Warren Buffett and Bill and Melinda Gates don’t get to have all the fun anymore. It used to be that only the rich could have private foundations and use them for their charitable giving. Now thanks to something called a donor advised fund, philanthropy is easier than ever. There is no need for extra accounting and legal fees, or to file a special tax return. Donor advised funds are like a charitable bank account where you control when and how much you give to the nonprofits you care about anywhere in the world. Best of all you get a tax deduction when you put money in a donor advised fund and then you can decide which nonprofits to support whenever works best for you now or later.
Donor advised funds are simple to set up and easy to manage. You can request donations, access your funds online and there is no tax reporting to be done. There is no set up fee but usually there is an annual cost of 1 percent annually of the assets in your fund. All the big mutual fund and investment companies offer donor advised funds but you have a great local option with ACT for Alexandria, a community foundation. Our donor advised funds are identical in every way but we have our roots right here in Alexandria. We are locally based, but you can give anywhere you want.
One couple with an ACT donor advised fund has lived in Alexandria for well over 30 years, having raised three kids who are now grown and gone. He practices law here and she is retired from a career with the federal government. They have had a donor advised fund with ACT for the last five years and have supported more than over two dozen local charities using their donor advised fund, working with ACT to identify local nonprofits that they had not known much about before. They enjoyed being part of the ACT for Alexandria grants committee, reading grant requests from local nonprofits seeking grant funds. Annually ACT for Alexandria awards grants totaling $75,000 but typically receives requests for more than $200,000. Being part of the grants committee enables donors like this couple have the opportunity to learn more about local nonprofits and their specific needs. After reading the grant applications they decided to partner with ACT to support some of the requests from their donor advised fund.
Another ACT donor advised fund holder couple have lived in Old Town for 15 years. They decided to set up a donor advised fund to simplify their life. In the past they gave to many charities and had to keep good records for their CPA to include on their tax return. Now they make one donation to their donor advised fund at ACT for Alexandria and all their contributions come from the donor advised fund throughout the year. ACT keeps all the records and their CPA only needs to report one donation, making it simple and easy.
Donor advised funds are not new. In fact there is over $70.7 billion of charitable assets in donor advised funds according to the Manhattan Institute. If your financial advisors have not discussed donor advised funds with you then ask them why. It might make sense for you too. Donor advised funds are a philanthropic tool for the rest of us. And you can support nonprofits you care about much like Bill and Melinda do. Contact us at ACT for Alexandria to learn more about our donor advised funds and the work we do.