By Michael Weiss, MD
In the Spring edition of INSIGHT, Van Durrer described the advantage of donating appreciated stocks and bonds. A tax deduction can be taken at market value, without the necessity of first paying federal or state tax.
The donor advised fund allows the same pre-tax donation, but has a few wrinkles that make it even more appealing than direct giving.
The donor advised fund is a charitable vehicle administered by a public charity. The administering entity might be a brokerage firm, such as Schwab or Fidelity, or a community foundation. The first donor advised funds originated in the 1930s but have become especially popular in the last two decades as an inexpensive, easy-to-establish, low maintenance alternative to the private foundation.
Although of obvious interest to those of us not of foundation level philanthropy, the advised fund has attracted some heavy hitters. Mark Zuckerberg and his wife recently donated almost $1 billion to a donor advised fund set up with the Silicon Valley Community Foundation.
I have a donor advised fund administered by Charles Schwab. An appreciated stock from my personal Schwab account was recently transferred to my donor advised fund. The asset was then sold, allowing me an immediate tax deduction. The funds were used to purchase shares in several mutual fund-like pools run by Schwab Charitable Fund. I can now donate to any 501(c)(3) charity, immediately or at any time of my choosing. In the interim, the invested funds might appreciate tax-free. It should be emphasized that the movement from the personal account into the donor advised fun is irreversible, and the deduction is taken immediately. There is no additional deduction at the time of the charitable donation.
The author claims no tax expertise, and the reader should rely on a tax professional.