LPL Account ViewFPW Client PortalJoinMe Presentation
Fortitude Private Wealth

What is a Donor-Advised Fund

What is a Donor-Advised Fund?

A Donor-Advised Fund is a charitable giving vehicle administered by a public charity. It is created for the purpose of managing charitable donations on behalf of an organization, family or individual. A donor-advised fund offers the opportunity to create an easy-to-establish, low cost, flexible vehicle for charitable giving as an alternative to direct giving or creating a private foundation.

Donors enjoy administrative convenience, cost savings and tax advantages by conducting their grant making through a donor-advised fund. Over the past two decades, donor-advised funds have become more and more popular. They have become the fastest-growing vehicle for family philanthropy, outnumbering private foundations two to one.¹

Simplify Your Giving Strategy

Establishing and administering a private foundation can be costly and is regulated by complex rules set by the Internal Revenue Service. A private foundation must file an annual tax return, distribute a certain percentage of assets each year and even pay an excise tax. With a donor-advised fund, a qualified public charity maintains compliance of IRS regulations. In addition, the donors who establish the donor-advised fund have no required tax reporting, no annual grant requirements and pay no excise taxes. Not only does a donor-advised fund simplify your giving strategy, but is a cost-effective alternative to creating a private foundation.

Immediate Tax Deduction

When donors contribute assets to a donor-advised fund they can claim an immediate tax deduction in the year of the contribution. In addition, they can contribute appreciated assets and thereby avoid capital gains when these assets are sold.

Give Anonymously

Grants from a donor-advised fund may be made anonymously. Grants from a foundation, by law, must be reported publicly. In fact, private foundations’ IRS filings are a matter of public record, which may disclose total assets, gifts, grants and even the names and addresses of trustees, directors and officers.

LPL Registered Representatives are not engaged in providing tax or legal advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. 

While donor-advised funds have many advantages, some disadvantages to be aware of include, but are not limited to, possible account minimums, strict limits on grant allocations, management fees and the potential that future tax laws may change at any time that may impact the tax treatment and benefits of donor advised funds.

¹ Source: Worth Magazine, Volume 22, Edition 01, article titled, “What are the benefits of having a donor-advised fund if I already have a private foundation”.

About Josh Zorger

Joshua D. Zorger is the founder of Fortitude Private Wealth and has more than 10 years of experience in the wealth management industry. In addition to holding the FINRA Series 7 and 66 securities registrations through LPL Financial, Joshua is a CERTIFIED FINANCIAL PLANNER™ practitioner.

Categories: Blog General

LPL Financial Certified Financial Planner Fortitude Private Wealth
600 E Carmel Drive, Ste #159
Carmel, IN 46032
Phone: 317-819-8550

Securities offered through LPL Financial, Member FINRA / SIPC. Investment advice offered through Level Four Advisory Services, LLC, a registered investment advisor and separate entity from LPL Finanical.
The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, IL, IN, OH, & WV.
Fortitude Private Wealth, Level Four Advisory Services, LLC and LPL Financial are separate entities.
*No strategy assures success or protects against loss. Investing involves risk including loss of principal.