Deseret Trust Donor-Advised Funds

A Deseret Trust donor-advised fund is a simple, powerful, and highly personal approach to giving. You may want to assist The Church of Jesus Christ of Latter-day Saints or any of its affiliated charities and schools, provide for missions, give back to the community, share and perpetuate philanthropic values with your children or grandchildren, or create a highly organized center for all your gifting activities. A donor-advised fund provides all of these opportunities and more so you can focus your time and energy on giving. And now you can create your fund online in the privacy of your home through the services of Deseret Trust Company, affiliated with the Church.

Deseret Trust donor-advised funds provide a vehicle that will help you and your family define your philanthropic values.

VALUES

VISION—A donor-advised fund gives you an enhanced and centralized view of your philanthropic activities. It clarifies your desires and may better bring within reach all your philanthropic dreams. Creating a clear vision about your charitable giving is essential to being effective in helping those you are trying to reach.

ADAPTABILITY—Simple to create and with a low cost to operate, a donor-advised fund can be used for all your charitable activities. You may have only one charity or many charities to assist. You may want your family involved in your giving now or after you are gone. You can recommend grants in small or large amounts now or save for charitable purposes in the future.

LEGACY—A donor-advised fund allows you to involve your children and grandchildren in your philanthropy in a way that can perpetuate your values for generations. You can name your donor-advised fund after your family, in memory of someone, for a specific cause, or with any name that appeals to you. Your donor-advised fund can exist in perpetuity.

UNITY—Your family can be brought together under a common purpose of representing the family in the causes that matter most. Your family can take an active role in researching charities and making decisions about what grants should be made and to whom. Often siblings can be brought together through a donor-advised fund as they carry out the charitable mission of the family. These experiences can change the lives of your loved ones forever.

EDUCATION—Often referred to as the “family university,” the donor-advised fund provides an environment for the “advisers,” or family members, to participate in researching the charities that the family wants to impact and in reporting the results of grants made and the impact on the lives affected. They get a real-life perspective of the world we live in and their role in it.

SAVINGS—A donor-advised fund provides many financial benefits, including an up-front income tax deduction for the value of the assets transferred to the fund. The assets can be sold without the impact of capital gains tax, so the entire value can be used to assist the charities chosen. The assets transferred are outside your estate for tax purposes. Additional benefits include higher tax deduction limits and lower costs than those associated with the creation and maintenance of a private foundation.

VISION

The donor-advised fund is part of a thriving landscape of giving.

For many people, helping others through philanthropy is a vital component of a rewarding life. A meaningful existence, in this context, may include giving back to the Church and its institutions, improving the lives of those in need, contributing to scientific research, or supporting the community, cultural institutions, or the arts. This commitment to charitable giving and philanthropic involvement can take many forms, and it can work in several different ways—but the important common denominator is making a difference.

DONOR-ADVISED FUNDS—The stage was set for donor-advised funds in 1969, when Congress passed the Tax Reform Act, which instituted new requirements for regulating and defining private foundations. Among the new restrictions imposed were excise taxes, from which public charities were exempt. This exemption opened the door to the creation of various forms of public charities and ways to support them, including the donor-advised fund.

PART OF YOUR FINANCIAL PLAN—In addition to the emotional and spiritual benefits of philanthropy, charitable giving can also be an important part of estate planning and help you to create a balanced financial plan.

One factor in planning your approach to charitable giving is whether or not you want the assets you give to charity to produce income for you, as in the case of charitable trusts. Alternatively, you may wish all the income from investments to go to charitable causes. Donor-advised funds are an example of the latter. All the money that is initially given by you, and any growth from investments made with those assets, goes to charitable purposes.

PLANTING THE SEEDS—Setting and accomplishing charitable-giving goals are powerful ways to become involved in your community and to engage your family in serious, thoughtful, and rewarding pursuits.

Involving your family members—spouse, children, and grandchildren—in your philanthropic goals can help you start and maintain a dialogue about helping others and nurture a shared interest in the causes you support. It can be a great way to get children started in a lifetime of involvement in philanthropy.

ADAPTABILITY

A donor-advised fund is a gift that lets you keep giving.

As a donor, you make a contribution to DTC. That money is used to open an account—a donor-advised fund—in your name. DTC manages the fund and distributes grants from it to specific charitable organizations in response to your recommendations or advice.

Each time you want to make a grant, you specify the recipient and the amount. DTC makes every effort to approve recommendations, provided the funds are going to a legitimate charitable purpose. Final approval for all grants rests with DTC.

FIRST THINGS FIRST—The gift you make to establish the fund, and any future gifts, are irrevocable or nonrefundable. While this might seem to be a drawback, it in effect creates what you might think of as a philanthropic nest egg. You commit that money to establish or expand your philanthropic legacy, just as you might assign money to an irrevocable trust for your children, for example, to help them enjoy a secure financial future.

WHY A DONOR-ADVISED FUND?—Donor-advised funds share some characteristics with other ways you might make charitable gifts, but they also offer a number of unique advantages:

  • Immediate and potentially substantial tax deductions
  • Ability to make grants from principal and income
  • Access to streamlined record keeping and minimal paperwork
  • Consolidation and organization of charitable giving
  • Low administrative costs
  • Benefit of due diligence done on prospective receiving charities

FUNDING YOUR ACCOUNT—Opening your donor-advised fund is a simple procedure that consists of completing the online application and transferring the initial contribution to DTC. One of the benefits of donor-advised funds is that they can be funded with cash, marketable securities, or even gifts from other charitable vehicles, such as a charitable lead trust or remainder trust.

But this initial contribution amount is only the seed money, so to speak. The assets in your account are invested to create tax-free income that can be reinvested. Any reinvested income increases your giving power and the potential benefit to your chosen charities. And, of course, you can continue to contribute additional assets to your fund on either a regular or irregular schedule.

YOUR PHILANTHROPIC LEGACY—A donor-advised fund gives you the opportunity to go beyond a series of individual gifts; it gives you a platform from which to create a legacy of giving. When you establish your fund, you can name advisers and successors—your spouse, your children, or even your friends—allowing them to take over the responsibility of recommending grants on your behalf. Through naming advisers, you can involve those close to you in your philanthropic efforts. And by naming successors, you offer your heirs a way to carry on supporting the causes that are important to you.

HOW A DONOR-ADVISED FUND WORKS—Once you have decided to establish a Deseret Trust donor-advised fund, it is time to give your fund a name and transfer the initial assets. Almost immediately you will be able to start advising DTC on how you would like that money to be given away

THE INITIAL CONTRIBUTION—You can open your account with a minimum contribution of $5,000. You may amass the total required amount by combining several kinds of assets, such as cash or appreciated stocks. DTC may impose some rules to streamline the process of liquidating the assets that aren’t already cash. In the case of appreciated securities, liquidation may be completed as quickly as the next trading day.

After your initial contribution, you can keep making additional contributions to increase the size of your fund. At DTC you can contribute as often as you would like, but each subsequent contribution must be at least $500.

WHAT’S IN A NAME?—With a new donor-advised fund, you choose the name. The DAF can be named for the donor(s), the donor’s family, or the DAF’s charitable purpose. If you prefer, you can remain anonymous and select a name that protects your identity.

Next, you may want to name advisers and successors. Advisers assist you in recommending grants from the fund. Successors will take over all the fund’s responsibilities at your death, including recommending grants and investments.

HOW OFTEN, HOW MUCH?—You can recommend as many grants as you would like each year as long as they meet the $350 minimum set by DTC. One thing to keep in mind is that because the grant takes a less direct route than when you simply write a check, the transaction may take up to four weeks. If you are counting on a grant to be processed and received by a charity on a specific date—in time for a certain event or calendar day, for example—you will need to plan for the extra time it might take for the fund to complete all the necessary transactions. This is especially true of end-of-year grants, which are given during the busiest time for philanthropy professionals.

RECOMMENDING GRANTS—Once the fund has been created, you can begin to recommend grants that you would like to be paid out of your donor-advised fund account. This part of the process is what gives the donor-advised fund its name—the donor advises DTC on the specific grants to be made. DTC does due diligence on the charity you have named to confirm its status as a legitimate nonprofit organization or a charity with a legitimate purpose. DTC also needs to establish that your grant is not being used as payment for a legal obligation or anything that will benefit you directly—such as membership dues, preexisting pledges, or tuition.

If a recommended grant is not approved, DTC will inform you of the decision and the reason for it. In these cases, DTC will often help by suggesting related or similar organizations to which you might redirect your grant.

MATCHING GIFTS—Another way for companies to promote philanthropy is to offer matching gifts to employees’ existing donor-advised funds. Matching gifts are a fairly common way for corporations to give to charity while encouraging their employees’ philanthropic involvement. A match may be as much as the full amount of the employee’s gifts or it may be only a percentage. Whatever the match amount, it is a great way to increase both an individual’s giving power and a corporation’s commitment to giving back and helping others.

KEEPING TRACK OF YOUR GRANTS—One of the greatest benefits of an online donor-advised fund is that all of the record keeping associated with charitable activity is managed by DTC. You will receive statements on a quarterly basis that detail the grants that have been made from your fund, as well as any gains earned on your fund’s investments.

Not only does this document consolidate all receipts into one comprehensive statement, but it also can give you a perspective on your charitable giving—providing a snapshot of how much you are giving and to whom. This is easier than trying to piece this information together from your checkbook register at year’s end.

THE PROCESS, A TO Z

  • You give the necessary initial amount of $5,000 (or more).
  • DTC liquidates noncash assets and provides a letter for tax filing.
  • You name your fund, advisers, and successors.
  • You recommend an investment strategy for the fund.
  • You recommend a grant.
  • DTC does due diligence on the charity and makes sure the money is going toward charitable purposes.
  • Once approved, DTC writes a check to the charity.
  • If the grant is not approved, DTC will inform you of the problem and may recommend a similar charity as an alternative.

CREATING A LEGACY

Your Deseret Trust donor-advised fund, established and invested, can be the start of something great.

With all the ins and outs and details and decisions about the best way to support your philanthropic goals, it may be easy to lose sight of the most important element—helping people, organizations, and causes that are dear to you.

Laying a framework for your personal philanthropy is a forward-thinking way of ensuring that your generosity makes its maximum impact and will continue to help others throughout your lifetime and that of your heirs.

A few of the instances that could be catalysts for formalizing your philanthropic efforts might be:

  • Receiving an inheritance
  • Getting a bonus
  • Exercising stock options
  • Selling your business
  • Updating a will or an estate plan

Creating a donor-advised fund can help you chart a course for giving, in both scope and longevity. A donor-advised fund can exist in perpetuity, which means that your heirs can advise the fund after your death. If the fund is left without advisers or successors or if you have not recommended any grants for a few years, DTC may continue making grants from your remaining account—grants that are aligned with the area of charitable interest that you designated when you opened the donor-advised fund.

WHEN DOES A LEGACY BEGIN?—The idea of starting a legacy may seem too grandiose or self-important. But what it is really about is sharing your good fortune—perhaps by giving back to the community that fostered you or by helping others who are less privileged. In fact, there may be certain events from which you have benefited financially that have inspired you to give back and share with others.

Philanthropy is important in these circumstances in the context of smart tax or estate planning—avoiding capital gains tax or getting deductions on federal income tax. But these events or times in your life are also likely to motivate you on an emotional level.

THE NEXT GENERATION—Naming advisers and successors to your fund is a good way to involve family members and loved ones in the charities and causes to which you are committed. Because your advisers can be actively involved in the grant recommendation process, asking your children to play these roles allows them to get involved in your interests and helps you pass on your values to them.

Successors, who frequently start out as advisers, have the opportunity and the responsibility to carry the torch you lit. They take over all the duties of a donor, including making contributions, recommending grants, and naming new advisers and successors.

GROWING YOUR CHARITABLE RESOURCES—In a very literal sense, a donor-advised fund increases your charitable legacy because the assets that you originally contribute to open the fund can be invested for growth. Since the contribution is irrevocable, any increase in the fund’s value from investment income is tax free and assures that even more grants, perhaps in greater amounts, may be made to the charities of your choice—thus furthering your ability to support these causes.

PARTNER TO A PRIVATE FOUNDATION—If you have a private foundation, you are no doubt already well acquainted with the idea of establishing a philanthropic legacy. But having a foundation does not preclude you from adding another way to further your philanthropic initiatives. In fact, a donor-advised fund can be a useful complement to your foundation because donor-advised funds offer flexibility in areas that private foundations do not.

For example, there may be a grant that you would like to make anonymously to maintain privacy—something impossible to do through a foundation because all grants are a matter of public record. You could easily make these types of grants out of your donor-advised fund, thus expanding your charitable mission in whatever direction you choose.

UNITY

Putting your donor-advised fund to work wisely means choosing the right charities to benefit from your recommendations.

RECOMMENDING GRANTS—Choosing charities to support comes down to looking at two main criteria: what they do and how they do it. Deseret Trust Company can offer guidance and expertise on specific charities, causes, and organizations—and suggest alternatives when a recipient you recommend turns out to be ineligible or not a legitimate charity.

But doing your own research can be rewarding in its own right. It can help you pinpoint charitable organizations that do good work for the causes you care about, or it can open your eyes to a new area of philanthropy that you may not have considered before.

MINIMUMS AND FREQUENCY—There is no limit on how many grants you can advise, although DTC has set the recommended minimum grant at $350. DTC requires at least 40 percent of the distributions of income and principal from each donor-advised fund be made to or for the benefit of The Church of Jesus Christ of Latter-day Saints or one of its institutions. The remaining balance may be distributed to any charitable organization that has been approved. Funds will not be distributed to any organization or program whose purposes are not compatible or in harmony with the religious, educational, or charitable purposes, teachings, or practices of the Church.

VALUATION AND DEDUCTION—Each type of asset is valued a different way. Cash: When you give a cash gift, your donor-advised fund will be credited with the total value of the gift. Securities: Your donor-advised fund account will be credited with the net proceeds, minus liquidation costs, from the sale of the securities you contribute. Your deduction is the fair market value on the gift date.

CHOOSING TO REMAIN ANONYMOUS—When one of your recommended grants is approved, you have the option to either receive recognition or make the grant anonymously. In the latter case, the receiving organization would simply receive a check from DTC with no specific donor mentioned. Some people prefer to give anonymously because it affords a degree of privacy and keeps grants out of the public eye.

Added benefits of anonymity can be keeping your name off mailing lists and preventing unwanted solicitations. The anonymity option is one of the advantages of donor-advised funds over private foundations, in which legally each grant must be a matter of public record.

Another option is to make the grant in another person’s name—either in their memory or in their honor. Some donor-advised funds are set up entirely in this manner so that all grants from the fund are given in the name of a loved one.

ENDOWING CHARITIES—In addition to recommending grants to be paid out of your donor-advised fund in your lifetime, you may also endow a charity by naming it as a beneficiary of the donor-advised fund upon your death. Endowing a charity from a donor-advised fund is subject to DTC’s requirement that at least 40 percent of all distributions from the fund be made to the Church or its affiliated charities.

DONOR ADVICE—When discussing donor-advised funds, one issue that regularly comes up is donor control. It is true that your initial contribution is irrevocable and that DTC has final approval or veto power on where money from your account can be given.

LIMITATIONS AND RESTRICTIONS—Deseret Trust Company follows guidelines known as best practices in approving grants.

DTC will not make grants for:

  • Tuition payments
  • An individual
  • Travel expenses
  • Nonoperating private foundations
  • Membership dues
  • Event tickets or goods purchased at a charitable auction
  • Political candidates or parties
  • A preexisting pledge
  • An organization or program whose general and specific purposes are incompatible with the principles, values, or religious, charitable, and educational mission of the Church

Receiving organizations must fit into one or more of these categories:

  • Public charities (for example, charitable organizations that are tax exempt under Internal Revenue Code Section 501(c)(3) and are public charities under Internal Revenue Code Section 509(a))
  • Operating private foundations
  • Religious or educational organizations
  • Governmental agencies supporting education, healthcare, and other acceptable social goals

MORE DONOR-ADVISED FUND DETAILS—When you have focused your charitable interest and chosen a charity to support, you may decide to recommend a grant without making any further specifications. This allows your generosity to be put to work however the receiving charity sees fit. However, you may wish to determine to an even greater degree exactly where your grant goes.

If you choose, you can direct how your grant is used to help. Many charities will give you the option of designating how your grant will be used—to fund mission-specific activities, to underwrite a particular event, or to function as part of a general operating budget.

Balancing your wishes with the most urgent needs of the charitable organization you are supporting is something to keep in mind. Though most charities will try to honor donor intentions for how grants are used, they may also prefer to have as much flexibility as possible in using the money.

CORPORATE DONOR-ADVISED FUNDS—Donor-advised funds are a personal, hands-on way for an individual to give to charity, but they can also be a boon to philanthropic-minded corporations. Companies are often inundated with requests for charitable donations, and handling these solicitations while charting a meaningful and effective philanthropic course can be a full-time job in its own right.

A company’s donor-advised fund can be a resource for charitable giving at specific times or in certain circumstances. A donor-advised fund could serve as a philanthropic reserve fund in years when charitable giving is not feasible financially for the company.

There are tax benefits as well. The current tax deduction corporations can take on contributions to a donor-advised fund is up to 10 percent of taxable income. Contributions of appreciated assets the company has held over time are deductible for the full fair market or appraised value of the asset, and capital gains tax on the imbedded gain is eliminated.

DEFERRED CONTRIBUTIONS—Some contributions can be given in the future, generally by naming DTC as the beneficiary of a qualified plan, account, trust, or bequest. Your donor-advised fund could even be the beneficiary of an existing charitable remainder trust or charitable lead trust.

Using a will or estate plan, you may be able to endow a charity by giving the money to your donor-advised fund, which will make the contribution upon your death. This will reduce the value of your estate for tax purposes.

TRANSFERRING THE GOODS—Another way to contribute to a donor-advised fund is to redirect funds from a previously existing donor-advised fund, a private foundation, or another source such as a charitable remainder trust.

In the case of a private foundation, the donor-advised fund might be a good choice if you would like to eliminate the costs and time associated with your foundation.

Rolling over an existing donor-advised fund to DTC is usually as simple as completing the Deseret Trust Donor-Advised Funds Application and recommending a grant for the balance of your existing original fund to the newly created fund.

EDUCATION

The money that you give to open your donor-advised fund is invested to increase your giving power.

INVESTMENT OPTIONS—Deseret Trust has preapproved a variety of investment choices to give flexibility in how your donor-advised fund balances are invested. Unlike gifts that you give directly to charitable organizations, the money that you put into a donor-advised fund can continue to grow, potentially creating additional funds that you will be able to give to charity.

INVESTMENT CHOICES—Deseret Trust Company offers a preapproved choice of investment options or groupings of different funds that are combined to achieve a specific investment objective. You can recommend to invest aggressively, moderately, or conservatively. The overall value of the combined assets in the different investment pools is determined monthly. The value of your donor-advised fund includes any realized or unrealized gains or losses on the portfolio of investments as well as undistributed net income.

WHAT’S RIGHT FOR YOU?—As in all areas of investing, experts recommend that you make investment choices for your fund based on your risk tolerance and, in this context, on your anticipated grant-recommending activity. For example, if you intend to make several grants annually but want to maintain the value of your account, you may recommend income investments. And if your goal is to increase the value of your fund over time, you might consider recommending investments for long-term growth.

TRACKING YOUR INVESTMENT RETURN—It is important to follow how the investments in your fund are doing, though they are being overseen by DTC. Based upon the gains or losses in your portfolio, you may decide to reallocate some of those assets to a different investment pool that is available.

FEES—While there are no initial setup fees for establishing a donor-advised fund, there are fees and expenses associated with maintaining the fund. Each fund will be charged an administration fee—calculated using the average daily balance of the fund—taken monthly.

SAVINGS

With a donor-advised fund, more of your money goes to charity and less to taxes.

TAXES: ISSUES AND IMPLICATIONS—Though charitable giving has long been understood as a path to tax savings, the tax benefits that are available through a donor-advised fund can be even more significant than those provided by many other philanthropic options. You may be able to deduct a higher percentage of your contribution, and more types of contributions are tax deductible.

IMMEDIATE DEDUCTIBILITY—One of the great advantages of contributing to a donor-advised fund is that it allows you some breathing space between giving for tax purposes and choosing where your actual grants will go. You can give a lump sum to your donor-advised fund and take the full tax deduction for that year. The money stays in the fund, where it accumulates tax-free investment earnings until you decide where to recommend a grant.

Contribution dates for tax purposes vary slightly with the type of contribution. The contribution date for cash is the postmarked date when you mail a check or the date a cash contribution is received. You can take an allowable deduction for up to five additional years after the year of your original contribution.

CROSS THESE TAXES OFF YOUR LIST

  • Transfer taxes—All contributions to your donor-advised fund are considered to be outside your estate and are thus exempt from estate tax and probate. There may also be relief from gift tax.
  • Capital gains—No capital gains are applicable for appreciated securities contributed to the account.
  • Excise taxes—Unlike private foundations, donor-advised funds are exempt from paying excise taxes on investment income.

LET THE CHARITY LIQUIDATE—Contributing appreciated securities directly to Deseret Trust Company, instead of liquidating them and donating the proceeds, can be better for both you and the charity. That is because if you contribute the securities instead of selling them, you may avoid paying any capital gains tax. That can mean a substantial reduction in your income tax—and it means the charity receives a larger gift. However, if your assets have depreciated, you may want to sell them and add the proceeds to your donor-advised fund to take advantage of the capital loss.

RECAP: THE ADVANTAGES OF DONOR-ADVISED FUNDS—When compared to other charitable-giving tools, donor-advised funds currently boast a number of important advantages.

DONOR-ADVISED FUNDS

  • Tax deductions up to 50 percent of AGI
  • Minimal, streamlined paperwork
  • No setup costs and minimal annual fees
  • No excise taxes and no required payouts
  • Option to make anonymous gifts
  • Due diligence done by parent charity
  • Guidance and support

PRIVATE FOUNDATIONS

  • Tax deductions up to 30 percent of AGI
  • Extensive paperwork and annual filings
  • Setup costs and ongoing management fees
  • Excise taxes paid on investment income
  • All financial details must be on public record
  • Minimum payout requirements

Considering all of these benefits, it is no surprise that many families are taking a serious look at Deseret Trust donor-advised funds.

For specific information on how a donor-advised fund can help you and your family meet your philanthropic objectives, we invite you to visit us online at www.daf.deserettrust.com or contact Gift Planning Services at LDS Philanthropies at 1-877-650-5377.