With the holiday season comes the opportunity for families to spend quality time together. The holidays also bring the spirit of giving front and center, whether finding the perfect gift for a family member or supporting charitable causes. It’s not too late to give a creative gift for the entire family that supports charity and teaches the spirit of philanthropy, all while offering year-end tax benefits. Establish a donor advised fund.
Think of a donor advised fund (DAF) as like having your own family foundation but without all of the legal and accounting paperwork. With a year-end gift, a family can receive an immediate tax benefit, but delay any decisions regarding what charities will benefit. Your family can recommend grants to your favorite causes on a schedule that works for you. By researching different nonprofits and determining which to support, kids learn the importance of thoughtful philanthropy and how to most effectively use their grant dollars.
A DAF may be a great option if you had a taxable event this year. Did you receive a large bonus at work? Did you sell property or receive a large inheritance? Are you holding appreciated stock?
That’s right. If you contribute an appreciated stock that’s been held for more than one year, you can take a charitable tax deduction for the full fair market value on the day it’s donated. You can also avoid the capital gains tax that you would owe if you had instead sold the stock and donated the proceeds to charity.
One of the challenges in this scenario is that many nonprofit organizations don’t have experience accepting non-traditional gifts such as stock. And transferring stock gifts to multiple nonprofit organizations can be a time-consuming headache with a lot of paperwork. That’s where establishing a donor advised fund at a community foundation like Northfield Shares can help simplify the process, enabling you to support your favorite charities on your own timeline. And, it allows your charitable recipients to focus on their missions rather than on non-traditional gift transactions.
This year, with stock values high, more people are considering the tax benefits of giving appreciated stocks rather than cash to charities. And if pending federal tax legislation is approved, some donors may see a decline in their 2018 tax rates and thus discover that their charitable donations have greater tax advantages this year, than next. These are two great reasons for establishing a DAF yet this year.
A donor advised fund is an effective charitable gift option on so many levels, and it makes a great family gift that keeps on giving to the community. And, there’s still time to establish one yet in 2017. If you’d like to learn more about donor advised funds, Northfield Shares would love chat with you. By establishing your fund through Northfield Shares, you enable your community foundation to expand its mission to advance philanthropy, inspire volunteerism and promote collaborative leadership.