Legal Blog

The Weekly Scenario from Steve Shane – 1.27.14

Question:  What is a donor-advised fund?

Answer:  A donor advised fund is often viewed as an alternative to a family foundation.  The donor advised fund is offered by a number of investment companies, Community Foundations and other institutions.

These funds are established as public charities and therefore contributions to them are tax deductible as a charitable contribution.  Most can be established with a fairly nominal contribution.  The big advantage is that the cost to establish and run a donor advised fund is substantially less than a family foundation.  Contributions to donor advised funds are deductible in the year of the contribution and for five succeeding years. Moreover, distributions or grants are made on the recommendation of the donor to qualified charities.  Distributions to charities can usually be made to as many charities and in any amount that the donor desires. One disadvantage to donor advised funds over a family foundation is that the donor generally loses control over the direction of the asset management within the fund.  However, certain funds now allow the donor to appoint her own investment manager or to direct the investment management independently.  For some philanthropists, this flexibility is important as a means to retain some control over the funds. Comment:  When a donor makes a gift to the donor advised fund, the receipt comes to the donor directly from the fund.  Donor advised funds can be advantageous for donors who don’t want the charity to know who he is to continue to solicit him for future gifts.  When the charity receives the gift, they know it comes from the fund, but the name of the donor does not need to be disclosed. Steven E. Shane Principal Offit│Kurman Attorneys At Law 301.575.0313 Washington 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.