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.