when an appreciated investment is donated.  For example: a stock was purchased for $10,000 and has appreciated to $15,000 at which time it is donated into a DAF, the investor gets a $15,000 deduction and does not owe capital gains tax on the $5,000 profit.
  • DAF contributions are not subject to estate taxes or probate
  • Donor can advise on how the money is invested while in the fund
  • Donor advises when, how much and to which qualified charity(s) the grants are made
  • Donor can involve children/successors both for grant choices but also to take control when donor passes
  • There is a minimum required grant amount from the fund annually but typically it is very small (e.g. $250)
  • Administration fees are typically around 1% (The fund we would use is .6%)
  • DAF can simplify the process of giving to numerous charities as the donor doesn’t have to complete full paper work for each and is not restricted by each charity’s rules on what can be donated 

As we move towards the end of tax season, you may be asking yourself if a Donor Advised Fund is the right vehicle for you for future giving needs.  If you’d like to discuss the potential benefits, give us a call, and we will review the details in light of your specific objectives.