Donor-advised funds are gaining momentum due to the new tax law. These funds allow you to donate money and receive a charitable tax deduction.
A donor-advised fund is established through a charity or nonprofit, and allows you donate assets (it can be cash, stocks, or real estate) to the fund. The gift is irrevocable – the nonprofit controls the assets and you cannot get the assets back. You may then take an immediate tax deduction for the gift to the fund. Once the fund is established, you can tell the fund where to donate the money, and when.
These funds are becoming more popular in part because the new tax law enacted in 2017 doubled the standard deduction to $12,000 for individuals and $24,000 for couples. This means that if your charitable contributions along with any other itemized deductions are less than $12,000 a year, the standard deduction will lower your tax bill more than itemizing your deductions.
With a donor-advised fund you contribute several years' worth of charitable donations to the fund at once and receive the tax benefit immediately, making it more likely that itemizing would be more advantageous than taking the standard deduction.
There are different types of donor-advised funds. Some are available through financial investment firms and others may be smaller community funds such as universities and faith-based organizations. Each fund has its own rules on how the money is distributed. There may be limits on how much you can donate each year or a requirement that you donate a certain amount.
Before deciding to give to a donor-advised fund, you should investigate the fund's rules, fees, and how established the fund is. We suggest scheduling an appointment at Tacoma Elder Care for a consultation so we can help you review all your options.
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