The top priority of most people when they are engaged in the process of estate planning is going to be to make sure that their family members are provided for after they pass away. This is as it should be, but it is not uncommon for some individuals take stock of their broader legacy as well. You may feel some philanthropic urges and decide that you would like to include a charitable giving component to your estate plan. There are a number of different options available, and the nice thing is that they often provide tax advantages while allowing you to give something back to the society as a whole.
Donor advised funds are a very popular instrument of charitable giving because they provide you with the ability to make contributions to multiple charities through a single transaction. These funds are typically housed within public charities but there are brokerages and financial services companies that offer donor advised giving programs as well.
The way that it works is that you first make a single contribution into the fund and you are entitled to a tax deduction in the year that the contribution was made. The funds are then the property of the fund, but you as the donor advise the fund with regard to how you would like to see endowments passed out to charities. Though you do get a deduction for the year the contribution was made, you don’t have to make recommendations during that year and this is very appealing to some people who need time to do some research before making recommendations.
Another one of the advantages is that you can contribute securities and recommend that grants be made to charities that cannot accept securities directly. And, if you contribute appreciated securities they are not subject to capital gains taxation so you can make a tax efficient donation that you can ultimately direct to multiple charities of your choosing.
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