Legal Blog

The Weekly Scenario from Steve Shane – 8.5.13

Question:  What is a donor advised fund and can a donor advised fund help me to receive a year-end tax deduction for my charitable gift when I’m not sure I will know which charity I wish to support by such time?

Answer:  A donor advised fund is often offered as an alternative to a full-fledged family foundation.  A number of brokerages and investment firms offer their own versions of donor advised funds, as well as Community Foundations and other institutions.  These funds are set up as public charities so that contributions are tax deductible as charitable gifts.  Because these funds can be established through a brokerage firm or Community Foundation (i.e., the Baltimore Community Foundation), it makes them far less expensive to establish than a family foundation.  Moreover, many require a relatively small initial gift to establish the fund ($5K – $10K). Distributions or grants are generally processed on the recommendation of the donor, or donor’s family, to qualified charities.  This allows the donor to make charitable gifts to a variety of charities in any amount that the donor desires.  Contributions to the donor advised fund are deductible in the year of the contribution (and if limited, can be carried over for five years).  Donors can name successor ‘donors’ to continue her legacy beyond her life with similar charitable goals. Often times, clients would like to make a charitable gift by year end for income tax purposes, but do not know the charities they wish to support at that time.  Through the use of a donor advised fund, donors can contribute to the fund to receive the tax deduction but wait until after year end to decide on the charity(s) to receive the funds (perhaps to perform any due diligence on the specific charity or if say a crisis develops late in the year for which the donor would like to assist). Comment:  For donors who wish to remain anonymous, gifts can be made from the fund without the donor’s identity being disclosed (assuming the name of the donor isn’t attached to the fund). Steven E. Shane Principal Offit│Kurman Attorneys At Law 301.575.0313 Washington 443.738.1513 Baltimore 410.218.9339 Mobile 301.575.0335 Facsimile Please note the above material discussed is intended to provide only general information. Do not, under any circumstances, solely rely on this information as legal advice. Legal matters are often complicated. For assistance with your specific legal problem or inquiry please contact me directly.