JAVS Summer 2021

The Development Corner

What Kind of Philanthropist Are You? By Thomas Tatton

Now that we have determined that most of us are Philanthropists, what kind of philanthropist are you? When it comes to volunteering for a local service organization, at your place of worship and for the local youth symphony—we know you are outstanding! But, how are you at handling money? Like most of us—you probably make some really smart moves and then, just sometimes, not so smart moves. The following describes one “S mart Move .” It is: • Tax effective • Allows your money to grow tax-free • Flexible and can ensure your chosen charities are funded even beyond your lifetime • Available for any IRS-qualified charity (501c3) The Donor-Advised Fund (DAF) Donor-advised funds have been around for some time before the Tax Reform Act of 1969. That Act made them more widely available and accessible to the general public. In the 1990s, these funds began to grow in popularity, and today they are philanthropy’s fastest-growing vehicles. 1 A donor advised fund can be set up by most anyone at brokerage firms (and other institutions); Vanguard, Schwab and Fidelity are examples. The donor hands over (“donates”) to the brokerage firm (host) a certain amount of money. If the donor itemizes deductions on their tax return, that donation is “deductible” much as a donation to any charitable organization. These “donated” assets grow tax-free until the donor specifies a distribution(s), which must go to an IRS qualified charity, i.e., a 501(c)(3). These charities can include your house of worship, the Red Cross, your Alma Mater, a local homeless shelter and of course, the American Viola Society ! Records show that most DAF donors give to six or seven charities annually. 2 Some important notes to consider: • Funding a DAF is irreversible. The money must be used for a qualified charity. • Most DAF hosts require a minimum investment: Fidelity and Schwab require $5,000: cash, stocks, or other assets. 3 • Most host firms have a variety of investment options including mutual funds and exchange-traded funds from which the donor may choose.

• There is a minimum cost to the donor for both the host (brokerage, etc.) and the investment vehicle, i.e. the mutual fund or ETF. • Anyone can contribute to your DAF including uncles and aunts, cousins and even grandpa. They receive the same tax advantaged deductibility as the donor. • Some DAF’s mandate regular giving. For example, at Fidelity the donor must make a gift of at least $50.00 every three years. • We mentioned above that a DAF could be set up to fund your favorite charities beyond your lifetime. This is very doable. If this is a feature that is attractive, we ask that you check with your tax advisor and or your estate-planning expert. If you have read down to here, we have piqued your interest. Perhaps a Donor-Advised Fund is just right for you. If so, please check with your investment advisor. If it turns out that a DAF is not quite right, we will have another “ Smart Move” idea in the next installment of The Development Corner . More information can be found at: • Consumer Reports. Google: Donor Advised Funds – Wang. Penelope Wang, 5 Things to Know About Donor Drop Down Philanthropy 101 Scroll to “Donor Advised Find” • Schwab website: schwabcharitable.org • Vanguard Website: vanguardcharitable.org Scroll down to “What is a donor-advised fund?” This article is for educational and entertainment purposes only and is not intended as a substitute for tax advice. Please consult your tax advisor for guidance. Notes 1 Consumer Reports, Penelope Wang 2 Consumer Reports, Penelope Wang 3 See “More information…” under Schwab and Fidelity Advised Funds, Consumer Reports, 2019. • Fidelity website: fidelitycharitable.org Drop Down Guidance

Journal of the American Viola Society / Vol. 37, 2021 Online Issue

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