The Gift That Keeps on Giving

Without fail, every December for the past 27 years, I have received requests at the last minute for a tax deduction to help offset income for the current year.  I follow up the request with two questions: how much would you like to contribute and to what would you like to make the contribution?  My questions are usually followed by a deafening silence and a true deer in the headlight look.

Charitable gifts are best not rushed, and I encourage clients to direct their charitable giving to causes in which they understand and have an interest.  Last minute charitable gifts and tax deductions often conflict with deliberate and purposeful giving.  Is there a solution?  Indeed there is a solution; the answer is a Donor-Advised Fund.Donor-Advised Funds are not new and have been around for quite some time.  The first donor-advised fund was created in 1931: The New York Community Trust.  In 1969 congress codified the legal structure for Donor-Advised Funds (DAFs). In recent years Donor-Advised Funds have grown in popularity.  They account for more than three percent of all charitable giving in the United States.  DAFs outnumber private foundations and exceed the combined number of charitable remainder unitrusts, charitable remainder annuity trusts, charitable gift annuities and pooled income funds!

So what is a Donor-Advised Fund?  A Donor-Advised Fund is a separately identified fund or account that is maintained and operated by an established public charity (501(c)(3)). The charity is called a sponsoring organization.  It allows a donor to make a charitable contribution, receive an immediate tax deduction and then recommend gifts to qualified charities over time. Think of a DAF as a charitable savings account.  The donor may contribute to the fund as frequently as they like, not just once, and then recommend gifts / grants from the fund to their charity of choice when they are ready.

The Pension Protection Act of 2006 made numerous changes to provisions of the Internal Revenue Code addressing charitable giving and tax-exempt organizations.  Specific changes to the law were made regarding sponsoring organizations and DAFs. These changes provided a statutory definition of a “Donor Advised Fund.”  Long story, short, DAFs have been around a long time, are routinely used, and are legally defined.

So, if you are charitably inclined, need a tax deduction, but don’t yet know where to gift the money, the Donor-Advised Fund is a great solution!

I hope you will join me on this month’s CE/CPE Webcast: Year End Tax Planning on Friday December 20, 2013 at 1:30PM EST. This Webcast will provide an overview of the key changes within the tax laws for 2013. We will cover new tax provisions to watch for as well as how the tax law changes will affect tax planning for our clients. The presentation is web based and virtual seating is limited. The course is approved for one hour of CPE and CE. For more information or to register, please send an email to



Speak Your Mind