What is a donor-advised fund?

It is a charitable fund that can be established by individuals and families to direct charitable contributions to nonprofit organizations from a single funding source. With every deposit into the fund, the donor receives a tax benefit in the same year. However, donations from the fund, in the form of grants, can be made to nonprofits over time.

“Donor-advised funds are a great option for people who want involvement with charitable giving, yet seek convenience and expert oversight.”

How does it work?

After opening your fund with an initial contribution (such as cash, securities and closely-held stock), you can advise Community First Foundation on the charitable organizations you’d like to receive grants from the fund. If you don’t have specific nonprofits in mind, you are welcome to discuss your interests with us and we will share our knowledge of local charities.

Name your fund and Community First Foundation will provide administration and oversight, such as verifying charities’ 501(c)(3) status, processing grants, maintaining records, and providing you with simple receipts and statements for tax purposes.

What are some reasons to open a donor-advised fund?

  • You make numerous charitable gifts throughout the year.
    Enjoy extensive charitable giving without the administrative burdens.
  • You have a highly-appreciated block of stock.
    Avoid paying capital gains taxes on the gain in the stock and generate a tax deduction. Then you can make gifts from your fund over time.
  • You have received an inheritance.
    Create a memorial fund in the name of your benefactor and generate a tax deduction. Then make gifts, over time, to charities that your benefactor cared for.
  • You wish to memorialize a loved one.
    Create a fund in the name of a loved one. Make periodic gifts to charities that he or she cared about. Consider inviting a group of close friends to remember the person and select charities together.
  • You wish to create a family culture of philanthropy.
    Introduce your children and grandchildren to philanthropy by naming them as additional advisors for the fund. Recommending which charities shall receive grants as a group can be an especially rewarding family giving experience.

Why consider a donor-advised fund rather than a private foundation?

Donor-advised funds offer a flexible, inexpensive opportunity to make your giving more organized and impactful. By completing an agreement and making an initial contribution, you can set up a fund at a community foundation such as Community First Foundation. The fund becomes a part of the Foundation, which provides administrative, investment, grantmaking and recordkeeping support. With no annual distribution requirement and a $5,000 minimum, you receive an immediate tax deduction, and the maximum tax benefits allowed by law.

Private foundations are nonprofit corporations or trusts requiring complex Federal and State filings and substantial legal support to establish. The typical size of a private foundation is $1,000,000 or more. The foundation manages and controls the assets and is responsible for the administration, recordkeeping, and grantmaking. The foundation is required to distribute at least 5 percent of its asset value annually and tax benefits are lower than those of a donor-advised fund. Detailed and public tax returns must be filed.

Donor-advised funds and private foundations both provide an opportunity for active donor involvement and family philanthropy.

In fact, increasingly private foundations use donor-advised funds to add flexibility to the timing of grants and enable individual family members to have more grantmaking control.

To learn more about the advantages of a donor-advised fund
or how your private foundation can benefit from a fund, contact:

Lynda-circle

Lynda Ricketson, CFRE
Vice President of Philanthropic Services
720.898.5916
lricketson@CommunityFirstFoundation.org

 

When to Set Up a Donor-Advised Fund (pdf) >

What is the minimum amount to open a fund?

Community First Foundation’s minimum is $5,000. Donor-Advised Fund Minimums and Fees >

Why open a fund at Community First Foundation?

  • Our high level of service and support will enhance your charitable giving experience and maximize your community impact.
  • Our low minimum contribution makes opening a fund affordable and accessible for diverse populations.
  • Our deep connection to the community and its needs help you identify charities and a rewarding giving strategy
  • We are a stable organization that has managed millions of dollars in assets since our founding in 1975.

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