SEVERE WX : Freeze Watch View Alerts

Here's how to donate to a Top 10 CNN Hero

Anderson Cooper explains how you can easily donate to any of the 2018 Top 10 CNN Heroes, through CrowdRise. Conditions apply.

Posted: Dec 13, 2018 1:32 PM
Updated: Dec 13, 2018 2:02 PM

I've heard a lot about donor advised funds. Are they a good way to structure my charitable giving while getting tax benefits?

A donor advised fund is a relatively simple, flexible and tax-efficient way to grow your investments and give to charity.

Think of it as a dedicated account for your charitable giving. It allows you to contribute cash, securities or other assets to the fund and get an immediate tax deduction. You maintain control of your investments, which grow tax-free since they are charitable donations, and make grants to the IRS-qualified charity you choose.

You can open a fund with as little as $5,000. All the money you put in goes to charity (once it's in, you're not getting it back), but you get an immediate tax break. Deciding how the money gets distributed is up to you: dole out $2,000 every year to a bunch of different charities, for example, make a significant gift of a $1 million ten years from now, or create a fund as a legacy for your children to continue to distribute after your death.

"Donor advised funds are one of my go-to strategies for reducing taxes for people who are already charitable," says Patrick King, a certified financial planner with Transformative Financial.

Here's how to figure out if a donor advised fund is the best way to accomplish your giving goals.

The benefits

Opening a fund is relatively easy. You can do it through many public charities such as Fidelity Charitable, Schwab Charitable, the National Philanthrapic Trust or a community foundation. You just need a Social Security number and at least $5,000 to invest, though some charities may have higher minimums.

If you donate cash, you're eligible for a tax deduction of up to 60% of your adjusted gross income.

But the real appeal of donor advised funds for many investors is that they might accept a wide variety of donations — including publicly traded securities, restricted stock, mutual fund shares, cryptocurrencies, private equity and hedge fund interest, real estate or privately held C-corp or S-corp shares — that charities often cannot accept.

"Donor advised funds have gotten to a place where they can take more complex assets," says Tina Davis Milligan, managing director of family office services at BMO wealth management. "A lot of clients have large capital gains and they may give more than they planned because it becomes more meaningful."

This is where investors can find very favorable double tax benefits. If you give these appreciated assets directly to a donor advised fund, you can, first, avoid paying capital gains tax and, second, take an additional income tax deduction in the amount of the full fair market value of the asset, up to 30% of your adjusted gross income.

A donor advised fund could make a great deal of sense right before retirement, says Michael Troxell, an investment adviser and certified public accountant with Modern Financial Planning.

"While a near-retiree is still working and in a high tax bracket, they could contribute a large amount of charitable giving (say 10-20 years worth) to a DAF in order to maximize the tax benefit while being able to distribute the funds to charitable organizations over the course of their retirement," says Troxell.

A good time to establish or add money to your fund is after a significant swell in assets — maybe a retirement payout, an unusually high bonus or the sale of a company.

"When a client has a big year, a donor advised fund can 'front load' their charitable giving for future years while providing a large charitable deduction in the year they need it most," says King.

The pitfalls

Like any investment, the value of a donor advised fund fluctuates. Don't get in over your head with a fund that includes costly or risky investments, says Dan Stous, the director of financial planning at Flagstone Financial Management.

Another mistake is opening a DAF with a high-cost provider. "There may be some premium services offered by some providers to justify a fee, like acting as a consultant to connect the giver with charities in their community, or talking through complex gifting situations, but givers should know what they're paying, and know what they're getting for that fee."

But the biggest pitfall with a DAF is to simply view it as an investment or tax-reduction vehicle, says Stous.

"Ultimately, donor advised funds are a way to give to charity," he says. "If your primary reason for putting money in a fund is something other than a generous heart, you're setting yourself up for disappointment."

Huntsville
Clear
47° wxIcon
Hi: 57° Lo: 40°
Feels Like: 47°
Florence
Clear
45° wxIcon
Hi: 56° Lo: 41°
Feels Like: 42°
Fayetteville
Clear
43° wxIcon
Hi: 54° Lo: 37°
Feels Like: 39°
Decatur
Clear
43° wxIcon
Hi: 56° Lo: 39°
Feels Like: 43°
Scottsboro
Few Clouds
46° wxIcon
Hi: 57° Lo: 41°
Feels Like: 46°
WAAY Radar
WAAY WAAY-TV Cam
WAAY Temperatures

Alabama Coronavirus Cases

Confirmed Cases: 162720

Reported Deaths: 2735
CountyConfirmedDeaths
Jefferson23940385
Mobile17123319
Tuscaloosa10602141
Montgomery10503199
Madison955798
Shelby760565
Baldwin676869
Lee664965
Calhoun476562
Marshall447451
Etowah441952
Morgan430835
Houston423934
DeKalb355429
Elmore327858
St. Clair311342
Limestone297031
Walker287493
Talladega276437
Cullman266525
Lauderdale240543
Jackson225317
Autauga212631
Colbert210232
Franklin209432
Blount200925
Russell19833
Chilton192332
Dallas189227
Dale184952
Coffee183611
Covington177329
Escambia175831
Clarke138717
Chambers138047
Tallapoosa137287
Pike136414
Marion110931
Barbour10559
Marengo104622
Butler101941
Winston94713
Geneva9427
Pickens89018
Lawrence88533
Bibb86115
Randolph84616
Hale78130
Cherokee76414
Clay76312
Washington75812
Henry7316
Lowndes72128
Monroe66310
Bullock65117
Crenshaw61230
Fayette59913
Perry5996
Cleburne5799
Conecuh57213
Wilcox57112
Macon54320
Lamar5235
Sumter48621
Choctaw39512
Greene34516
Coosa2173
Out of AL00
Unassigned00

Tennessee Coronavirus Cases

Confirmed Cases: 256880

Reported Deaths: 3263
CountyConfirmedDeaths
Shelby37335570
Davidson32679345
Knox1319395
Rutherford12406115
Hamilton12175112
Williamson738756
Sumner6371113
Wilson492063
Putnam461059
Montgomery438960
Out of TN427836
Sullivan398150
Madison391880
Washington376753
Bradley370323
Blount351536
Sevier349722
Maury345839
Robertson268143
Hamblen254750
Tipton246623
Dyer233638
Unassigned22306
Gibson222749
Coffee198726
Hardeman193133
Greene187654
Obion185523
Anderson181314
Bedford178920
Trousdale17899
Dickson176319
Fayette175925
McMinn171238
Lawrence170720
Loudon169012
Cumberland166927
Carter166636
Wayne16197
Weakley161026
Jefferson160424
Monroe152129
Warren150711
Lauderdale149517
Henderson144126
Hardin143522
Roane14208
Macon138125
Franklin133623
Haywood132028
Hawkins127228
Overton126120
White125214
Johnson11927
Marshall119011
Carroll116926
Cocke115014
McNairy115029
Rhea114119
Campbell110413
Cheatham109712
Bledsoe10344
Smith103214
Giles100738
Lake9904
Lincoln9453
Fentress94411
Crockett90722
Henry83712
Hickman82915
Marion81210
DeKalb78617
Chester74115
Decatur67911
Grainger6364
Grundy58712
Union5554
Claiborne5437
Polk54013
Unicoi4775
Jackson4716
Humphreys4654
Morgan4587
Lewis4425
Benton43410
Cannon4322
Houston43117
Clay41815
Scott4085
Sequatchie3632
Stewart34811
Perry3435
Meigs3376
Pickett2879
Moore2832
Van Buren2122
Hancock1253

Community Events