The value of a donor advised fund

You may have heard about the benefits of something called a “Donor Advised Fund.” Simply put, a Donor Advised Fund is a vehicle for giving that lets you contribute assets to the fund when it’s most advantageous for you, receive a tax deduction, and then later decide how you want the money distributed. 

You can use the money in the fund for multiple purposes – like starting new churches, working along the Rio Grande Valley and helping student ministry work on a college campus. You make one gift, receive one tax receipt and one tax deduction and receipt, and the Missions Foundation sends checks to benefit the causes you select, as long as they are consistent with the fund agreement. Contributions to your Donor Advised Fund have the potential to grow tax-free, enabling you to provide more support to the causes you want to help.

If you wish, a Donor Advised Fund can span family generations. You can establish a family fund, and you and other family members can contribute to it. Then, distributions from the fund can become a family decision that is repeated whenever you desire to make a gift to a charity. It can be a wonderful way to involve children, grandchildren and beyond in the giving process. As the one who establishes the fund, you get to choose how the fund will end. You may decide that you want it to end at your or your spouse’s death and the remaining funds distributed to charity. Or, you may want the fund to continue with your children and grandchildren making the distribution decisions. A Donor Advised Fund has a lot of flexibility!

Here are some reasons to consider a Donor Advised Fund with the Missions Foundation:

• You write one check or make one gift, receive one tax receipt and still support multiple causes.

• You receive an immediate income tax deduction to the extent allowed by law.

• If you give appreciated property, your deduction is based on the current fair market value. You avoid paying taxes on any capital gains you would have incurred had you sold the property yourself and made a cash gift.

• You can make a gift timed to an increase in income or a windfall and decide later which causes to support.

• A Donor Advised Fund can be funded with a wide variety of assets, including stocks and real estate.

• Your gift to the cause can be anonymous if you wish.

• You can add to the fund whenever you would like - even through your will.

• It is a way to involve family members in making giving decisions, even after you have passed away.

• It can remind your family of causes you felt were important.

• There is no setup cost for establishing the fund.

Example #1: Mr. Johnson’s stock has appreciated, and he thinks that now is a good time to sell it. He knows he wants to make a charitable gift of part of his stock holdings but has not settled on which specific organizations to support. So, before he authorizes his broker to make the sale, he gives a portion of his shares to create a Donor Advised Fund with the Missions Foundation. He receives a deduction for the full value of the stock, avoids paying capital gains tax on the appreciation and has time to decide which cause or causes he wants to help.

Example #2: Mr. and Mrs. Jones have been giving to Baptist causes for years. They want to help their children and the following generations share in their commitment to these causes that have been so important to them. They create a family Donor Advised Fund so they can make gifts from the fund a family decision. They want to have regular family meetings to decide to which causes distributions will be made. They have chosen to make their fund function like an endowment and only spend the earnings each year so their family will be involved in giving decisions for generations to come. 

A Donor Advised Fund gives a donor great flexibility in charitable giving. It is a wonderful way to make a gift at the most financially appropriate time for you or your family and then later select the causes you want to support.

Bill Arnold serves as president of the Texas Baptist Missions Foundation (TBMF). To receive more information about how you can set up a Donor Advised Fund, please contact TBMF at (214) 828-5343 or tbmf@texasbaptists.org.