What is a Raymond James Donor-Advised Fund, and why should you learn more about it as we head into the holidays and the most charitable time of the year? It’s important to do your research and know your options when it comes to making donations. Giving to different charities may be a top priority for you either personally or as a business. These acts can connect you more deeply to your community and help you feel that your investments are making a bigger difference for causes that are important to you, personally.
This is an excellent time of year to contribute to charity both from the spirit of the giving season and for your upcoming taxes. Many businesses count on this support, and if you get it done by the end of the year, there can be some great tax benefits. The first thing to do is to decide how to go about it.
Donor-advised funds, or DAFs, are a great option if you’re not sure which charities you want to donate to right away. You are able to donate without having to decide where it’s going. This concept has many benefits, and there are some things you need to know:
They are increasing in popularity
Due to the flexibility of DAFs, they are increasing in popularity. More people are finding these a great option when it comes to their charitable donations. Now is the time to think about these for this and the next year.
They can be an attractive option
DAFs can be an attractive option for many different people. Because they are flexible and straightforward, they have qualities that could make them a great option for high net-worth clients who are in the stage of enjoying their wealth as well as younger investors or those who may still be building their wealth for the future.
There are thousands of different options
There are so many options out there that you can choose from. These include major fund companies, individual charities, universities, and community foundations.
The minimum amount you need also varies
When you’re looking into your options, make sure to take note of the minimum required investments. There’s a huge range here. It could end up being anywhere between 5,000 and 25,000 dollars.
There can be helpful tax breaks
If it makes sense for you to itemize your taxes, you may be able to get a deduction for your donor-advised fund. In 2018, the standard deduction nearly doubled. It is now 12,000 dollars for single and 24,000 dollars for a married couple that is filing jointly. Because the standard deduction increased so much, you would need pretty large itemized deductions to come out ahead.
If you double on your contributions every other year, you may be able to reach the itemizing threshold. You also need to keep in mind that there is an annual deduction limit on donating an appreciated asset. The limit is 30 percent of your adjusted gross income. You can still decide to make a more substantial donation and carry the deduction forward over the next five years.
Donor-advised fund holders can get a federal income tax deduction up to 50 percent of adjusted gross income for cash contributions, and up to 30 percent of adjusted gross income for the appreciated securities they donate.
It can make record-keeping easier
Instead of giving to charities only once per year, maybe you want to spread it out. This could be a headache to keep track of, but with a DAF, it can simplify things. A DAF will track all your donations throughout the entire year for you and then provide you with just a single tax document.
It can help you feel more secure
When you use a Donor-Advised Funds, you can donate with confidence. It will verify that your donations only go to qualified charities. These are those registered as a 501(c)3. This helps assure you’re not feeding into any scams. It is crucial that you still thoroughly vet your charity prospects.
DAFs do charge some fees
There is a cost to the convenience you experience with DAFs. The fees can include both investment and administrative costs. You need to clarify these costs ahead of time with the company that you’re working with.
Each company is different
Each sponsoring organization has its own procedures and rules, which can affect the funds you open. There are usually three categories: community-foundation, commercial, and single-issue funds
Once you donate into a DAF, that money is inaccessible
A crucial point with Donor-Advised Funds that you need to remember is once the money is placed into that account, you no longer have control over it. The sponsoring organization now controls it, and you won’t be able to pull it back. The sponsor is not legally obligated to follow where and when you want the money donated. Even though they’re not legally bound, they do still tend to follow the donor’s wishes
You can grow the fund tax-free
Your balance can grow along with market growth. You will not be taxed on this growth since the assets now belong to the sponsor. This provides more money for charity without having to worry about it being taxable income.
Donor-advised funds are a great way to plan and simplify your charitable donations. Work closely with one of our financial advisors to move forward with this type of plan for your portfolio.