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A Wealth of Good: Navigating Donor Advised Fund Giving

A Wealth Of Good Navigating Donor Advised Fund Giving

Originally established in 1931 by the New York Community Trust and supported by John D. Rockefeller, the concept of the Donor Advised Fund (or DAF) has recently taken the nonprofit world by storm. According to data from the National Philanthropic Trust, 1,948,545 individual accounts with more than US$228,890,000 in assets are active in the United States.

As an IEEE supporter, you may have established a DAF in order to take advantage of the tax benefits and maximize your philanthropic impact. If so, IEEE and the IEEE Foundation (both IRS-recognized 501(c)3 organizations), and any of its donor supported programs, can accept disbursements from most DAFs. You can find more information needed to process your gift at our DAF website: https://www.ieeefoundation.org/ways-to-give/donor-advised-funds/.

David Durocher, long-time IEEE volunteer and donor, recommends that people consider establishing a donor-advised charitable giving fund, which both maximizes taxable deductions while minimizing taxable income. “A donor-advised fund is a charitable investment account created for the sole purpose of supporting charitable organizations you care about,” shared Durocher. “When you contribute cash, securities, or other assets to a donor-advised fund, you’re generally eligible to take an immediate tax deduction; those funds can then be reinvested in a tax-free growth account and you can self-direct grants to virtually any IRS-qualified public charity.”

Have you named a successor for your DAF?

An important part of a DAF owner’s estate plan and charitable legacy is deciding where to direct the DAF upon their death. These directions are known as the ‘DAF Succession Plan’ and involves informing the DAF sponsor how to distribute the remaining balance in the DAF upon the owner’s (or owners’) passing. The exact options available to a DAF owner vary and are determined by the DAF sponsor. The most common options related to designating a non-profit, like the IEEE Foundation, include:

  • Naming the IEEE Foundation as successor advisor to the DAF
  • Naming the IEEE Foundation as a full or partial beneficiary of the DAF
  • Endowing the DAF to issue grants to the IEEE Foundation for as long as possible

If you have nominated the IEEE Foundation as a successor for your DAF, you are eligible to  join the IEEE Goldsmith Legacy League. Let the IEEE Foundation team know at donate@ieee.org to arrange your recognition. 

David (Dave) and Beverly Green included the IEEE Foundation in their DAF Succession Plan and are Forever Generous members of the IEEE Goldsmith Legacy League. They said of the decision, “Like everyone with a DAF, we have made a decision to donate, over time, to causes we believe in, like the IEEE Foundation. When it came to designating successors to our DAF, it seemed obvious that we should name a charity to receive the funds rather than having someone else make decisions on directing the funds. The IEEE Foundation was an obvious choice for us. We support the Foundation, its mission and its programs. For us, it is the perfect choice for the remaining funds.”

Don’t Have a DAF and Curious to Learn?

What is a Donor Advised Fund (DAF)?

A DAF is a centralized charitable account that enables charitably-inclined individuals, families, and businesses to make tax-deductible charitable donations of cash, publicly-traded stock, and in some cases, certain illiquid assets to a public charity that sponsors a DAF program. 

What are the benefits of a DAF?

Establishing a DAF has two main benefits for those looking to make a philanthropic impact. First, when an irrevocable contribution is made to the DAF, an immediate tax deduction can be taken. This gift can be made without a specific designation in mind, which allows a donor to maximize their charitable deduction as part of their financial strategy. Second, the donor invests assets in the DAF per their designated investment strategy, giving the donor the potential to generate even more philanthropic capital. This gives a donor the ability to grow far beyond the initial investment.

How to Establish a DAF?

To establish a DAF, a donor makes an irrevocable contribution to the DAF held by a sponsoring charitable entity and receives an immediate tax deduction. The donor can name their DAF anything the donor would like; appoint friends and family members to help the donor manage the responsibilities of a DAF, and design a Legacy Plan to determine what will be done with the DAF assets beyond their lifetime, which may include appointing successors or charitable beneficiaries. (Tip – nominating the IEEE Foundation as a successor for your DAF also qualifies you for entry into the IEEE Goldsmith Legacy League)

What happens to assets within a DAF?

The donor can then invest assets in the DAF per their designated investment strategy, giving the donor the potential to generate even more philanthropic capital. As soon as the DAF is set up, the donor can recommend organizations for grants to be approved by their DAF sponsor. The DAF sponsor can approve grants to most organizations that are tax-exempt under Internal Revenue Code (Code) Section 501(c)(3) and classified as public charities under Code Section 509(a), as well as certain private operating foundations. This typically includes IEEE and IEEE Foundation, but for a comprehensive list, check with your financial services provider.

If you already have a DAF, consider how it can make an impact on the IEEE and IEEE Foundation donor supported programs. If you are interested in establishing a DAF, contact your financial services provider. You can learn more about DAF Giving online.

The information in this article is for educational purposes only and is not intended as legal, tax, or investment advice. If you are considering establishing or making a gift from a DAF, we highly recommend you consult with your own tax and legal advisors to determine the best options for you.

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