Invest in Giving
Everything you need to know about donor-advised funds
A donor-advised fund (DAF) is one way that you can give to Gilda’s Club in an efficient, cost-effective way! A donor-advised fund is a charitable investment account opened for the sole purpose of supporting charitable organizations you care about (like Gilda’s Club!). DAFs are appealing to donors because of their simplicity and low costs.
Here are a few reasons you might like to use a donor-advised fund for your charitable contributions:
- Tax Deductions: When you contribute to a DAF, you can claim an immediate tax deduction for the full amount of your donation. This deduction can be especially valuable if you have appreciated assets (such as stocks or real estate) that you’d like to donate. One larger tax deduction is more likely to be able to qualify for itemization at tax year end.
- Investment Growth: While your funds are in a DAF, they can be invested for potential growth without being subject to capital gains tax. This means your charitable dollars can continue to work for you, potentially increasing the impact of your giving over time.
- Flexibility: A donor can make donations from their account balance over a number of years as the balance runs down. The donor can also designate qualified charities one time and make multiple donations with one click. A DAF can also make regular distributions over time.
- Lower Fees: There are no processing fees associated with donor-advised funds like there often are with credit cards – the full amount goes to your designated charities. Total fees for a Giving Account typically amount to about 1% of the balance, less than the operating costs associated with a private foundation or credit card fees. A DAF Manager will charge a nominal management fee, but also profitably manages the cash balance tax free to reduce the overall effect of the management fee.
- Legacy Planning: Family members can be involved in selecting charities and grant making. Most DAFs allow for a succession plan to be put in place for directing account assets after a donor passes. Thus, charitable contributions can continue unheeded according to the donor’s wishes.
- Recordkeeping: The DAF Manager does all recordkeeping and administration. Donors receive a quarterly and year-end tax summary from the DAF Manager to help complete their taxes.
While donor-advised funds are a great option for many looking to make a charitable impact, they may not work for everyone. Some of the shortcomings of DAF’s are:
- DAFs usually require you to distribute a certain amount each year. If you plan to give less than the minimum distribution amount, a donor-advised fund may not be for you.
- Contributions are irrevocable. Once the investment is liquidated, it cannot be retracted, and funds must be used for charitable purposes. You don’t want to invest any funds you may need for personal use in a DAF.
- DAF Managers are not legally required to spend the money they receive and can hold it for as long as they want. Furthermore, the fine print in the agreements explicitly states that donors cede all legal control of their contributions to the DAF sponsor. Opening a donor-advised fund with an institution you know and trust can reduce the risk of funds being used in a way counter to your wishes.
Donor-advised funds are not just for the very wealthy! A recent industry survey found that half of all existing DAFs are modest in size, with assets of $50,000 or less. The most common annual donation amounts into DAFs—40% in the study sample—were in a range between $10,000 and $50,000, reflecting a desire by taxpayers to exceed the standard deduction for tax purposes.
Investment assets accepted for DAF’s include:
- Private equity and hedge fund interests
- Restricted stock
- Publicly traded securities or mutual funds
- Certain complex assets, such as privately held C Corp and S Corp shares
- Cash equivalents such as checks, wire transfers, or cash positions from a brokerage account
- Cryptocurrencies
There are also benefits to Charitable organizations when donors use DAF’s:
- DAF contributions are generally larger than contributions made by credit card or checkbook because they are dispersed from a separate fund set up for charitable giving rather than a household spending account set up for day-to-day expenses.
- Nonprofits like Gilda’s Club can receive funds electronically with no transaction fees.
So, how does a donor get started and donate to Gilda’s Club Minnesota using a DAF?
1. Set up your DAF and fund it.
2. Designate Gilda’s Club Minnesota as a designated charity within your DAF. Gilda’s Club’s Tax ID is: 20-4265823.
3. If offered, select EFT (electronic fund transfer) delivery instead of a check. If Gilda’s Club hasn’t worked with the DAF sponsor before, they’ll provide information to Gilda’s on how to enroll. If EFT is used, Gilda’s can quickly receive the funds electronically without transaction fees.
4. Make a grant to Gilda’s Club Minnesota
However you choose to give to Gilda’s Club, your support is appreciated, as it helps GCMN continue delivering free supportive programming to Minnesotans impacted by cancer. Learn about more ways to support Gilda’s Club here.
Warmly,
Jim Thomas
Board Member, Gilda’s Club Minnesota
