According to the National Philanthropic Trust, contributions to donor-advised funds (DAFs) totaled an estimated $52.16 billion in 2023.*
Here are more reasons to use a donor-advised fund, such as the Janney Charitable Giving Fund, rather than contributing directly to a charity.
These investment vehicles, administered by public charities, have grown in popularity due to the ability to donate to them and receive immediate tax benefits. You can also disburse the money according to your timetable. In other words, you can choose to make grants from the DAF to your favorite charities on a consistent basis or invest the money in the DAF account and let it grow tax-free until you want to pay it out; either way, you get an immediate tax deduction.
Grow Your Charitable Gifts Tax-Free
By investing your contributions, the investment growth is not taxable to you, the DAF, or the charity that receives the grant. When determining the investment allocation in your DAF, consider the appropriate amount of investment risk for the DAF based on your grant-making time horizon.
Leave a Legacy
A DAF can be a beneficiary of your will, trust, annuity, insurance contract, retirement plan, or investment account. The DAF also allows you to name a successor older than age 18 who can continue in your spirit of giving.
Alternatively, you can direct the DAF to continue making grants to charities of your choice for a period after your passing. By donating amounts over the estate tax exemption to the DAF, you may be able to avoid the estate tax and receive an income tax deduction. This can be done either during your lifetime or through an estate plan.
Streamline Tax Reporting
If you itemize your taxes, you need to keep proof of your contributions through a receipt from every charity you support. By donating first to a DAF—and then granting to multiple charities over time—just a single donation receipt is generated.
Evaluate a Charity’s Fiscal Responsibility Over Time
Rather than giving a charity a single lump-sum donation, you may want to give smaller amounts over time while evaluating the charity’s ability to fulfill its stated objectives. By contributing the full amount to the DAF in a single year, you realize any potential tax benefits up front with the potential for tax-free growth, while offering stable grants to the charity to help plan its budget.
In Memoriam and Anonymous Giving
You can honor a loved one by designating a grant in their memory. While some people may wish to maintain a close relationship with each charity they support, others may find the resulting volume of solicitations undesirable. A DAF can allow you to remain anonymous to the charity if you wish.
Share the Values of Charitable Giving
During your lifetime, you may wish to pass along your charitable giving activities to your loved ones. DAFs can allow for joint or supervised charitable giving. Giving money to a DAF removes it from your estate and may help alleviate intergenerational conflict about subsequent charitable grants.
Provide an Alternative to a Family Foundation
While family foundations offer more control over administration and granting, DAFs can offer many of the same benefits along with the lower cost and convenience of setting up and maintaining a charitable vehicle. In addition, DAFs allow you to make anonymous grants and enjoy higher income tax deduction limits compared to a family foundation.
Ensure the Charities You Choose to Support Are Qualified by the IRS
DAFs, including the Janney Charitable Giving Fund, verify that recipient organizations are qualified charities before distributing grants. This process helps ensure that donations are made to legitimate, IRS-approved charitable organizations.
While doner-advised funds can offer some advantages over donating cash directly to charities, there are some drawbacks. It's a good idea to weigh their pros and cons with your Financial Advisor before deciding.
Working With Janney
Depending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.
If you engage in a brokerage relationship, you will buy and sell securities on a transaction basis and pay a commission for these services. Our recommendations for the purchase and sale of securities will be based on what is in your best interest and reflect reasonably available alternatives at that time.
If you engage in an advisory relationship, you will pay an asset-based fee, which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory relationships.
For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.
By establishing a relationship with us, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences.
Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.
Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
*National Philanthropic Trust — Donor Advised Fund Report 2023
