Philanthropic Planning: Donor-Advised Funds
Charitable giving through a donor-advised fund (DAF) is an easy and flexible way to make taxadvantaged charitable gifts.
A donor advised fund is a philanthropic vehicle established by the donor at a public charity. Because the contributions are unconditional and irrevocable, gifts to a DAF qualify for a federal income tax charitable deduction in the year they are made. The donor has the opportunity to make grant recommendations from the DAF to their choice of charitable causes.
The benefits of a DAF are similar to those of a private foundation, only the setup and management of a DAF are less expensive. However, for families who desire a stronger measure of intergenerational control, a private foundation may be preferred.
ABOUT THE AMERICAN GIFT FUND
The American Gift Fund (AGF)1 is a tax-qualified public charity that receives donations nationwide, including donations to DAFs established within it. The American Gift Fund was established to provide clients with a flexible charitable gifting option and it has been making grants to numerous charities since 1998. RBC Trust Company (Delaware) serves as the trustee for DAFs opened with the American Gift Fund. Through City National Bank’s affiliation with RBC Trust Company (Delaware), AGF is available to City National Bank and City National Rochdale clients who want to establish their own donor-advised fund.
Grants made from a DAF established with the American Gift Fund are very flexible. Clients may select one or more charities, such as a local community foundation or any other qualified 501(c) (3) organization,2 annually as grant recipients based on the recommendations they make to AGF. Clients may also change future grant recommendations. While deciding on grant recommendations, a client's donation can also potentially grow based on their investment preferences, making more money available to support future grantee recommendations. Clients may nominate someone as a successor —often a family member or agent — to make grant recommendations after they die or are incapacitated. If clients prefer, grants made from their DAF funds may be made anonymously.
ASSETS GENERALLY ACCEPTED (SUBJECT TO REVIEW AND FINAL APPROVAL) INTO A DAF WITH AGF CAN INCLUDE:
- Cash equivalents
- Publicly traded securities
- Certain restricted, controlled or lock-up stock
- Mutual fund shares
- Private equity and hedge fund shares
- Real estate
- Certain complex assets such as privately held C-corporation shares
BENEFITS INCLUDE:
- Streamlined setup and account administration
- Ability to make additional contributions after the initial gift to generate additional tax deductions3
- Contributions of cash can be deducted up to 60 percent of the donor’s adjusted gross income
- Contributions of marketable securities are valued at fair market value and can be deducted up to 30 percent of the donor’s adjusted gross income
- Any unused tax deduction generated in the first year can be carried forward for an additional five years.4 Please consult a tax professional for further details.
Charitable giving through a DAF provided by the American Gift Fund can help build a family legacy, monitor the impact of giving over time and help maximize federal income tax deductions.
1The American Gift Fund is a public charity exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code and receives donations and makes grants for a variety of charitable purposes. Please see AGF’s website at www.giftfund.org for further information and the AGF Disclosure under Financial Advisor, Client Materials. Consult your financial advisor for AGF fees applicable to your DAF. AGF’s fees are deducted from the DAF and are not charged separately to the donor. RBC Trust Company (Delaware) Limited serves as trustee to AGF and is paid a fee by AGF. City National Bank may receive a fee from the trustee for contributions by CNB clients to a DAF with AGF.
2The charitable beneficiary of a DAF cannot be a private foundation. Grant recommendations are subject to AGF approval.
3The minimum initial contribution is $5,000. Subsequent gifts may be made in the amount of at least $250. Each donor must complete and sign an application when he or she makes an initial gift. All gifts to AGF are irrevocable.
4Tax information contained herein is for example only. Your tax situation may differ. City National Bank, its affiliates and subsidiaries, as a matter of policy, do not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax and accounting are subject to change and open to varying interpretations. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.
Important Disclosures
This document is for general information and education only. It is not meant to provide specific tax guidance. The information in this document was compiled by the staff of City National Bank (City National) from data and sources believed to be reliable, but City National makes no representation as to the accuracy or completeness of the information. The opinions expressed, together with any estimates or projections given, constitute the judgment of the author as of the date of the presentation. City National has no obligation to update, modify, or amend this document or otherwise notify you in the event any information stated, opinion expressed, matter discussed, estimate, or projection changes or is determined to be inaccurate.
City National Bank, its managed affiliates and subsidiaries, as a matter of policy, do not give tax, accounting, regulatory, or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. Any strategies discussed in this document were not intended to be used, and cannot be used for the purpose of avoiding any tax penalties that may be imposed. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies or information presented taking into account your own particular circumstances.
This presentation (or any portion thereof) may not be reproduced, distributed, or further published by any person without the written consent of City National. Professional trustee services are offered to City National Rochdale clients by City National Bank which may serve as trustee.
City National Rochdale, LLC is an SEC-registered investment adviser and wholly-owned subsidiary of City National Bank. Registration as an investment adviser does not imply any level of skill or expertise. City National Bank is a subsidiary of the Royal Bank of Canada.
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