Donor-Advised Fund: Tax Smart Giving
Donor-Advised Funds (DAFs) are the fastest-growing charitable giving vehicle in the United States because they are one of the easiest, most efficient, and tax-advantageous ways to give to charity. A DAF is like a charitable investment account that provides the donor with an immediate tax deduction for a charitable contribution while allowing the donor to advise on the support of charitable organizations they care about. Setting up a DAF at the Southern Baptists of Texas Foundation and utilizing it to manage your charitable contributions is easier than you think.
Setting up a DAF at the Southern Baptists of Texas Foundation and utilizing it to manage your charitable contributions is easier than you think.
1. Make a Tax-Deductible Donation: Donate cash, stocks, mutual funds, bonds, or other assets to be eligible for an immediate tax deduction. Your donation to a DAF is an irrevocable commitment to charity, and the funds must be utilized for the purpose of grantmaking.
Giving appreciated securities or other appreciated-value assets like property allows donors to give up to 20% more to charity because capital gains taxes are minimized. The donor receives a fair market value tax deduction while providing more support for their local church or a favorite charity.
As an example, Ron Cornelius established a DAF at the Foundation by donating appreciated value property. The Foundation provided an immediate tax deduction to Ron, then sold the property to fund the DAF. Ron finds joy not in buying bigger and better things for himself but in giving to charities that help people because he wants his life to make an impact for the Kingdom.
2. Grow Your Donation, Tax-Free: Another benefit to using a DAF for your charitable giving is that these donated funds can potentially grow (tax-free), making even more money available for charitable grants. The Foundation has a variety of investment options for your charitable dollars.
The Cornelius Family DAF is growing tax-free, allowing Ron and his family to direct more grant funds to charities without being taxed on the growth of the DAF.
3. Provide Charitable Grants Now or Over Time: You can support virtually any qualified charity with grant recommendations from a DAF – from your local church to a favorite mission organization or ministry. The Foundation will conduct due diligence to ensure the funds granted go to qualified public charities.
Ron uses his DAF to educate his family, teaching them the importance and priority of giving, helping them take an interest in different charitable organizations, and ultimately allowing him to leave a legacy of giving to his children.
While the Cornelius family can make charitable grants now, they can also plan charitable grants for the future by continuing to make tax-deductible gifts to the family DAF, growing those funds (tax-free) over time, providing even larger future charitable grants.
If you would be interested in establishing a Donor-Advised Fund at the Foundation, give us a call at (682) 347-4900.
Terry Jeffries | SBTF Director of Investment Services