What if there was a way to easily maximize your tax advantages so that you can give more this year-end? What if you could do this by leveraging both a private foundation and donor-advised fund (DAF) together? In the first year since we welcomed our President of DAFs, Stephen Kump, we’ve shared the complementary advantages of donor-advised funds with donors, private foundation leaders and their professional teams. Keep reading to find out more about Stephen’s recommendations on how to leverage a DAF alongside a private foundation at year-end to optimize your philanthropic impact. Don’t have a private foundation yet? It takes less than a week to establish one and just minutes to set up a DAF account!
Year-end is an important time for donors. For private foundation leaders, they’re also managing day-to-day foundation business, considering how to achieve their annual minimum distribution requirement, and thinking through how to maximize the impact of year-end grants and how to engage family more purposefully in their philanthropy. As year-end considerations loom, donor-advised funds can serve as a great complement to a private foundation.
Here are a few specific ways a donor-advised fund can enhance your year-end plan.
Strategize your giving
Donor-advised funds provide you with added functionality to make your giving more strategic. A contribution from your foundation to a DAF can help you meet your minimum distribution requirement, while giving you the time you need to identify the right charitable opportunities. You can also optimize your tax benefits and philanthropic potential with key giving strategies, such as charitable bunching.
When grantmaking, you can opt to make anonymous or international grants. Additionally, if you are considering making a large grant to a small charity, you may be able to help them preserve their public support test by granting to them through a DAF.
A donor-advised fund can be a great tool to pursue your foundation’s philanthropy more thoughtfully and stack your charitable deductions in years when it’s needed.
Seed a charitable fund for your children or grandchildren
During the holidays, you may feel inspired to involve your loved ones more intentionally in your philanthropic initiatives. It can be incredibly rewarding to engage your children or grandchildren in your private foundation if appropriate.
For your relatives that may not be ready or able to commit to actively participating in your private foundation, a great option is to seed a donor-advised fund in their name.
For example, with virtual gift cards offered by some technology-driven DAF sponsors, it’s easy to give your children, grandchildren or other loved ones the gift of generosity. They do not need to have a donor-advised fund to receive a charity gift card —instead they will receive an email that will prompt them to create a free DAF account with your gifted funds immediately available for giving upon completion.
Seeding a charitable fund is a great way to spark conversation around philanthropy with your family during the holidays, regardless of where they are on their giving journey.
Lead a collaborative fund
Whether you are looking to fund a joint initiative alongside your philanthropic peers or curious about values-aligned fundraising within your community, you can utilize a “Community Fund” DAF as an opportunity to pool your funds in a donor collaborative.
As an example, with Charityvest Community Funds, it’s easy to set up a “social” donor-advised fund. You can create a shared story of impact via a branded private or shareable webpage and invite others to give alongside you. Your foundation can contribute to the fund to creatively meet your minimum distribution requirement, or you can donate taxable personal assets.
Some examples of collaborative funds include:
- CareWorks Fund: A caregiving, end-of-life, and bereavement fund led by women of color, for women of color, who lead culturally adapted eldercare workforce and service solutions.
- The Big Give: A fund to support a cohort of local nonprofit organizations on Giving Tuesday.
Opening a Community Fund DAF and contributing from your private foundation or taxable assets provides an avenue to get more stakeholders involved in participatory grantmaking and address practical issues like your distribution minimums, if applicable.
How to take next steps
I am encouraged by the future of philanthropy—technology is bringing new tools together that expand philanthropic possibilities. Bringing DAFs and private foundations together to create philanthropic and financial synergy is a fitting example.
This giving season, explore the possibilities and consider optimizing your year-end impact with a donor-advised fund that complements your private foundation.
Foundation Source’s partnership with Charityvest allows for a wide variety of applications for donors, nonprofits and advisors that help encourage and facilitate giving.
Let us help you maximize your year-end giving
Contact us or call 800-839-0054. Together, let’s #begiving.
