Donor-advised funds are becoming increasingly popular investment vehicles for San Diegans, especially if you want to:
- Avoid capital gains tax from a recently-sold business, privately-held stock or other asset
- Protect your inheritance from federal or state taxes
- Expand your investment portfolio
- Fund a specific social cause
- Improve your business sector
- Add more meaning or purpose to your life
- Maximize your giving
- Leave a family legacy through funds and philanthropic values
What is a Donor-Advised Fund?
A donor-advised fund is a philanthropic giving vehicle administered by a charitable sponsor, such as a community foundation.
Individuals: (1) establish donor-advised funds with a charitable sponsor; (2) fund the account with an irrevocable, tax-deductible contribution/gift; and (3) receive an immediate tax deduction.
The charitable sponsor manages and invests the funds to grow giving, and the individual – or donor – then recommends – or advises – grants from those funds gradually, over time, to other charitable organizations.
That’s because one of the most appealing factors of donor-advised funds is the acceptance of both cash and non-cash assets, such as:
- Stock. This includes publicly traded stock, mutual funds, bonds, private or restricted stock, partnership interests and pre-IPO shares.
- Life Insurance. You can either transfer a life insurance policy or name the donor-advised fund as the beneficiary of an existing policy.
- Will or Living Trust. You can name your fund as the beneficiary of a portion or the entirety for your estate.
- Individual Retirement Account (IRA). Avoid income tax on your distributions.
- Charitable Gift Annuity. You can give cash or appreciated stock and receive guaranteed, partially tax-free income for life.
- Charitable Remainder or Lead Trusts. You can name your fund as the beneficiary.
Donor-Advised Funds & Community Foundations
Donors must partner with a charitable sponsor, such as a community foundation, national charity, or single-issue charity, to open a donor-advised fund.
Recently, large commercial brokerage firms began offering donor-advised funds to their clients after recognizing the loss of asset management to community foundations.
While some commercial gift funds may offer lower investment fees, they: (1) provide little to no insightful community knowledge or local expertise about ways to maximize giving in your community; (2) do not share fee income generated by donor-advised funds with local nonprofits strengthening our community and region; and (3) lack opportunities to connect like-minded donors, or participate in local programming that builds civic engagement and enhances community education and understanding.
Community foundations, like The San Diego Foundation, are grantmaking public charities dedicated to improving the lives of people in a defined local geographic area. We bring together the financial resources of individuals, families, agencies and businesses to support nonprofits strengthening our communities.
With more than 40 years of service in the region, we have deep roots in San Diego and our expert advisors work with donors every day to create tailored solutions that meet their specific interests.
According to the National Philanthropic Trust 2017 Donor-Advised Fund Report, there are 69,587 individual donor-advised funds with charitable assets totaling $29.8 billion in community foundations across the U.S.
Charitably-minded San Diegans turn to community foundations to manage donor-advised funds because community foundations:
- Have deep roots in the community
- Grow your giving and impact
- Provide expert advisors in philanthropy
- Ensure optimal tax advantages
- Maximize the impact of your gift(s)
- Deliver the highest degree of personal service
- Connect you with charitably-minded peers
- Honor your legacy
- Simplify the giving process
How can you utilize a donor advised fund?