How to make Simple and Flexible Charitable Donations

A donor advised fund can allow you to make donations in a way that will provide you with greater simplicity and flexibility in making charitable contributions. These funds allow you to contribute cash and various securities (including restricted stock), with the fund taking care of the transfer and record keeping for these securities in one location. Securities held for more than one year and contributed to the fund are deducted at their fair market value on the date of transfer, and no capital gains tax is imposed on the long-term appreciation of the securities. Your contributions are deductible in the year that you transfer the cash or securities to the fund, not when the contribution is made to the charity. Therefore, you can contribute property to the fund, take a tax deduction, and then have a contribution made to a charity at a later date. In addition, amounts contributed to the fund reduce your estate and the amount subject to estate tax.

Once a contribution is made to the fund, it is irrevocable and is owned and held by the fund. Contributions are not refundable. There are restrictions on what charities can receive the funds (no private foundations), and while you recommend the organization, it must be approved by the trustees of the fund. Upon contribution to the fund, additional earnings and appreciation of securities belong to the fund, income is added to your account, though no additional deduction is allowed. Remember that your charitable deduction is subject to certain limitations, cash contributions are limited to 50% of your adjusted gross income while contributions of securities are subject to a 30% limitation.

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