A lot of people feel as though it is not the government’s job to cure all of society’s ills, and this issue has been the primary political football for decades. Many would say that when the government tries to do so, it trips over itself in a tangle of red tape and inefficiency. Others would contend that it is simply not the role of the federal government under the Constitution to tax the people in order to redistribute resources. Yet all people agree that needs do exist, and those who would like to see less government and less taxes generally support the practice of voluntary philanthropic giving as the solution.
If you are interested in giving back as part of your estate plan, you may want to join the legions who are using donor advised funds to do so. With these charitable giving vehicles you make a single contribution to a donor advised giving program, which can be housed in a brokerage account run by a financial services company, a public charity, or a community fund. As the name implies, you as the donor advise the fund regarding the grants that they make with your contribution. The fund owns the assets and the gift is irrevocable, but you do have some say regarding how the money is granted.
One of the advantages over simply giving money to a charity directly is that you can donate to multiple charities through a single donation. Plus, there are tax advantages. You may deduct the total market value of the donation for the year within which it was made, but you don’t have to advise the fund about how to grant the funds until a later date. Since you have a relationship established with the fund, it is simple to make a donation at the end of a year to gain tax efficiency. Plus, you don’t pay capital gains taxes on donations of appreciated securities placed into the fund.