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A simple, flexible and tax-efficient way to give to your favorite charities.
A donor-advised fund is like a charitable investment account, for the sole purpose of supporting charitable organizations you care about. When you contribute cash, securities or other assets to a donor-advised fund at a public charity, like Fidelity Charitable, you are generally eligible to take an immediate tax deduction. Then those funds can be invested for tax-free growth and you can recommend grants to virtually any IRS-qualified public charity.
When you give, you want your charitable donations to be as effective as possible. Donor-advised funds are the fastest-growing charitable giving vehicle in the United States because they are one of the easiest and most tax-advantageous ways to give to charity. Let’s take an in-depth look at how a donor-advised fund works.
Make a tax-deductible donation
Donate cash, stocks or non-publicly traded assets such as private business interests, cryptocurrency and private company stock to be eligible for an immediate tax deduction. A contribution to a donor-advised fund is an irrevocable commitment to charity; the funds cannot be returned to the donor or any other individual or used for any purpose other than grantmaking to charities.
Grow your donation, tax-free
While you're deciding which charities to support, your donation can potentially grow, making available even more money for charities. Most sponsoring organizations have a variety of investment options from which you can recommend an investment strategy for your charitable dollars.
Support charities you love, now or over time
You can support virtually any IRS-qualified public charity with grant recommendations from the donor-advised fund—from your local homeless shelter to your alma mater or religious institution. The public charity sponsoring your account will conduct due diligence to ensure the funds granted go to an IRS-qualified public charity and will be used for charitable purposes.
Giving non-cash assets is often more efficient than giving via cash or credit cards, but it is difficult for many charities to accept these donations. Contributing assets other than cash is simple with a donor-advised fund. In some cases, it’s possible to transfer stock directly from your brokerage account with the click of a button. See what you can donate.
Assets generally accepted include:
As soon as you make a donation, you are eligible for an immediate tax deduction, just as you would by donating to another public charity, like your local homeless shelter or food pantry. But some donations could make you eligible for additional benefits.
If you donate cash, via check or wire transfer, you're generally eligible for an income tax deduction of up to 60 percent of your adjusted gross income.
Donations of long-term appreciated assets
Donating long-term appreciated securities directly to charity—instead of liquidating the asset and donating the proceeds—can help maximize both your tax benefit and the overall amount you have to grant to charity. These donations provide two tax benefits:
Once you have funded your donor-advised fund, you may recommend an investment strategy for your account—potentially growing your account and providing you with more dollars to grant to charity. Many sponsoring organizations also have programs allowing you to nominate your financial advisor to manage the investment of your charitable funds.
With a donor-advised fund, you don’t have to keep track of every gift acknowledgment from every charity you support—just the receipts from your donor-advised fund contributions. When you’re ready to support your favorite charity, you can simply log in to your account and recommend a grant to any IRS-qualified public charity.
You can incorporate your donor-advised fund into estate planning by making a bequest in your will to the donor-advised fund sponsor or by making the sponsor a beneficiary of a retirement plan, life insurance policy or charitable trust. By leaving instructions with the donor-advised fund sponsor, you can support multiple charities with one bequest. These gifts can also help reduce or eliminate the burden of estate tax for your heirs.
Many sponsoring organizations also enable you to create a succession plan for your donor-advised fund—allowing you to pass the remaining funds in your account on to your heirs or to your favorite charities. Some programs allow you to break the fund up into multiple smaller funds that you can pass down to different successors. While sponsoring organizations handle succession differently, donor-advised funds can be a valuable tool for estate planning.
With a donor-advised fund, you generally CAN:
TIP: Though a donor-advised fund is not a foundation or a trust, many donors choose to grant from their donor-advised fund as they would from a family or private foundation. Because of this, some elect to use this language in naming their donor-advised fund.
Examples: The Frank Smith Giving Foundation, The Francis Williams Missions Trust
With a donor-advised fund, you generally CANNOT:
You’ve worked hard to establish your charitable legacy. Make sure to pass it on by nominating an individual, a charity or a combination of both as a successor for your Giving Account. Nominating a successor(s) is the simplest way to continue the legacy of your Giving Account after your passing. You can establish a succession plan when you open a Giving Account, or you can nominate a successor(s) at any point by logging in to your Giving Account, clicking Your profile, and choosing the Successor tab.
If a successor is not recommended, then upon your death, any remaining balance will be granted out in accordance with the Fidelity Charitable Trustees’ Initiative. For more information regarding successor options, review the Fidelity Charitable Program Guidelines.
Private foundations and donor-advised funds are both charitable giving vehicles that help donors facilitate their giving and achieve their philanthropic goals. Unlike donor-advised funds, private foundations are separate legal entities, generally established by an individual, family or corporation. Private foundations are subject to more stringent tax laws and regulations than public charities and are responsible for their own tax filing and recordkeeping. Benefits of a private foundation include greater administrative control over assets and grantmaking, including the ability to make grants to organizations other than IRS-qualified, 501(c)(3) public charities. With different structures, rules and features, donor-advised funds and private foundations each come with a unique set of advantages and limitations. Learn more about private foundations.
Since 1991, we have been helping donors like you support their favorite charities in smarter ways. We can help you explore the different charitable vehicles available and explain how you can complement and maximize your current giving strategy with a donor-advised fund. Join more than a quarter million donors who choose Fidelity Charitable to make their giving simple and more effective.