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Donor Advised Funds

Jeff Wasser

The BSBI Endowment Foundation (Tax ID 05 0540805) continues to encourage legacy giving in collaboration with the Jewish Community Foundation. As the tax laws have recently changed some vehicles for charitable giving have become more attractive. 

Since the recently approved tax plan nearly doubles the standard deduction, the ability to deduct charitable contributions may be limited unless the charitable deduction is greater than the standard deduction. In order to overcome the threshold of the standard deduction, one can pool charitable gifts in certain years in order to exceed the standard deduction and maximize the tax savings. Although bunching the charitable contributions may optimize deductions for the donor, the charitable recipient may depend upon a steady flow of donations to sustain their mission.

A potential solution which may meet both your needs and those of the charitable organizations you wish to support is the “Donor Advised Fund” or DAF.

What is a Donor Advised Fund?

A DAF is a charitable vehicle established at a public charity that can serve as your “philanthropic checkbook.” It provides an opportunity for you to make charitable donations to your DAF, receive an income tax deduction in the year that donation is made to the DAF, and then make charitable donations to organizations of importance to you, such as BSBI, from your DAF at any time in the future. DAFs are available through the Jewish Community Foundation, the Hartford Foundation for Public Giving, and major brokerage and mutual fund organizations such as Fidelity, Schwab, T Rowe Price and Vanguard. Individuals may fund their DAFs with cash, life insurance, or appreciated securities including stocks, bonds and mutual funds. You may also name a DAF as a beneficiary of your estate through your will. At the time of death, DAFs can accept retirement assets or the remainder of a charitable remainder trust

Mechanics of DAF Accounts

Creating a DAF may enable you to maximize your giving, fulfill your philanthropic goals and provide an opportunity to engage another generation in philanthropy. By making an irrevocable contribution to the DAF, you receive the maximum allowable charitable deduction in the year that gift is made, regardless of when you distribute the funds to organizations about which you care. The donor may name the DAF, the advisors, charitable successors and charitable beneficiaries. The contribution is placed into the DAF where it is invested. Within the DAF, earnings and capital gains are tax free. Any time after the initial contribution, the donor or named advisors may recommend a grant to a qualified charitable organization, such as the BSBI Endowment Foundation.  Presently, there are no laws that require the DAF assets be distributed in a specific amount of time. Current minimums for opening a DAF are $5000 at Fidelity and Schwab, $10,000 at the Jewish Community Foundation and $25,000 at Vanguard. 

DAFs and Legacy Giving

DAFs differ in their policies on succession planning. Many DAFs permit donors to appoint successor advisors such as adult children. The original donor may also recommend that some or all of the assets remaining in the DAF go the BSBI Endowment Foundation as part of the Leave a Jewish Legacy Program and as a final gesture of charity. Donors who decide to bequest their donor advised fund assets to the BSBI Endowment, a qualified 501(c)(3) organization, will be honored in perpetuity as a member of our Etz Hayim Legacy Society.

The tax regulations are complex and in constant flux. If you are considering establishing a Donor Advised Fund or leaving Donor Advised Fund assets to the Endowment Foundation of BSBI, please reach out to me at jeffreywasser@sbcglobal.net or Roy Filkoff at royfilkoff@altmanandco.com or BSBIEndowment@myshul.org.

Sat, July 2 2022 3 Tammuz 5782