Donor Advised Funds
The following is a list of frequently asked questions relating to Donor Advised Funds. Please click on any of the relative questions and an underlying answer will appear. If you can not find the answer you're looking for, do not hesitate to call.
- What is A Donor-Advised Fund?
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A donor advised fund is a convenient alternative to a private foundation that allows individuals and families to take an active role in grantmaking. Every donor advised fund is named by its contributors, often to recognize family members.
- Can A Donor-Advised Fund Give To Charities Located Outside Washington?
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Yes. Many donor advisors have ties to other areas outside of North Central Washington. A good example is many donor advisors recommend grants for their college.
- Can I Give Away Principal As Well As The Income Earned By My Fund?
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Yes, the donor would provide this information when the fund is established.
- Are There Restrictions On The Charities To Which My Fund Can Give?
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Yes. Federal law mandates several restrictions for donor advised funds. The best guide is whether the charity would qualify for a federal income tax deduction if the donor gave cash to that charity directly. For example, if a foreign charity (Tibetan Monks Incorporated) would not qualify if a person gave directly, then the donor cannot give indirectly through the fund. Personal pledges (often associated with capital campaigns) and grants to individuals (including scholarships) are also not eligible grants from a donor advised fund. Donors may not receive any personal benefit from a grant recommendation, such as tickets to an event or dinner.
- Why Should I Name My Children Or Grandchildren As Advisors?
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Many parents find that to teach their children how to give, they use both the power of a good example and “empower” their children to give by naming them as advisors. If a child can suggest gifts to charities to be made from a fund, the child may be able to give much more than he or she could by themselves.
- Does My Fund Benefit From Investments?
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A donor is able to make contributions not only from the original value of the fund, but also from any interest earned by it or any appreciation is its value. Many funds are invested with banks, trust companies or money managers who have dealt with the donor in years past. Other funds are invested pursuant to the asset allocation of our Investment Committee.
- How does a Donor Advised Fund work?
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It really is as easy as 1*2*3....
1. You make a gift of cash, stock or other asset to establish the fund at the Community Foundation.
2. You receive an immediate tax dedcution for your charitable contribution.
3. You recommend grants from the Donor Advised Fund to support charitable organizations locally, nationally or internationally (in some cases). After the Community Foundation's review and due diligence, we make the grants, sending a letter to the grant recipient noting the name of the fund providing the grant.
You benefit by centralizing your charitable giving, enjoying the highest level of charitable tax benefits, and you receive written acknowledgement of contributions for tax purposes. CFNCW handles all of the paperwork and provides you with regular reports of investment and grant activity.
- How Does The Charity Know That I’m Giving A Gift, Rather Than The Community Foundation?
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Each gift is accompanied by a letter acknowledging the donor when we send out the check.
- Are There Any “Nitty Gritty” Advantages to a Fund?
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Under tax law, a taxpayer is supposed to save copies for each donation over $250. A person who makes donations to several charities could have a shoe box of such receipts. If they fail to produce these receipts on audit, they may forfeit their charitable deduction even if they have the cancelled check because the cancelled checks do not have the language saying that no goods or services were received from the charity in return. With one large gift to a donor-advised fund, the donor need save only one receipt from us.
Many donors have a stock portfolio with capital gains associated with it. It is quite simple to transfer stock once, receive the tax deduction, save the capital gains and then distribute those proceeds over the course of a year, or many years, to a variety of charities and causes that are important to you.
