Circle of Giving/Donor Advised Funds - Ocala Star Banner

Posted at 2:28 pm on 12/12/2016
   Gail MarksJarvis/Chicago Tribune


When Peggy and Stephen Goulding sold their company in Wenona, Ill., this year they decided they wanted to set aside a large sum to give to charity.

For years they had been writing individual checks when attracted to charitable organizations that they thought were helping their community or global needs — everything from Doctors Without Borders to Housing Opportunities &Maintenance for the Elderly. Peggy, 62 and a dietitian, also has been volunteering for charitable causes such as food banks.

But with the larger commitment to give, the couple didn't know immediately where they would want to donate all the funds. They wanted to take time to think about what they most value and seriously evaluate organizations that might receive their money. Goulding said she's second-guessed donations made in the past when she heard, "the head of the organization was living in a mansion or 60 percent was going to administration."

So they turned to a donor-advised fund, which they set up at Northern Trust. Donor-advised funds have become popular in recent years because they allow people with charitable intentions to set aside money easily and solidify a major tax deduction in a single year. Then, people can take their time — months or years — to decide where to give the money and how much to give each organization that appeals to them. Some of these funds can be started with as little as $1,000, which is less than the $2,974 sum given by the average American household to charities last year, according to National Philanthropic Trust data.

While the funds have been gaining popularity throughout the decade, this year some financial advisers are suggesting them with a greater sense of urgency because of possible federal tax changes next year. President-elect Donald Trump and congressional Republicans have talked about tax changes that include cutting back tax deductions while lowering tax rates. Although the outcome of the tax debate is far from certain, advisers have been telling clients that a major contribution to charity this year will count more than in the future if charitable donation tax rules change.

Despite their rising popularity, it's important to remember that a donor-advised fund should never be used simply for tax reasons. They are designed for people who want to give, and once money is in a fund and the tax deduction taken, people can't change their minds and use the money for anything other than giving to charitable organizations recognized by the Internal Revenue Service.

People starting donor-advised funds at Northern Trust must begin with at least $50,000. But during the last decade companies such as Fidelity, Vanguard and Charles Schwab have made the funds accessible to less-affluent people. At Fidelity the minimum requirement is just $5,000. Typically, securities such as stocks or mutual fund shares can be used instead of cash. This allows people to contribute an investment that's gone up greatly in value without having to sell it and take a capital gain.

There were 269,180 donor-advised funds last year; almost twice as many as existed just five years earlier. Some are offered directly by charitable organizations for a single cause, others are through community foundations, and fast growth is occurring at those offered by mutual fund and financial services companies.

Peggy Goulding likes that the money in her fund will be invested and therefore should grow and allow her to make more contributions over time than she would have had if she simply wrote checks. In donor-advised funds, the investment gains aren't taxed, and charitable organizations get contributions that aren't taxed.

Goulding plans to give charitable donations from her fund over the next 10 to 20 years and will add new contributions to the fund in future years. If current tax laws stay intact, she will get a new charitable tax deduction any year that she adds a new contribution to her fund.

An attraction, she said, is the ability to think carefully about organizations that will get her money. While there are websites such as www.charitynavigator.org to check on a charitable organization before giving to it, she said she now is going to invest a lot of time visiting organizations that interest her. She is particularly interested in giving to organizations involved with mental health because "it's very underfunded and very underserved." Now that she and her husband have a charitable fund, they are talking with their children and grandchildren about charitable priorities — a discussion she hopes will continue throughout their lives.



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