What are Donor Advised Funds?
Broadly defined, a donor advised fund is a charitable giving vehicle, much like a charitable foundation. It is established initially through an up-front donation by a donor to an independent organization, like Link Charity. The donors contribute to the fund as frequently as they like and watch as their charities investment grows tax-free.
Donors to the fund receive immediate tax benefits and can advise on fund distribution to their favourite charities at any time.
While the donor advises how funds are distributed, all administrative, operating and daily hands-on matters are carried out by the independent organization (i.e. Link Charity).
Many philanthropists like the idea of setting up a charitable foundation, to create a vehicle for giving and a conduit for setting up a legacy. However, it comes with a lot of administrative work and responsibility.
Donor Advised Funds have all the benefits of a Charitable Foundation but with someone else to take care of all the administrative workload. Donors advise the organization regarding the charities that will benefit, the timing of donation and the amount of the donation. One of the best parts is the donor doesn’t need to worry about filing financial reports, managing financial assets, dealing with tax receipts, tax returns, or a board of directors.
This allows donors to focus on their passion, not the paperwork.
Donor advised funds can be set up easily, with an investment as small as $10,000 and are ideal for those who want to set up a charitable foundation in order to be strategic in their giving and creation of a legacy.
Once the fund is created anyone can contribute and receive a tax receipt for their donation.
- Immediate tax benefits with a single tax receipt
- Anonymous gift, if desired
- Cost savings compared to private foundations
- Ability to contribute appreciated securities
- Continued investment of contributions over time
- Tax-free growth
- Easy management of gifts and grants – someone else takes care of all the administrative work