How to get more bang for your charitable buck

(BPT) – Grants from individuals and families are the lifeblood of American charities. They accounted for 72 percent of the more than $ 350 billion in total giving in 2014, according to Giving USA. For their generosity, donors receive both tax benefits and the satisfaction of supporting causes that are important to them.

Charitable giving helps people feel connected to their communities and brings families together through their most deeply held values. Keeping track of giving, however, can be a challenge– not to mention navigating the tax code. Donors who value convenience, giving power and tax benefits are increasingly turning to charitable accounts, known as a donor-advised funds.

How donor-advised fund accounts work

Contributions to donor-advised funds, which are registered public charities, are treated the same as donations to other public charities and generate an immediate tax deduction. Donors can then take time to make thoughtful giving decisions and grant funds to the charities of their choice over time. In financially challenging years, donor-advised funds can also effectively serve as a savings account for giving, as earlier deposits can be used to sustain annual donations.

Management and processing of contributions, grants and tax filings are handled by the donor-advised fund provider, and donors are able to access details about their accounts at any time. Some providers sponsored by financial services companies also enable donors to view and manage charitable accounts next to their other investment or bank accounts online. This convenience and flexibility helps to facilitate and encourage giving and might explain why donor-advised funds have become one of the fastest-growing charitable giving vehicles according to the Chronicle of Philanthropy.

Advantages of donor-advised fund accounts

Another possible reason for this growth is that donor-advised funds support tax-smart financial planning. Cash contributions to donor-advised funds are deductible up to 50 percent of adjusted gross income. Appreciated securities and other assets are deductible up to 30 percent of adjusted gross income. Appreciated assets that have been held for more than a year may be deducted at their full market value, generally with no capital gains tax obligation. This enables donors to give more than they otherwise would to their charities of choice. Common contributions to donor-advised funds include publicly-traded stock or funds, IPO shares, restricted stock, real estate, interests in private businesses, private equity, venture capital and hedge funds (all accepted on a case-by-case basis).

Many large donor-advised funds have significant experience accepting such contributions, providing a valuable service to charities. Of course, a donor’s ability to claim itemized deductions is subject to a variety of limitations that depend on the donor’s specific tax situation.

“It is a no brainer for our clients to give appreciated securities instead of cash to charity,” says Chris Wheaton, an investment advisor at Litman Gregory Asset Management in the San Francisco Bay Area. “They are typically able to deduct such assets at fair market value and also receive the extra tax benefit of avoiding paying capital gains tax on the sale of the securities.” This can increase a donor’s level of charitable giving in the short term or allow a donor to maintain their desired level of giving for longer.

Another way donor-advised funds help people increase their giving is through the potential tax-free investment growth of accounts over time. Donors may invest their accounts in a range of pre-selected investment pools and, in some cases may also select a Registered Investment Adviser to actively manage them. At Schwab Charitable, one of the nation’s largest donor-advised funds, cumulative investment growth has made $ 1 billion in additional funds available for charitable giving between the organization’s inception in 1999 through June 30, 2015.

The chance to make more of an impact is what really draws people to donor-advised funds, says Kim Laughton, president of Schwab Charitable. “Whether driven by thoughtful planning, smart tax management, or sheer convenience, over 65 percent of our donors tell us they give more as a result of their donor-advised fund account. We are very proud to be facilitating and encouraging greater levels of giving.”

To learn more about donor-advised fund accounts, visit

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