What is the difference between Donor Advised Funds and private foundations?
Why contribute to a Donor Advised Fund rather than directly to a charity?
Who should be listed as the donor?
What is a charitable beneficiary?
Can an account be named after someone other than the donor?
When is a contribution considered a charitable donation?
What is the minimum to establish a Donor Advised Fund at Boston Private Bank?
What types of assets can be contributed?
Can a donor contribute foreign stocks?
What type of asset is best to contribute?
What charities and nonprofits can grants be made to?
How many grants can be made in a year?
Can an existing DAF be transferred into the ACGFund?
Can an existing private foundation be transferred into the ACGFund?
How does one establish a Giving Account?
Does the ACGFund require specific contribution amounts?
What happens when the ACGFund receives a donor’s contribution?
Will the ACGFund send the donor a receipt for his or her contribution?
How often can a donor contribute to the ACGFund?
Are additional contributions to the ACGFund tax-deductible?
What types of assets can a donor contribute to the Gift Fund?
What does “immediate tax deductions” mean?
What are the limitations on charitable deductions?
Is there a minimum grant amount? Are there other guidelines for grant recommendations?
What is a Donor Advised Fund?
A Donor Advised Fund is a charitable giving vehicle wherein an individual, family, or corporation makes an irrevocable, tax-deductible contribution of assets to an IRS-qualified investment pool, and at any time thereafter can recommend grant distributions to qualified charitable organizations.
What is the difference between Donor Advised Funds and private foundations?
Starting a private foundation can involve substantial start-up costs and administrative expenses, such as the yearly filing of a Form 990-PF. But one of the most important differences is that under current law, Donor Advised Funds receive more favorable tax treatment than a private foundation. Donor Advised Funds allow donors to take a federal income tax deduction up to 50% of adjusted gross income (AGI) for cash contributions, and up to 30% of adjusted gross income (AGI) for appreciated securities, versus 30% of AGI for cash contributions and 20% of AGI for appreciated securities for a private foundation. Donor Advised Funds also offer the ability to recommend grants anonymously, if desired. It is also easy to convert a foundation to a Donor Advised Fund to simplify ongoing maintenance and record keeping.
Why contribute to a Donor Advised Fund rather than directly to a charity?
Under current law, Donor Advised Funds provide a number of benefits that direct donations to a charity may not, including:
- Ability to accept and process appreciated securities on which the donor does not have to pay capital gains tax
- Variety of investment options allowing the contribution to potentially grow over time
- Capacity to receive one block of securities that can benefit multiple charities
- Creation of a legacy versus providing a one-time gift
- Separation of tax planning and charitable giving—donor receives tax deduction when contribution is made, but grants to charity can be made later, often over many years
- Simplicity—a single contribution can benefit multiple charities while only requiring one tax substantiation letter
Who should be listed as the donor?
The donor is the person or persons responsible for making the contribution(s) to the Donor Advised Fund. If the contributions are from joint ownership, then multiple donors can be listed. If the donor wants non-contributors to have grant making rights to the account, they should name those individuals as account advisors.
What is an account advisor?
An account advisor is named by the donor to recommend grants from the account. An account advisor is usually the donor, a family member, or corporate grant committee.
What is an account successor?
An account successor is the person identified by the donor to take over the account after the donor’s death. Multiple successors can be named to an account and, depending on the donor’s wishes, the account can be split equally among the successors, or they can share the responsibilities. Successors can name future successors to take over the account in the event of their own death, essentially leaving a legacy from one generation to the next.
What is a charitable beneficiary?
A charitable beneficiary is a charitable organization identified by the donor to receive either all of the remaining assets of the account or a percentage of the account annually upon the death of all the original donors. This is done as an alternative to naming an account successor(s).
Can an account be named after someone other than the donor?
Yes, donors can choose any name for the account. However, it is recommended that the name reflect the donor’s name and/or the main purpose of the account, such as “The Jones Family Foundation.” Notably, each grant has the ability to be recognized by either the donor name, the account name, anonymously, or by special acknowledgment (for example, In Memory of, In Honor of).
When is a contribution considered a charitable donation?
A contribution is complete when the asset is out of the donor’s control. The time frame varies, depending on the type of asset and when it’s transferred to the account. The process usually takes less than two weeks.
What is the minimum to establish a Donor Advised Fund at Boston Private Bank?
The minimum initial contribution is $25,000.
What types of assets can be contributed?
Cash, mutual funds, bonds, and most publicly traded securities. Potential clients should contact us to review their holdings to determine if they are appropriate for use in a Donor Advised Fund.
Can a donor contribute foreign stocks?
Yes, if they are traded on domestic stock exchanges. If not, clients should contact Boston Private Bank prior to donation so we can have the security properly reviewed.
What type of asset is best to contribute?
Appreciated securities that have been held for more than one year make the most effective contributions. Under current law, clients can avoid the capital gains tax on the securities and can deduct the total value of the contribution from federal income taxes, up to 30% of adjusted gross income. Unused deductions can be carried forward for five years. Because of these advantages, clients may be able to give more to the causes they support.
What charities and nonprofits can grants be made to?
Grants can be made to charitable organizations that are tax exempt under Internal Revenue Code Section 501(c)(3) and public charities under Internal Revenue Code Section 509(a). Most established religious organizations and educational institutions are not listed as 501(c)(3) nonprofits, but are nevertheless tax exempt charitable organizations.
How many grants can be made in a year?
There is no limit to the number of grants made out of an account. The minimum grant amount is $250.
Can an existing DAF be transferred into the ACGFund?
It is easy to transfer an existing Donor Advised Fund account into the ACGFFund. Please contact us for further information.
Can an existing private foundation be transferred into the ACGFund?
It is easy to convert a foundation to a Donor Advised Fund to simplify ongoing maintenance and record keeping. Please contact us for further information.
How does one establish a Giving Account?
To establish an account, simply complete a Donor Application and submit it along with a contribution (minimum initial contribution of $25,000) in cash or securities. If contributing securities from an institution other than Boston Private Bank, please complete a Letter of Instruction as well. Contact us for more information.
Does the ACGFund require specific contribution amounts?
Individuals and corporations may establish an account with a minimum initial contribution of $25,000. The minimum additional contribution is $10,000.
What happens when the ACGFund receives a donor’s contribution?
When a contribution is received and accepted, the ACGFund will invest the assets in a money market account until month’s end, at which time it will be allocated to all investment pools recommended by the client for the account.
Will the ACGFund send the donor a receipt for his or her contribution?
Yes. Generally, the ACGFund will provide written confirmation of a contribution within 10 business days of receiving a gift. This confirmation will serve as a receipt for tax purposes. Please note that as donors are eligible for a tax deduction at the time of making a contribution to the ACGFund, any other receipts they may receive (e.g., from a public charity to which they recommended a grant) are duplicative and cannot be used for tax purposes.
How often can a donor contribute to the ACGFund?
Donors can contribute as often as they like. Some donors like to add to their accounts immediately after recommending grants. Others make regular contributions to build up the account for future grant making. The flexibility of the ACGFund allows donors to determine their giving timetable.
Are additional contributions to the ACGFund tax-deductible?
Yes. Under current law, donors will be eligible for an itemized income tax deduction for a charitable contribution on the date the contribution is made to the ACGFund. This is subject to the deductibility limitations set by law. Donors should consult their legal or tax advisor to review their personal situation. The donors will receive a consolidated statement of their annual contributions and granting activity at the end of each calendar year. Please note that since donors are eligible for a tax deduction at the time they make their contribution to the ACGFund, any other receipts they may receive (e.g., from a public charity to which they recommended a grant) are duplicative and cannot be used for tax purposes. Grant recommendations made to individual charities, though they may be acknowledged by the charity, are not eligible for additional tax deductions by the donor.
What types of assets can a donor contribute to the Gift Fund?
Cash, publicly traded stock, mutual fund shares, and bonds are eligible for contribution to the Gift Fund. We will be glad to discuss proposed contributions with potential donors. To contribute assets held outside of Boston Private Bank, a Letter of Instruction and an Additional Contribution Form can be downloaded.
What does “immediate tax deductions” mean?
Under current law, ACGFund donors are eligible for an itemized deduction on the date their charitable contribution is received by the ACGFund, subject to the general limitations described below. Deductions will depend, in part, on the type of asset contributed. For contributions made by check or wire, the deduction is for the amount of the cash contribution. For donations of publicly traded securities held for more than one year, the deduction will be the fair market value of the securities, determined by the midpoint of the security’s price range on the day of receipt.
What are the limitations on charitable deductions?
Under the Internal Revenue Code, deductions for charitable contributions are subject to certain “percentage limitations” that limit the deductions that can be taken to a stated percentage of adjusted gross income (AGI) in the year the deduction is taken. (Contributions in excess of these percentage limitations may be carried forward up to five subsequent years.) Because the ACGFund is a public charity, the percentage limitations that apply are generally the most favorable charitable deductions available under IRS regulations.
Deductions for contributions of long-term capital gain property (such as appreciated securities held for more than one year) are currently limited to 30% of AGI. Deductions for all other contributions (including contributions of cash) may be taken up to 50% of AGI. A donor’s ability to take itemized deductions may be subject to certain other limitations. Donors should contact a tax advisor to determine their tax deductibility limits.
Is there a minimum grant amount? Are there other guidelines for grant recommendations?
The Trustees have set minimums on grant distributions to maintain cost-effectiveness and to encourage charitable giving. The minimum grant is $250. Grants must be made in $50 increments.
