Maximize Your Tax Savings This Season with Donor-Advised Funds

Wednesday Nov 23rd, 2022

The holiday season is a time when many people think about giving back to their communities. One great way to do this is through charitable giving strategies like using donor-advised funds. Donor-advised funds are investment accounts that allow you to save and grow your assets over time while enabling you to give to causes close to your heart. With these funds, you can make charitable donations over time, choosing from a wide range of organizations and causes.

What Are the Benefits?

One of the main benefits of a donor-advised fund is that it allows you to manage your giving in an organized and tax-efficient way. If you itemize deductions on your tax return, donating long-term, appreciated securities (stocks, bonds, mutual funds, real estate or fund shares) to a donor-advised fund can be a strategic win-win. By donating appreciated stock held for more than one year directly to a donor-advised fund – rather than liquidating it and then donating the proceeds – you can reduce your tax liability by eliminating capital gains tax, as well as reducing your marginal income tax. In addition to income and capital gains tax benefits, donor-advised funds are not subject to estate tax.

Another benefit of donor-advised funds is that they give you flexibility when it comes to making charitable gifts. You may want to focus on one particular organization or spread out your giving among multiple groups. Instead of making one large donation each year, you can regularly contribute smaller amounts to your fund, allowing you to stretch your charitable giving over time. This makes it easier for you to give more consistently and effectively.

How Are Donor-advised Funds Set Up?

If you're interested in exploring the benefits of donor-advised funds for yourself, there are several key steps to follow when setting up your account. First, work with a financial advisor who can help guide you through the process of setting up your fund and deciding which charities should receive distributions from it. Also, take the time to consider what values and goals are most important to you as an individual or family before deciding on the organizations and causes that will benefit from your generosity through this powerful tool for giving back.

Whether you're looking for an easy way to manage your charitable giving or simply want to maximize the impact of your philanthropic efforts, donor-advised funds may be a great option for you. To learn more about how these funds work and how they might fit into your overall financial strategy, talk with an experienced financial advisor today. 

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